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.