KEYNOTE ADDRESS BY SHRI HIRAK DAS, MANAGING DIRECTOR,

SAGARIKA ACOUSTRONICS PRIVATE LIMITED

Anil (Studio Systems) has been doing a commendable job in bringing various important information about the Optical Disc Industry through his magazine. Forums such as this one also go a long way in developing the industry. I, on behalf of the Optical Disc Industry in India, would like to place on record our appreciation for a wonderful job done. Thank you Anil, I hope you will continue doing this for many years to come.
   Friends, Anil has requested me to present before you an overview of the Optical Disc Industry in India. It appears to be a very difficult task since the industry is in its incipient stages and no authentic data or statistics are yet available. However I will try to get into this difficult subject as far as practicable.

   I want to deal this subject in a few broad categories.

1)       Emergence and Convergence of various media to CD.

2)       CD Audio - Indian Scenario Present and Future.

3)       CD Video -  Indian Scenario Present and Future.

4)       CD ROM -  Indian Scenario Present and Future.

5)       DVD         - Indian Scenario Present and Future.

6)       Setting up a Replicating unit in India issues

7)       Indian Optical Disc Manufacturers Association (IODMA)

  1)       EMERGENCE AND CONVERGENCE OF VARIOUS MEDIA TO CD

The unique feature of CD as a media is that various media’s like audio cassettes, video cassettes, floppies, print media have all evolved over the years only to converge into one media and that is CD. All the above mentioned media’s were formidable in popularity in their own right. It is the versatility of the CD media which has been able to encompass all these media’s and has been able to dethrone them. With the advent of CD a/v cassettes, floppies, etc are progressively going down in popularity and demand. The CD media has come to stay.  

2) CD AUDIO – INDIAN SCENARIO – PRESENT AND FUTURE

It is estimated that in India the ratio of CD Audio to Audio cassettes is about 10% CDs to 90% Audio cassettes. Compare this to the same ratio world over, it is just the reverse. Audio cassettes are becoming extinct world over, but in India they are still existing as a dominant format. This is probably due to the sheer penetration of the audio cassette H/W and the cheap cost of S/W. I find that the CD H/W and S/W are following a similar pattern of the audio cassette industry. The big names in Audio player H/W manufacturing are making the H/W affordable and music companies are dropping the prices of S/W. We  foresee a scenario where the CD H/W and S/W will be comparable in terms of pricing to Audio cassette H/W and S/W. At this stage the CD market will explode and India will follow the world trend where audio cassettes will be relegated to a minority status.

  How long will this take? Well no one can really say but our guesstimate would be about 3-5 years from now. One threat to the emergence of audio CD as a mass product is the MP3 Format. MP3 is growing in popularity world over with the internet revolution sweeping across borders, but its implications on the CD format are still not quantifiable. I would say, “what we don’t know doesn’t hurt us!”
But MP3 is definitely good news for CDR manufacturing.

3) CD VIDEO – INDIAN SCENARIO - PRESENT AND FUTURE

VCD is a cheaper option to DVD, though the quality cannot be comparable. As we all know anything that is cheap has a huge potential to succeed in a price sensitive country like India. The success of this format is limited to S.E. Asian countries like China, HongKong, India, Pakistan, etc. The format is fast gaining popularity.

  From a Replication point of view, however, the major demand is still generated from institutional sales to various VCD H/W manufacturers that bundle free VCDs with VCD H/W. The actual VCD industry scenario is quite dismal and the order sizes typically range between only 500 to 1000 VCDs per title. The demand may increase with deeper penetration of H/W. But issues like piracy and cable TV are overshadowing the legitimate sales of VCDs. Cable TV with more and more channels to offer, some which are latest Hindi movies, may have a dampening effect on the success of the VCD format in India. VCD Rentals are also containing the demand for VCDs to a great extent. If issues of privacy and VCD rentals are not dealt with immediately then VCD may meet the same fate like VHS. I am sure Anil would make some efforts in this direction to ensure survival of the VCD format.

4) CD ROM – INDIAN SCENARIO – PRESENT AND FUTURE

As I can see presently this is where the action is really happening. The S/W market has indeed exploded and multimedia companies are mushrooming across the country. The ongoing internet revolution is also fuelling this boom. With so many M/M companies coming up, a boom in the CD Replication demand is a natural outcome. This sector is indeed witnessing a vertical growth which will sustain for years to come.

