IMI Mobile Acquires Music Distributor DX3 For Entering The European Market

Is the content aggregation and distribution the most vulnerable space in the Digital Content Business?

Hyderabad based Mobile VAS co IMI Mobile has bought London based digital music distibutor dx3, reports ContentSutra. Dx3 provides legal digital downloads, and in 2004-05, added a mobile content delivery component as well. The company will serve as a gateway to the European market. DX3 will be renamed IMI. A couple of months ago VR Vishwanath, Chairman and CEO of IMI Mobile had told MediaNama that the deal size is around $10 million, but we wonder if it’s been revised downwards given recent trends. Neither the report nor the press release mention the size of the deal or the percentage acquired, some reports suggest it’s a 100% acquisition. We’ll confirm and update.  

Content or Marketing?

Well, both. dx3 has a content marketing platform, which can be used to deliver promotional premium content that is free to users. IMI Mobile appears to be more keen on dx3 for marketing services.  According to Vishwanath, this gives them the opportunity for media campaigns on both Internet and Mobile, given dx3 strength in the web domain. Frankly, apart from the clients and distribution network that dx3 will bring to the table, we’re not sure of what else there is to this deal. 

DX3 distributes music for clients like EMI, MTV, Universal, Warner Music Group, Sony BMG, and has tie-ups with Virgin Mobile, Smash Hits, Sony Ericsson, among others. 

This appears to be a backwards integration for IMI Mobile - which is more of a platform service provider. As DX3 CEO Anu Shah put it - “It’s very difficult for pure digital music providers to make money in the space“. Aggregators and distributors get squeezed from both sides - by operators and music labels, and this is essentially a means of combining revenue share which was earlier divided between content aggregator and platform service provider.

This appears to be an acquisition that is similar to Motorola’s acquisition of Soundbuzz, though Soundbuzz had branded services as well, not just a white labeled solution. In the past year, we’ve seen other significant moves in this space - when Nokia entered the content services space with Ovi, and OnMobile inked content deals in South India.

So…Is the content aggregation and distribution the most vulnerable space in the Digital Content Business?

Nokia To Launch Music Store In India In Early 2009

At the TiEcon2008 conference, Vineet Taneja, Head of Go to Market (India), Sales for Nokia disclosed that the company intends to launch the Nokia Music Store in India early next year (2009). D. Shivakumar, MD of Nokia India later confirmed the plans to us, but declined to comment on specifics.

The Nokia Music Store allows users who have purchased a Nokia 5310 or a 3G enabled N95 to download all the music they want, for one full year. They just need to register their phone, and can download the music to their PC, and transfer it to the mobile handset. The service is currently live in Finland, UK, Germany, Ireland, Italy, Netherlands, Singapore, Australia, France, Sweden and Spain.

There are two elements at the core of this launch - the first is the content acquisition, and the other is the distribution. Nokia is already acquiring content for the launch of its Ovi service, though the words “Free Music” will scare away many a content owner. DRM will be key to content acquisition, and an “all you can eat” plan won’t come cheap for Nokia. The other is the distribution - Broadband penetration is abysmally low in India, and Nokia will have to either allow users to download content over the mobile (which will end up being rather expensive for consumers). What will also limit the service, is the fact that it is restricted to particular handsets, so Nokia will use it primarly to sell the handsets.

Note: The access to content for Ovi will also be enabled early next year, Taneja had said.

WorldSpace Bankrupt And On The Block: What Happened & What They Were Waiting For

WorldSpace Inc, which provides satellite radio services, along with its US subsidiaries WorldSpace Systems Corporation and AfriSpace Inc, has filed for Chapter 11 (Bankruptcy). The owners of the company have secured financing of up to $13 million for 90 days, in order to facilitate a sale. Readers may recall that the company had announced having received financing facility of upto $40 million earlier this year, and re-branded as 1worldspace.

In India, the company operates satellite radio services, and had recently tied up with Bharti Airtel for radio on DTH. In August last year, the company had also tied up with MSN India for online radio, but we are told by reliable sources that there were issues since online and mobile rights for the music had not been sold to WorldSpace. The website doesn’t appear to be active anymore.

What Happened

WorldSpace was launched in India in 2000, with an eye on the countrys craze for music. They launched premium subscription services in 2002. At present, they levy a monthly fee of $3.3 (Rs. 150) in India for the base package, while the premium package is charged at $9.99. WorldSpace receivers in India are manufactured by BPL, retailed at prices ranging from Rs.2,499 to Rs.3,599 (approximately, $60 to $90). A majority of the sales were of their lowest priced receiver, for which they had to provide a subsidy.

Worldspace, meanwhile, was only able to gather 163,000 subscribers in India by December 31st 2007. What went wrong for them, was the launch and success of free-to-air radio stations from Indian companies, which were essentially ad-supported because of their massive userbase. Nevertheless, India remained a key market for them, which is obvious from the fact that by then, they only had 11,000 subscribers in the rest of the world (Europe, the Middle East, and Africa).

