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New Delhi: A year ago, listening to a song people raved about on Facebook, or that tune stuck in one’s head, was almost impossible if it hadn’t already been preloaded on an mp3 player or phone, or without access to a music-streaming app.

For Bharti Airtel Ltd, the solution was to come up with a music curation app of its own that would create a new revenue stream for the telco and in the process drive significant data usage in an intensely competitive market. It was becoming clear at the time that data usage would become the next battlefront for telecom companies.

Bharti launched Wynk—an app that allows users to stream and download music, similar to Saavn, Gaana or even Apple Music—in September 2014 that can be downloaded on all smartphones, across service providers.

This was the first time an Indian telco itself became an OTT (over-the-top) app provider. Until then, telcos had only been allowing their subscribers to install and use other OTT apps, such as Skype and WhatsApp.

“The primary way people used to consume music, on their phones, was by sideloading—people would buy a memory card preloaded with music and then load it on their phones," said Srini Gopalan, director, consumer business, Airtel. “There’s no data consumption and the experience leaves a lot to be desired—you had a fixed few hundred songs that you could listen to—and most of the music was pirated. This was because at the time the digital music industry was very fragmented, there was no good-quality curation happening, and there was a big opportunity to drive the category as a whole."

The timing was right. Globally, OTT service providers including YouTube and subscription-based digital content companies such as Spotify have acted as a catalyst in the growth of audio/video data streaming. Global audio and video traffic combined is expected to reach 82% of all Internet traffic by 2018, a May report by Deloitte said.

In the June quarter, Airtel’s India mobile data revenue rose 70.4% to 2,324 crore, boosted by a 41% increase in average usage per customer to 656 megabytes (MBs) and a 30% increase in data customer base to 46.3 million.

Consumption of music also leads to a significant amount of data consumption, money in the bank for Airtel. Another reason Airtel chose music for its maiden OTT offering is the fact that music is a sharing experience, Gopalan said.

Typically, if a user likes a song, he shares it among his friends. This means access to that one song could lead to an exponential bump-up in usage. “To be truly competitive, you have to be open. You can’t restrict yourself to only your subscriber base," Gopalan says. “Look at Spotify—social consumption is a huge part of music consumption. And for it to be social, it has to be carrier-agnostic."

Music was also the easiest business for the Mittal family-promoted telco to get into. Although it did not own the rights to any songs, it was already a music distributor through value-added services such as caller ring back tones, radio and music on demand. The existing relationships helped the company get access to content.

The next step was developing the app.

“We looked at many other telcos, globally, which tried to build the engineering team completely in-house, and we found that it doesn’t really work. You need the right mix of building some of the skills in-house and building outside partnerships," Gopalan says.

Wynk was mostly built by Bharti SoftBank, a joint venture between Bharti and Japan-based SoftBank Corp. Some elements of the product design as well as integration with telco billing systems were done in-house.

Bharti used the newly developed expertise for its next app—Wynk Movies, which it launched in August—as well as to improve its self-service app—MyAirtel (which ranked among the top five most downloaded apps in the Android playstore in May).

“The new 4G site also uses the engineering learning from building apps. That learning is invaluable," Gopalan says.

Wynk music also spurred the existing music-streaming services Saavan and Gaana to expand, claims Gopalan.

“One of the things we wanted to do was catalyse the ecosystem, since our business is still data consumption. So from our perspective, it’s been brilliant that across Saavn, Gaana and us, we’ve seen phenomenal growth in the last year. Between the three of us, you’ve seen a three-four times increase of the actual streams of music on an app," Gopalan said.

Wynk mainly competes with Saavn, launched in 2007, with around 15 million active users and valued at $300-400 million; and Gaana, a two-year-old app with 16 million active users and owned by the Times Group. Wynk has hit 10 million downloads in the last year of operations, Gopalan says. He declined to share the number of active users.

And since users stream nearly three times the music they download, that means higher data consumption, and more revenue for the telcos. The apps, on the other hand, make money through a mix of advertising and some subscription, and are currently not profitable.

“While the competition may be currently ahead, the telcos have the advantage of deep pockets and a much easier reach to their customers, with whom they have an existing relationship. This means they could easily edge out the start-ups in various segments of the app ecosystem," said a telecom and media analyst with a large management consulting firm on condition of anonymity.

Hemant Joshi, partner, Deloitte Haskins and Sells, disagrees. “The beauty of this modern economy is that you don’t have to be big to win. It could enhance the app ecosystem. There’s more money on the table and more usage, and hence more revenues," he adds.

Saavn raised $100 million in Series C funding in July from Tiger Global Management Llc and other investors; it plans to use the money to scale its services and move to video—something Airtel has already done with Wynk Movies.

But there’s no line of sight on the winners. “It’s still too nascent a sector with many new operators still entering. It’s a very dynamic sector and it will be exciting to see how these guys evolve," a media analyst with a multinational brokerage firm said on condition of anonymity.

Meanwhile, Airtel is actively talking to various app developers and providers in a variety of sectors, ranging from healthcare to so-called Internet of Things (IoT) to launch more than one app in the next year.

IoT is defined as a worldwide network of “things" that include identifiable devices, appliances, equipment, machinery of all forms and sizes with the intelligence to seamlessly connect, communicate and control or manage each other to perform a set of tasks with minimum intervention.

Airtel will look at partnerships in these new endeavours given that they need very specific domain knowledge and skill sets.

“There are categories where we don’t want to play in. We don’t believe there is room for another social network. There are other categories where we believe there are opportunities, but we will have to work closely with that app provider and help take it forward. Where we don’t have the expertise to do that stuff, we believe that it’s best left to them to do it.... It could be a purely marketing partnership, rather than buying into one," Gopalan says.

The telecom industry could also see a big shift in its business model where the telcos are rivals in the front but share everything at the back end, to cut costs, says Joshi. “There could be a scenario where one telco does one kind of app while another does another kind, and both drive (data) traffic for each other," he says.

“The barriers between industries are disappearing. It’s difficult to say what kind of company is Google. Is it a search company or is it a technology company or is it an advertising company? Similarly, the way telcos are spawning off into different businesses to drive usage—be it payment banks, or entertainment or anything else—the identity of a telco is undergoing a metamorphosis," Joshi says.

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