The heavily skewed music-tech startup landscape in India

As you may know, I got my start in freelance journalism in 2015 by covering music-tech startups for Forbes. I loosely defined a “music startup” as any tech-driven company solving pressing problems for music creators and companies — whether through micropayments, crowdsourcing tours or reinterpretations of the sharing economy for artists.

Since those beginnings, I’ve naturally gravitated towards discussions on music-tech entrepreneurship both online and offline at industry gatherings around the world — including, most recently, the All About Music (AAM) conference that I attended in Mumbai.

You may know already that India is one of the world’s largest IT hubs, with a projected $181 billion in revenues from IT services and business process outsourcing (IT-BPM) by the end of 2019 — over 75% of which will come from exports to the U.S. and other countries, according to national trade body NASSCOMM.

This reputation is quickly expanding into support for local tech entrepreneurship as well. A slate of unicorn startups like Oyo, Flipkart, Ola Cabs and Paytm have gained global renown, with an abundance of additional early-stage activity across areas including fintech, healthcare, agriculture and online education. Chinese behemoths like Alibaba and Tencent are also investing more in Indian startups, amidst a relative slowdown in domestic startup investment in their home country.

I was looking forward to learning more about how this unparalleled tech activity translated to the music and entertainment industries in India. But to my surprise, there were almost no programmed discussions or even any panel speakers representing local music-tech startups at AAM.

To clarify, most of the entertainment-tech companies present — including local services like Saavn, Gaana and Hungama, as well as international services like YouTube and Smule — were not only in the consumer-facing streaming business, but also had already far outgrown the “startup” label, as they each touted a critical mass of tens if not hundreds of millions of users.

Turns out, that gap is consistent with the amount of actual funding that music-tech companies have received. During an AAM panel on funding for music companies, Neeraj Roy, CEO of Hungama Digital Media Entertainment, shared that out of the $700 million or so in funding that went to Indian music-tech companies over the past five years, around $600 million ended up going to consumer-facing streaming platforms that already had millions of users (including Hungama, Gaana and Saavn before its merger with Reliance Jio).

This skew isn’t necessarily unique to India. In a 2017 analysis for Billboard (my first one for the publication!), I found that 75% of the nearly $900 million in publicly-announced funding that went to music-tech companies in the first half of 2017 ended up going to streaming services, while over 80% of that funding pool went to the top four companies on my list.

Nonetheless, more mature music markets like those in North America and Europe generally offer a wider variety of early-stage resources for music startups. A key example of such a resource is the growing ecosystem of music accelerators, which have encouraged investment activity across multiple B2B and B2C areas of the industry beyond streaming alone.

In fact, there were more international music-tech companies represented on AAM’s speaker lineup, such as Smule and Centralized, than there were local Indian founders.

Smule actually came forward with one of the more interesting music-tech growth stories for me at AAM. According to Jesse Gillette, Smule’s Senior Vice President of Business Development and Partnerships, up to eight million of the company’s 40 million monthly active users are based in India, and up to two million of those monthly active users are on the app daily, for an average of 57 minutes per day.

Upon doing some research after the panel concluded, I also learned that Smule received a strategic investment of $20 million in October 2018 from Times Bridge — the global investment and partnership arm of the Times Group, the conglomerate that also owns both the record label Times Music and the streaming service Gaana. Times Bridge, whose officially stated goal is “bringing the world’s best ideas to India,” made a similar investment in social storytelling platform Wattpad in March 2019.

While these kinds of stories are interesting, I wish there were more information online on local Indian startups that were building products to help artists and music companies, not just for music consumers. Even when searching “Indian music startups” on Google, I struggled to find examples of these more “B2B” music startups that are still around today.

One likely reason there isn’t enough entrepreneurial activity on the B2B/artist side: neither founders nor investors see any meaningful financial opportunity yet. According to IFPI’s 2019 Global Music Report, the Indian recorded-music industry made US$156 million in revenue in 2018. While indicative of 25% growth year-over-year, that amounts to less than 1% of the revenue generated from India’s IT-BPO industry and just 7% of what the national film industry, inclusive of Bollywood, made back in 2015.

Aside from this gap in dollars and cents, there’s also a deeper cultural gap. Entrepreneurs arguably can’t afford to service independent artists or labels effectively if there’s no product-market fit, i.e if the investment in independent artist development doesn’t already exist at scale. In general, Bollywood’s historical dominance over the Indian music industry has left little financial wiggle room for artists to make a career out of original music at all, let alone pay third-party tech companies to help them manage their careers (I discussed this challenge around A&R in a previous Patreon post).

In this vein, AAM was merely a reflection of market activity and demand: it was highly content-heavy, with lots of conversation about Bollywood and “non-film” music but little time dedicated to how to drive tech innovation in both consumer experiences and business practices. The most compelling music experiences emerge when cultural and technological innovation go hand-in-hand — a mutually beneficial relationship that will hopefully manifest as the Indian music industry continues to grow.