Flipkart shutting Flyte has more to do with its strategy than flaws in industry, say peers

E-commerce major Flipkart entered the digital music business with its store Flyte with a bang. It was said to be a big move forward for selling digital content in India. So when the firm decided to shut it down a little over a year after started selling legal music online, the big question is: does it mean the end of the road for legal music purchases in India?

"We have realised that the music downloads business in India will not reach scale unless several problem areas such as music piracy and easy micro-payments, etc, are solved in great depth," was what Mekin Maheshwari, head of digital media and payments at Flipkart said.

But industry peers who also run digital music stores don't see it as a buzz killer and remain bullish on the market. At least two other large firms sell digital music online, Saregama and Hungama.

Siddhartha Roy, COO, consumer business and allied services, Hungama, which has the same service running on its portal and app, said, "The digital music streaming and downloads business is not only here to stay but will grow exponentially. Two factors that account for this huge opportunity are smarter, affordable devices and more accessible bandwidth. The sector is absolutely booming."

Referring to the two main issues that plague the sector— piracy and micro payments—Roy said, "Yes, piracy is rampant but still so many people buy music. It's about the experience we give to customers."

He said electronic payment is a problem in India but that is more due to the penetration of plastic money and less due the issues of 'micro payments'. "Even in traditional e-commerce cash on delivery is much higher than online payment. This is because there are not enough cards in our country and even if there are, people are not willing to make online payments. But alternative solutions like operator billing, online wallets, etc, can solve this problem easily," Roy said.

According to Adarsh Gupta, senior vice president of RPG Group-owned musical label Saregama India Ltd, Flyte shutting down is a one-off incident and it is not going to make any impact in the audio or video streaming industry. "The audio and video streaming market is growing. It is in fact on the threshold of a massive growth in India. So, I don't think it will affect other companies operating in the segment. It may take some time for these companies to establish, but I have no doubt in my head that this is going to be the feature." Saregama also launched a digital music store along with Internet radio in December last year.

It may be noted here that both Saregama and Hungama have a kind of hybrid business model. While Saregama generates revenue through its music label and in effect has zero cost of content per se, Hungama has a streaming business in addition to digital music store. Flyte was essentially a music store where one could go and purchase songs or albums; it didn't have a model of online streaming which could have brought in other monetisation options.

The industry believes that Flipkart shutting down Flyte has got less to do with the industry as a whole and more to do with Flipkart's own strategic interests. "I suspect the amount of money asked by the record companies and the slow uptake among customers helped them make their decision. Could they have avoided the shutdown? Sure, but it seems to me that their priority was to focus on things that have a bigger bang for the buck," said Mukund Mohan, an active angel investor in tech startups who is also part of Microsoft Accelerator.

Flipkart's decision to shut down Flyte came as a huge shock to some but going by the industry views, it seems the e-commerce firm just didn't have the patience for the sector and for now it would rather focus on things they have already got right.

But does the decision of video streaming site iStream to down shutters point towards a flaw in the business model for streaming business as well?

"Gaana, Saavn, Dhingana are still streaming music. YouTube still is the number 1 site for video in India, IPL (Indian Premier League) on the net had more viewers than the last few years. So I don't think streaming and downloading has failed to take off. It only means the two companies (Flipkart and iStream) made some incorrect assumptions about the size of the market and the pace of its growth," Mohan said.

(Edited by Joby Puthuparampil Johnson)