Following its acquisition of digital distribution company Mime360, Flipkart.com co-founder and COO Binny Bansal spoke with MediaNama about their plans to roll out digital distribution, potential conflict of interest with other music sites, pricing of music, and interestingly, why the company is looking at digital distribution despite the fact that its sales of music in physical (DVD) format is growing at 30%. Excerpts from the interview (more details on the acquisition here):

MediaNama: Why have you acquired Mime360?
Binny Bansal: We basically started talking to them a couple of months back, when we were integrating with them for our digital music launch, and we really liked the team and the technology platform that they had built. We acquired them for the team, for both the business and technology, and that is coupled with their strong domain knowledge of the music industry. They’ve been at it for the last two years, and they have built good relationships with the industry. The second is the robust digital distribution platform that they’ve built. It helps us with the time to market.

MediaNama: What are you looking to achieve through Mime360?
Binny Bansal: Music and ebooks are the two big ones, and then you have games and video, which are there, but all of this will be launched some time in the future. Music will be first to roll out.

MediaNama: Will Mime360 will stay independent and continue servicing sites like Gaana.com, or will it be Flipkart-only?
Binny Bansal: Yes, the Mime360 distribution platform will stay totallly independant and continue to service publishers like Gaana.com, Saregama.com and In.com.

MediaNama: How will Flipkart manage the conflict of interest for mime360 when it comes to powering Flipkart’s store and also powering sites like Gaana.com?
Binny Bansal: What seperates one publisher from another (Gaana.com from Hungama.com say) is the combination of business model, UI and on-site features such as search, recommendation etc. Mime360 is a media content delivery platform that streams media files to publisher’s end users. It doesnt collect user level information nor does Mime360 have any knowledge of or control over what features other publishers’s sites showcase. Thus we feel there is no real conflict of interest. Flipkart’s store will have to differentiate itself on the merit of its own salient UI and site features.

MediaNama: I’m curious about what you’re looking at from an ebooks perspective – are you looking at a subscription model, which is more like an online library?
Binny Bansal: We are in discussions with publishers and all the other stakeholders in the industry. The decision on this hasn’t been taken yet within the company as well as the stakeholders outside the company.

MediaNama: What would you like to do? What do you think is suitable for the Indian market?
Binny Bansal: We’re still debating it. We will want to do what is best for the customer, whether subscription or digital downloads for ebooks. It’s early days. We don’t have any concrete answer for that right now.

MediaNama: You haven’t launched self publishing yet, right? Will that be a part of your plan once you go down the ebooks path?
Binny Bansal: No we haven’t launched it yet. Maybe later, but not to begin with.

MediaNama: What are you planning to do in terms of video and gaming?
Binny Bansal: In terms of gaming and video, there are no concrete plans as of now but it’s in the long term roadmap.

MediaNama: How do the costs differ for you when it comes to physical distribution vs digital distribution of content?
Binny Bansal: So, the margins are lower and there are no operational costs. But the marketing costs increase.

MediaNama: In terms of percentage, what would you be our estimate of the difference?
Binny Bansal: I’ll know once we do it. (laughs)

MediaNama: In terms of music, are you looking at DRM free? What do the labels say?
Binny Bansal: Yeah, obviously in case of music, DRM is dead for music. Labels are of the same opinion, and the whole industry has moved to DRM free.

MediaNama: How is the DVD and music sales working for you?
Binny Bansal: Our DVD sales are increasing quite a bit, whereas the industry is shrinking. That is the case because we are able to reach a lot more customers. The distribution for this category is very very hard, and all the manufacturers are scaling down physical distribution. It is efficient through the stores. We have seen a 30 percent month on month growth for the last few months.

MediaNama: If physical format distribution is growing that much, why are you getting into digital distribution?
Binny Bansal: Lets take music. The music industry, physically, is very very small. I think we can create a new category online, where people really start buying music. I don’t think people buy music today.

We’ll start with single track downloads, a very simple iTunes like model. It’s a chicken and egg problem. People pirate because there is no easy way of buying music. If you make it really easy to buy music at the right price points, we believe that people will be willing to pay.

MediaNama: How much do you think people will pay for a song?
Binny Bansal: I think anything below Rs 10 is a good price point for a song.

MediaNama: What about gaming?
Binny Bansal: We already sell games in the physical format, and that is growing at almost 40 percent month on month. We have started talking to the large publishers of games, but I think that is a longer term project.

MediaNama: Are you looking at the Indiagames games-on-demand model, where a user can download and play a game as long as he’s subscribed?
Binny Bansal: I think there are different models. It will depend on… I think we have to do a deeper study before we can answer this question.

MediaNama: On your roadmap, by when do you think your entire rollout of digital distribution will be complete?
Binny Bansal: Hopefully, by the end of next year.