  But as usual the government of India takes pride in being a party pooper and has thrown cold water on CD Replicators’ plans of expansion. The Government has exempted CD ROM from payment of Excise and Customs Duty in order to give a boost to the IT Industry. Great! So what is wrong? Well, the Government has somehow forgotten the Baby CD Replicating Industry, by not exempting the raw material used in manufacturing CD-ROM, from payment of Excise & Customs Duty which typically is anywhere between 50% to 65%. This means that CD ROM, manufactured in India are  50% to 65% more costly than if manufactured in its S.E. Asian neighboring countries like China, Singapore, HongKong, Malaysia. Taking advantage of this situation offshore replicators have appointed commission based agents in all major metros of India to get CD replication orders for them. The modus operandi is simple, the commission agent offers a ridiculous price which a domestic CD Replicator cannot afford to compete with and flies with the order to the offshore CD Replicator and flies back with the CDs. Since CD-ROM, are exempted from payment of customs duty, the agent does not find any problem in import. This kind of an operation is growing rapidly and presently we estimate losing almost 40% of the Indian market to such operators, this will grow till some initiatives are taken to stop this. Anil, food for thought!

5) DVD – INDIAN SCENARIO - PRESENT & FUTURE

The present demand of DVD in India really does not merit anything to be said. We estimate it to be in the region of about 1,00,000 DVDs p.a. In any case I anticipate that the DVD format may only be popular in the video segment where the capabilities and capacity of the DVD is actually put to use. As far as the audio and ROM segments are concerned, DVD is an overkill. Here I tend to agree with an article in a recent US magazine that DVD is a solution to a problem that does not exist. DVD is yet to happen in India and has some time to really penetrate the market.

6) SETTING UP A REPLICATING UNIT IN INDIA – ISSUES

As a  part of the growing optical Disc Industry we invite all new/ prospective entrants in the field. We welcome them all. It is said that it is competition that keeps you ticking and alive otherwise you get too complacent. The present CD replicators are eight in number that are operational and scattered around the country. The capacity according to our estimate is sufficient to meet the present demand. Sony is shortly setting up their replicating facility in Bombay. A few more are in the offing. But in the short term the capacity will outstrip the demand and will lead to price wars amongst existing replicators. The strong will survive to enjoy the long-term benefits. For those planning ventures into this industry we have some suggestions.

§         Finance – Since the project is capital intensive you must have deep pockets to finance it. Keeping a contingency provision of 20% would be a wise thing to do.

§         Machinery- I am sure that the distinguished speakers after me will dwell on this issue at length & so I will not take up your time for that. But one piece of advise, we have met many (almost all) machinery manufacturers who claim that their equipment is the Rolls-Royce of the industry and others are Honda’s & Toyota’s. Well, we would just say that most of them are right but as a prudent entrepreneur it would make sense for you to evaluate all claims in details before investing.

§         Raw materials and Utilities- Since almost everything connected with CD Replicating is imported, we suggest you have good tie ups with the raw material suppliers who are indeed professional.

§         Governmental interference- Like any business enterprise in India, one has to be prepared for tremendous amount of interference by the Government in day to day functioning. First of all one has to be a philosopher to understand these laws and then one has to be a superhuman in trying to stay clear of them.

 

7)       INDIAN OPTICAL DISC MANUFACTURERS ASSOCIATION (IODMA)

To address these issues of governmental interference and several other issues, I took initiative to get all the CD Replicators together to form IODMA. We got an overwhelming response since everyone was facing similar problems. We are taking up various issues with the Government to overcome these problems and am sure will succeed in due course. Further under the auspices of IODMA we can try to help the industry in various ways. We have one suggestion to make at this august forum which comes after discussing with Anil. Presently Replitechs are held in various parts of the world where Indians find difficult to reach due to constraints of time and money. I am glad to learn that Studio Systems is organising Replication Asia 2000 in New Delhi in October this year. I am sure that it will do our industry a lot of good.

 

With this suggestion friends, I take your leave and say that the future looks bright lets join together to make it brighter. But let us remember that all that glitters is not gold.

 

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