Hungama Becomes Bollywood Gateway for Music Providers

To make it in the lucrative world of Bollywood music, it pays to be local.

Hungama Digital Media Entertainment Pvt. Ltd., which has digital rights to 75 percent of the music from Bollywood films and controls 40 percent of the entire Indian digital music market, has signed Apple Inc. and Sony Corp., supplying the media giants with Indian tunes for their online stores. It also sells songs directly to listeners through its own smartphone applications and Websites.

The company’s catalog of more than 2 million songs is a gateway for music purveyors to tap into Indian affection for movies and their scores worth $2 billion that depict everything from champagne-soaked nightclub parties to domestic disputes.

India, a nation where 800 million people live on less than $2 per day, is also now the world’s fastest growing smartphone market, according to market researcher IDC. That’s a potentially huge yet challenging market for the music industry. Consumers there are used to paying only a fraction of the download price charged in Europe and the U.S. Hungama is able to sells songs for as little as 1 rupee (2 U.S. cents) apiece.

“Music is very much a poor man’s medium too,” said Vipul Pradhan, head of India’s Phonographic Performance Ltd. “India’s content providers have realized the line for impulsive transactions is much lower in markets like India.”

Discounted ITunes

Even within those constraints, Indian consumers are increasingly buying their music on smartphones, often low-cost devices that use Google Inc.’s Android operating system. Handset sales may rise 61 percent to 26.5 million units this year, according to an estimate from Canalys, a consultant with offices in Singapore.

The country’s Internet users will more than double to 348 million by 2017, according to a forecast from Cisco Systems Inc.

The music industry, which grew 11 percent in 2012, will more than double in size by 2017 to 22.5 billion rupees, according to KPMG.

Put it all together, and big media companies see an opportunity. So they’re doing business with closely held Hungama to offer Indian fare as well as Western tunes. Cupertino, California-based Apple introduced a discounted version of its iTunes store in December. Apple offers songs such as the Beatles “Hey Jude” for 15 rupees. The songs are among the most expensive in India, but the cheapest among iTunes stores around the world.

Sony, Nokia

Sony and Nokia Oyj have also opened digital content stores for mobile users in India where they can download songs and other applications. Vodafone Group Plc sells Indian music through an online store run operated by Hungama, where songs, video clips and ringback tones costs no more than 1 rupee.

Adam Howorth, a London-based spokesman for Apple declined in an e-mail to comment on the company’s Indian content providers. Vodafone spokesman Suresh Rangarajan said 25 percent of the content sold on their 1 rupee store is music. Nokia didn’t respond to requests for comment.

Adoption of more digital music from closely-held Hungama as well as Apple and other providers may also benefit from an expansion of India’s broadband networks and fourth-generation networks being built by Bharti Airtel Ltd. and billionaire Mukesh Ambani.

“India needs to be connected for businesses like ours to really thrive,” said Chief Executive Officer Neeraj Roy. “Our product will permeate down to the least common denominator.”

Hungama, meanwhile, is finding creative ways to make money from its song rights, which includes those composed by Grammy award winner A.R. Rahman in the Oscar-winning movie “Slumdog Millionaire.”

Free Downloads

Mahindra & Mahindra Ltd., India’s largest maker of SUVs, lured customers into their service centers by offering coupons for free downloads on People who bought Panasonic Corp.’s Viera smart televisions got coupons for music they could access through a pre-installed application.

Hungama maintains about 40 percent of India’s total digital music market, which includes more than just Bollywood tunes, with both Sony and Indian competitor Saregama controlling about 20 percent each, according to Shridhar Subramaniam, President of India and Middle East for Sony Music Entertainment. As many as 200 other companies contend for smaller portions of the industry, he said.

Mohan Nair, a spokesman for Mahindra, declined to elaborate on the collaboration with Hungama. Panasonic India spokeswoman Richa Sethi declined to comment. Calls to Saregama’s India headquarters in Kolkata were not answered.

“There’s a big difference in the cultures of music consumption in India versus the rest of the world,” said Jehil Thakkar, head of media and entertainment at KPMG India.

Before it's here, it's on the Bloomberg Terminal.