New Delhi: How soon you’ll be fast-forwarding, and not speed-reading, the latest self-help book by Robin S. Sharma could depend on something as mundane as sales tax.
A new report by Futuresource Consulting, a British consulting firm, projects the Indian audio book market to touch $9.4 million (about Rs40 crore) by 2012, selling 1.3 million copies every year.
“So far, the single factor that has hindered the growth of this medium is price,” Kanchi Thota, who authored the report for a Futuresource client, said in an email interview. “Right now, the average retail price of an audio book is Rs650.” Thota expects this to drop, year on year, to less than half by 2012.
But, for that to happen, more Indian companies will have to stop importing their audio books and start manufacturing them domestically--which also means that they’ll have to start shelling out sales tax, or pitch for a special exemption on audio books.
“Audio books should be taxed as CDs and cassettes, because they just aren’t the same as a physical book,” an executive at a leading book retail chain, wanting to remain unnamed, said. “But none of the Indian book importers and distributors has a sales tax registration, since sales tax isn’t levied on books. So they just bring in small quantities of audio books and sell them under the radar as books.”
Some Indian audio book ventures have figured out more ingenious alternatives. The Chennai-based Karadi Tales, a leading producer of audio books for children, sells “audio book bundles, which is a book plus CD,” Thota said. “Because it is essentially a book with a ‘free’ CD, it doesn’t attract sales tax.”
Karadi Tales launched its first audio book—The Blue Jackal, a Panchatantra story— in 1996. It has since become known for its attractive stories and marquee narrators, such as actors Naseeruddin Shah and Nandita Das and the playwright Girish Karnad.
After The Blue Jackal, Karadi Tales has launched 43 more titles, including six for adults and young adults. But the genre of audio books is still relatively unknown, said C.P. Vishwanath, director of Karadi Tales. Low as they are, the sales of audio book promise to rise strongly. For the nationwide book retail chain Landmark, audio book sales form 2-3% of overall sales, said M. Madhu, head of books at Landmark. “Once the issue of taxation is sorted out though, the market will grow significantly.”
In other markets, such as the US, audio books have taken off as ways to make morning commutes and airplane journeys more interesting.
In India, expansion will follow growth in allied consumer electronics, a market that Futuresource values at $3.8 billion today and a potential $16 billion by 2012. The proportion of households with home audio-visual products, which is less than 15% today, will rise to 30% in 2012.
“Prices will decline as international publishers begin replicating discs in India, saving on production charges, freight charges and import duty,” said Thota. At present, Madhu calculates, imports of CDs invite upon themselves a heavy burden—a 40% import duty, to which is added 4% value-added tax, or VAT, plus inter-state sales tax of anywhere between 4% and 12%, as well as freight and vendor margins.
Landmark has begun working with a publisher it won’t name to domestically manufacture audio book CDs. “We’ll sell them by paying and charging VAT on them, and this will help bring down prices significantly,” Madhu said. “Roughly, such a product will be priced between Rs200 and Rs300.”
The audio book market may need to brace for another upheaval. “I think, in the long term, sales will move to an electronic format, rather than a physical format,” Madhu said. “Then it will be very interesting to see the implications of taxation when legal electronic downloads become popular.”