What They Were Waiting For
WorldSpace was banking on “Hybrid” digital radio services - a combination of satellite and terrestrial transmission, which would allow them to broadcast to vehicles - what they called “Mobile services”. The success of this model was also dependent on car manufacturers integrating WorldSpace receivers alongwith their cards.

But for this, they first needed spectrum allocation. The Telecom Regulator (TRAI) had issued recommendations, but recommended that licenses be granted only to Indian subsidiaries (100 percent Foreign ownership allowed), but subject to a revenue share of 4 percent of Annual Gross Revenue. However, nothing had been finalized, and the government had not issued any ruling.

With regulations taking time, they put their India plans on hold - reducing spending and marketing and sales activities, and shifted focus to Europe.

In Conclusion

Worldspace’s costs mounted, and the subscription based business model did not find enough takers to make it profitable. At the same time, the reworked business plan depended heavily on infrastructure spends (establishing a terrestrial repeater network), for a regulation on spectrum and terrestrial licensing to come through. Meanwhile, by December 31, 2007, costs continued to mount, and they incurred aggregate losses of approximately $2.5 billion. Given the current financial situation, I think it is unlikely that any financer will take a punt on supporting them, given that regulations may not favour them.

Do read the WorldSpace Annual SEC Filing, here.

A Question For You: what kind of a business-to-consumer subscription service do you think will find takers in India?

Landmark Considering Online Books And Music Retail: Report

Landmark, the books and retail chain in which the Tata group owns 76 percent stake, intends to retail books and music online, reports Televisionpoint, quoting official sources.

If you visit Landmark’s site, it appears they’ve outsourced online sales and distribution to Sify - most of the links lead to Sify Shopping. If Landmark goes solo, that’ll be a significant loss for Sify, since books and music are two of the key products bought online.

Update: Landmark should remove its old site . It appears they’ve gone solo, and are retailing their own books. Thanks for pointing it out Gopal.

What’s interesting is that they’re planning to set up a music store, where users can buy single tracks after sampling online, and also enable users to pause and resume downloads. According to the source based report, the group will set up a separate online venture, and is in talks for online retail rights for music.

Now online retail of music is not new in India, but it’s hardly anything to write home about - it’s been attempted in the past by Soundbuzz (now owned by Motorola), MotoMusic (powered by Soundbuzz) and music label Saregama. I just checked, and Saregama’s site is currently down for maintenance, while their CD retail website - HamaraCD - doesn’t load. Who uses these sites anyway? The problem for most of the retailers is the piracy rampant online - does a user download the music, easily available at a consistent speed, from bittorrent, or a site like Saregama.

The other key issue is the pricing - songs are for around Rs. 12-15 each, and yet are DRM protected which means buyers can port them only to a limited number of devices (usually 1-3 devices). Why bother?

Related:
- OnMobile Global Inks Exclusive Mobile Music Deals With Around 40 South Indian Labels
- Motorola Launches MOTOMUSIC In India With MOTOROKR E8

OnMobile Global Inks Exclusive Mobile Music Deals With Around 40 South Indian Labels

You’re reading it here first: The South Indian Music Industry will never be the same again. BSE listed OnMobile Global has entered the South Indian music business by inking mobile music deals with around 40 companies from SIMCA (South Indian Music Companies Association), MediaNama has learned from multiple, reliable sources. We’re awaiting a confirmation from OnMobile and J Sridhar of SIMCA. Neither has denied the deal, while many content owners and aggregators whom we have contacted over the past month have confirmed it. This is effectively OnMobile’s entry into the content space.

Sources say that the total value of the deal is around Rs. 8.5 crores, which is fairly small compared to Bollywood standards, where deals run into tens of crores, but this deal does mark a significant change in the way SIMCA functions. We’re told that it is likely to result in an increase in the value accorded to mobile content in the South Indian music business.

The Labels, The Deal, And Things In A Flux
What’s important is that Satyam Audios - which accounts for 30-40 percent of SIMCAs music catalog, has signed up with OnMobile. Some of the other labels include East Coast Audio, Five Star Audio, Mass Audios, Star Music, JSJ Audio, Amudam, Symphony Recording Company.

OnMobile has done exclusive individual deals with each company, and payouts will be made directly to individual companies; this is a change from the earlier practice, where payments were made out to individual content owners via SIMCA. SL Saha, former Joint Secretary of SIMCA, credited as the man who organized SIMCA and helped companies adjust to the digital age, told MediaNama that he is against exclusive deals. SIMCA earlier partnered with (Motorola owned) Soundbuzz, Chennai based TechZone, Onmobile, Mauj, Phoneytunes, and others (Updated). Saha’s company Inreco Hindustan and 4-5 others including Anak Audio and Iyengaram have not signed up with OnMobile, according to sources.

