E-commerce major Flipkart disappointed over one lakh regular customers by sending customised e-mails on Wednesday where it apologised for shutting down its digital music store Flyte.
Launched with much fanfare a year ago, Flyte was hailed by several industry players as “iTunes of India”.
While Flipkart said it has stopped the service (a paid download model) due to problems of piracy and payments, industry experts believed the company has succumbed to the fierce competition from the streaming-based music model and the launch of iTunes.
In an e-mailed statement, the Bangalore-based firm’s head of digital media and payments reason that, “We have realised that the music download business in India will not reach scale unless several problem areas such as music piracy and easy micro-payments are solved in great depth.
“Which is why, we feel that at present, it makes sense to take a step back from Flyte MP3s.”
What went wrong?
Buisness Line spoke to several players in the space and found out that the paid download model in India is facing challenges as consumers are moving to the new format of streaming music, which comes free and can be enjoyed at a click of button at any remote place such as mobile, iPad, iPod and similar devices.
Saavn, a New York-based player into music streaming, says the paid download model will have issues with pricing and that it is not scalable unlike the streaming platform, where revenues generally come through advertising and subscription.
“Consumers in India are shifting fast to the streaming format with the penetration of smartphones and tablets. It has already happened in mature markets like the US, where we have seen consumers preferring streaming format over iTunes,” said Rishi, co-founder of Saavn.com. In India, the company has seen its user-base growing by over ten times to 10 million in just three years. The total digital music industry is pegged at $400 million in generic revenues. However the actual market size would be around $10 billion, which consists of pirated versions also.
He added that another problem with the Flyte-type of services is that they sell songs without any digital rights management (DRM), a technology that controls their use on behalf of copyright owners.
Flyte, which sold songs for a price between Rs 6 and Rs 15, had set a limit on how many times a user could download the song from its servers, but had to tweak it soon after iTunes launched in India.
The latter has better brand recall and has provisions to fight piracy unlike Flyte, according to industry players such as Gaana and Dhingaana.com, who are on streaming platform and are seen as a competition to the paid-download model.
Re-launch soon
Meanwhile, Flipkart said it will tweak the model and re-launch the service in a few quarters.