Indian streaming music startup Dhingana faces an uncertain future after T-Series, its biggest music label partner, said it will not be renewing their licensing agreement.
Soundbox reported last week, and T-Series president Neeraj Kalyan confirmed to TechCrunch, that the company will not renew the license set to expire for nearly 8,000 songs from Dhingana’s catalogue. “We were not able to see much traction in the service and secondly we couldn’t agree on the commercials and both parties thus decided to part ways in an amicable manner,” said Kalyan.
However, it looks more like a near-death experience for the music service and not an imminent shutdown. Dhingana CEO Rohit Bhatia said that any new developments will be shared this week. He declined to comment on whether Dhingana will indeed shut down.
Any recovery from T-Series ending its licensing agreement would depend on whether Dhingana can overcome the hurdles of poor ad rates, rampant music piracy, and rising costs of supporting its free service in the country — issues facing every streaming service in the country.
Dhingana is among the top-funded music startups in India. It raised $7 million in Series B funding in October last year from Lightspeed Venture Partners, Inventus Capital Partners and Helion Venture Partners. Bhatia told Medianama that Dhingana is in the process of restructuring its operations.
Dev Khare of Lightspeed declined to comment on Dhingana, and executives at Inventus Capital (another investor in Dhingana), also refused to comment.
Another source, a music industry executive familiar with Dhingana’s negotiations with T-Series said Dhingana didn’t agree to the music label’s commercial terms and more importantly, was running out of money. “T-Series’ exit is a trigger, but Dhingana’s problems are much beyond that,” this person said over the weekend.
The Challenges Facing Music Streaming In India
Earlier this year, India’s largest e-commerce company Flipkart shut down Flyte, its digital music store, citing piracy and complex payment mechanisms among the top reasons for the decision.
Whether or not Dhingana shuts down, being a pure-play streaming music startup in India is going to get tougher for sure.
There are some big challenges facing both the free streaming and the pay-for-download models in India — music piracy is clearly the toughest to battle, with most consumers still preferring to download free music from illegal sites like Songs.pk. The other challenge is that most big music labels demand stiff fees for awarding any digital music rights apart from the per-stream cost for each of the songs.
The recent Bollywood hit Chennai Express for instance, sold music rights for an estimated $2 million. The music labels want bang for their bucks and they cannot achieve that by being too generous in their commercial arrangements with the streaming services.
The Holy Grail for all these music startups is to reach a scale where they are more comparable with a Spotify. But as the CEO of one of the music startups in India told me over the weekend, becoming a Spotify will require very deep pockets, enormously patient investors and, above all, an industry where more consumers are willing to pay for legal music downloads. Unfortunately, that’s not the case. India’s media and entertainment industry loses about $4 billion every year due to copyright infringement.
Telecom operators like Vodafone on one hand, and aggressive Internet platforms like YouTube on the other, are threatening to hit these pure play music startups very hard. YouTube’s rumored music streaming service on top of what it already offers is set to put more pressure on advertisers to increase their ad spending with Google.
So will other music-streaming services face this ‘loss of faith’ from music labels?
Gaana.com (backed by Times Internet Ltd) and Saavn (the Spotify for Indian music), continue to survive and even expand their services, thanks to the deep pockets and some innovative business models. Their success (so far) also reflects that the digital music scene in India may not be so gloomy after all. Gaana has around 7.5 million monthly active users.
Satyan Gajwani CEO of Times Internet, which owns Ganna, said the focus is more on building consumer habit of paying for legal music.
“We have started to convert free users into paid ones, but our primary goal today is to build the habit of using Gaana before piracy, and we are confident over time of converting free users into paid ones,” he added.
Saavn CEO Vin Bhat told me that despite challenges of music piracy and competition from Google’s YouTube in getting a bigger share of the ad market, there’s a large addressable market in India. Already, almost half of Saavn’s 11 million monthly active user base is from India, and it’s growing.
Kalyan of T-Series added that it will continue to work with Saavn, Gaana and others, as these platforms continue to show good traction.
“The streaming business has to slowly move from free economy to paid economy as sustainability of ad-supported revenue model is a big question mark. Free music is a very dangerous thing, and we would not like our next generation grow up believing music is for free,” Kalyan said.
Lead picture courtesy Soundcloud.