Over the past one month, we’ve received conflicting reports of which of the labels have signed up, and it appears that things were in quite a flux for a while. Madura Entertainment, a Telugu label, withdrew from SIMCA a few months ago, and we’re told they’ve tied up with Hungama. Saha, Joint Secretary of SIMCA, resigned from his post last month.

Note that SIMCA has not split up, since a majority of the labels have signed up with OnMobile. Some senior executives from the industry, who did not wish to be named, have termed the move as disruptive, but even they say that OnMobile is a responsible player, and has given content owners a better deal better than before, which is why a majority have aligned with them.

The Platform Advantage
Music based Caller RingBack Tones (CRBTs) form a significant part of the mobile operators VAS revenue business, and consumers pay three types of charges - a monthly subscription, browsing and content download. We’re told that content aggregators are now working on fixed fee model with some operators, while platform service providers are working on a revenue share basis. However, the models vary from operator to operator.

To simplify things - money is split between between five entities - the Operator, Content Aggregator, Royalty Owner, Platform Service Provider and the Government (tax). So a platform service provider which also becomes a content aggregator brings in greater efficiency into the value chain. Hence, OnMobile has greater leverage than a content aggregator in case of deals. A simplified diagram:

What do content aggregators do now?
There has emerged a trend of some of the larger companies stretching beyond their traditional role in the Mobile Content Value chain. We’d written earlier about the MotoMusic and Ovi model, and the impact on the value chain when a handset manufacturer becomes a content aggregator. Question is - can content aggregators compete? It’s a huge risk, and only aggregators that are operating on a large scale can compete…but for how long?

Some content aggregators we spoke to are considering aligning with OnMobile, since it now becomes the single source of South Indian mobile content; this will work in geographies where OnMobile doesn’t have a platform.

Italian VAS Co Dada S.p.A Launches With Airtel; To Bring Dada Entertainment To India Next Year

A consolidation has been pending in the Mobile Value Added Services space, and the last year has seen a few key events - OnMobile listed on the Indian bourses, MIH India picked up 30 percent stake in ACL Wireless, One97 Communications was funded and Bharti Telesoft acquired Jataayu Software. Rumours of other VAS companies being acquired have been floating around, but we’ve not been able to confirm any.

A new set of VAS players, lured by the “India Opportunity” of over 250 million mobile subscribers, have entered India over the past year - including the Italian Dada Mobile, Mango Networks, and some others still in stealth mode.

DADA Mobile launched subscription based services on Airtel yesterday. Available at http://in.dada.dj via WAP on Airtel, it is priced at Rs. 10 per day, allowing users to download 4 non-premium content, and 1 premium content every day. The content on offer includes the usual package - Ringtones, Wallpapers, Screensavers, Games; users are allowed to carry forward a maximum of 28 non-premium, and 7 non-premium credits on mobile. Medianama spoke to Shilpa Dureja, Marketing Director, India, Dada S.p.A about the companys plans:

How has the past year been for Dada mobile?
We’ve done a lot of ground work over the past one year to get the service off the ground. The acceptability for a subscription based model with the operators has come through now, and we’ve signed up Airtel
What made Dada set up operations in a low ARPU (Average Revenue Per User) market like India?
This is a market where Dada sees a lot of potential, and is working the way the Italian market worked initially; from our operations in Brazil - whatever cues we’ve managed to pick up - it seems to be on track. Besides, the number of subscribers in India is huge. It’s apparently one of the countries where WAP traffic is high - there’s an active WAP base here.
How was your first day of launch and how have you promoted the service?
We crossed a 1000 subscribers mark yesterday, which was great. Today’s been better than yesterday. We’re promoting via mobile advertising, off-deck - banner and text - mKhoj, MobileWorx and Buzz City.
Who are your content partners?
We’ve got content from Mobivention (formerly MEF), Mobibase, Telcogames, Seletra. The feedback I’ve received so far that is that the content is fairly fresh. In India, we’ve tied up with Mauj and IMI Mobile for content.
But you’re also competing with IMI and Mauj in the same market because they’re also aggregating and selling content…
While they do a lot of content selling themselves, they’re looking at distributing it via their WAP site or with partners. For us, we distribute across multiple networks and our reach becomes higher by that logic. Mauj and IMI will exclusively have their own content, while we bring in other content. We’re providing content providers with an additional revenue stream.

For Pricing Strategy, Revenue Share, Content plans and Dada Entertainment, click (more…)

Motorola Launches MOTOMUSIC In India With MOTOROKR E8

So almost six months after struggling handset manufacturer Motorola acquired online and mobile music distribution company Soundbuzz, Motorola has launched music distribution service MotoMusic in India. MotoMusic powers the MOTOROKR E8, two versions of which are priced at Rs. 15.455 and Rs. 13,999 respectively. The launch of MotoMusic is significant, since it comes before the launch of Nokia’s content service Ovi.

Value Chain: This is what the value chain looks like, with a handset manufacturer also becoming a content aggregator. This should, ideally, result in increasing efficiencies, and hence offer a greater margin to Motorola:

Pricing, Distribution and content partners: (more…)