Born in the USA, Saavn wants to disrupt pirated music market in India

A small company started in 2006 as a distributor of Indian music and films to North American publishers like Amazon, Hulu and iTunes, generated $3 million in revenue by 2009. Not a herculean figure, but the promoters, all born and raised in the US with a bonding for music as their USP, sensed a gigantic opportunity to serve the growing appetite for music in the Indian consumer market. Though profitable, the venture in that form did not have rosy growth prospects, according to its founders.

What Rishi Malhotra, Vin Bhat and Paramdeep Singh bet on then is now the fastest growing online and mobile music service that gets content from hundreds of music labels. Its collection of songs has now hit the two-million mark across various genres including Bollywood, ghazal, classical and devotional, in Hindi, Tamil, Telugu, Gujarati and Marathi.

Saavn attracted a million users in the first six months and has scaled up quickly since. As of June 2012, the company had a million unique visitors, according to comScore, and 8.33 million page views.  Saavn claims to have over 10 million unique users worldwide, of whom two-thirds are based in India.  It counts half a million new users every month. The company now operates from Mumbai and Boulder, Sunnyvale and Mumbai.

"We were all born and raised in the US. But, taking a step back, we noticed the one thing all of our friends and family had in common was passion for music from India, regardless of whether they had been born there or not," said Paramdeep Singh, co-founder Saavn.

"Over time, and given the rollout of 3G in India, with record label relationships already in place, Saavn gradually refined our focus to music, then music streaming, and then to creating web and mobile streaming products free, anytime, anywhere," Singh explained.

Saavn provides dynamic audio bitrate adjustment for better streaming on any connection (EDGE, GPRS, 3G, 4G and Wi-Fi). The company has also released its feature phone app in June, with a catalogue of 1.1 million songs.

Saavn makes money from ad revenues against streams of licensed content. Some of its advertisers include Samsung, Google+, Hyundai, Pantene, Lay's, Pepsi, Domino's Pizza and Nokia.

"All audio and display ad units on the Saavn website and mobile apps are calibrated to produce the most compelling connection between brands and music fans," says Singh.

Brands advertising on Saavn -– both on the Web and the mobile –- also get an extended reach to its sister properties like SmasHits.com and Saavn's YouTube channel.

As for revenue, Saavn gets to keep about 70 per cent of the gross revenues while the 30 per cent goes to record labels, besides a variable upfront fee.

The market scenario

According to International Federation of the Phonographic Industry (IFPI), as much as 32 per cent or almost a third of the total revenues in the music industry came from digital sources in 2011 – much higher than comparable numbers for other media segments like movies. So the world is moving faster towards digital music, which is also apparent from the decline in revenues from physical albums, compared to the growth in digital music sales. Digital music revenues were up 8 per cent year-on-year to $5.2 billion in 2011, as per IFPI.

The Indian market is a tiny speck in this, but still mirrors the trend. According to FICCI KPMG Indian Media and Entertainment Industry report 2012, the local music industry hit revenues of Rs 900 crore ($160 million) in 2011, up 5 per cent over 2010. The industry witnessed 19 per cent Y-o-Y decline in sales of physical music (CDs and cassettes), although there has been a 24 per cent jump in sales of digital music in the same period.

"Music is a multi-billion dollar industry in India. However, over 95 per cent of the industry is pirated and illegitimate. Saavn hopes to recapture much of these illegitimate revenue streams by disrupting the piracy market in India, offering a legitimate service that offers easier access and provides a better user experience," Singh said.

Looking at comparable Western companies, Spotify has 20 million users across more than 15 markets, and Pandora has 52 million in the US alone, which illustrates the size of the opportunity for streaming services within India.

"There are at least 150 million Indians on data-enabled feature phones, and we have a talented team working hard to put Saavn music in their hands. We predict that by 2015, everyone in India will have a data-enabled mobile phone, and Saavn's intention is to be their constant mobile companion," Singh said.

Saavn competes with other music streaming sites like Gaana and Dhingana. The former has 10 million songs in Indian and international languages, which are available on Windows 8 store, HTML5, iPad and Web. The latter has 3.5 million songs across 35 languages and other genres and available on iOS, Blackberry, Andorid, Nokia-based phones and Web.

And how does the industry see Saavn's growth trajectory?  According to Anirudh Suri, managing director, India Internet Group Advisors Pvt. Ltd, a firm which advises on investments in and incubation of early-stage internet/mobile start-ups in India, music streaming is one of the more widespread uses among mobile phone users in India.

"While most people are today listening to FM radio on their phones, eventually you would expect these users would want to listen to the songs of their choice and in the sequence that they want. Most feature phones today come equipped with FM radio, which is probably the biggest competition for music streaming sites in my opinion as far as the mobile platform is concerned. As far as smart phones are concerned, these music streaming sites are very well placed," Suri said.

"Saavn has managed to build a great app on the smartphone device, which creates a delightful experience for the user. The fact that it allows you to create playlists with streaming music means that it can also be used for various occasions, including for DJing at parties (which I have done myself as well)," Suri said.

"They have managed to strike some great partnerships with firms like Facebook which means that they have placed themselves well to be a social music streaming player," he said.

Saavn has raised $6 million in angel funding and undisclosed VC funding from Tiger Global, according to the company website.

(Edited by Prem Udayabhanu)