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The Jakarta Post
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Record labels slipping through digital cracks

  • Mariel Grazella

    The Jakarta Post

Jakarta | Tue, February 14 2012 | 10:10 am

The voracious efforts to push anti-online piracy bills put out by US entertainment giants, including the recording industry association, which critics dismiss as a sledgehammer, is evidence of the degree of malaise these industries have reached towards digitalization trends.

Digital trends, including illegal downloads, file swapping and free music streaming have become prime destinations for those who once rifled through brick-and-mortar record shops for CDs — the lifeblood of many record labels.

Local labels are not exempt from the tangles of digitalized music. The revenues these labels reaped from the robust sales of ringback tones (RBT), the most profitable form of digital music, took an about face in October last year.

The government ordered content providers to abolish the automatic re-subscription of RBTs after customers complained that their mobile phone credits had been deducted without their prior consent due to these services.

Warner Music Indonesia marketing head Hendra Tanusaputra said that over the last three years the label had relied on revenues generated by RBTs as sales of CDs waned.

“Up to 60 to 70 percent of our revenues came from RBTs, but that was before October 2011. Revenues from RBTs started to drop after the government introduced the new regulation,” he said, adding that the drop reached at least 50 percent.

“If around 500 people used to activate the RBT per day, now it is only 50 people,” he said.

Ringback tone services vary in fees. Mobile phone operator Telkomsel charges around Rp 9,000 (US$1), while XL Axiata sets a fee of Rp 6,050 for monthly subscriptions.

Aquarius Musikindo marketing head Meidi Ferialdi similarly explained that the label has experienced a significant drop in RBT-generated revenues, which contributed 70 percent to total revenues.

Labels could not yet rely on revenues generated by online downloads. Illegal download sites have besieged those such as melon.or.id and langitmusik.com, which work with labels in providing legal downloads, some charging Rp 5,000 per song.

Sony Music Indonesia managing director Toto Widjojo pointed out that illegal download sites drew most of the traffic, with traffic reaching 6 million track downloads a day for certain sites.

“This is a loss, not only for Sony, but also the entire industry,” he said.

He added that massive illegal downloads have made the business of providing legal downloads less lucrative for websites, as well as mobile phone operators who could actually provide a mobile-based platform for legal downloads.

Mobile phones are the primary access to the Internet in Indonesia, not to mention the favored device to listen to music.

“We need to bring as many businesses as possible, whether it is locally-based or from overseas, to provide full-track downloads,” he said.

Hendra also pointed out that industry players were aware of the potential of a mobile platform for legal downloads. Yet, issues such as royalties, sale prices and whether the tracks are embedded with digital rights management (DRM) affected discussions.

DRM is a technology intended to protect copyrights by blocking the unauthorized use of digital content.

“Some labels prefer non-DRM, as this would help create awareness of an artist because people share the downloaded files with their friends,” he told The Jakarta Post.

Faltering revenue has forced labels to grapple for new distribution channels. For Aquarius, Kentucky Fried Chicken (KFC) and other fast food chains, this became a critical distribution channel for CDs by Agnes Monica.

According to Meidi, the sales of the artist’s CDs through this distribution channel surpassed the combined sales of the label’s other artists. The label has around 24 artists under their label.

“We have to work extra hard in selling records in digital form, such as CDs, DVDs and VCDs by not being dependent on the traditional market,” he said, referring to record shops.

Toto added that the recording industry “needs help in shutting down illegal download sites”.

The government banned access to 20 illegal download sites last year. Labels though, have said that the move has not stopped illegal downloads.

“The music industry can meet its demise if illegal downloads persist,” he stated.

Tech expert Andy Zain said that the industry had to shift its focus from demanding shutting down illegal download sites to providing incentives for legal downloads.

He said that the music industry must be receptive to platforms that facilitate convenient, low-cost yet high-quality legal downloads — factors that made Apple’s iTunes popular.

“They must have the willingness to transform” he told the Post.


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