Nouveau teen Megha Sharma is a music freak. She listens to music when she is playing, eating, chilling out with friends, even when she is studying. Much to her delight, there's music everywhere-in taxis, at shopping malls, fast-food restaurants, gymnasiums, barber shops and roadside tea vends. More Indians are listening to music than ever before. And they are listening to more music than ever before.

Sounds like the best of times for the music industry. The reality is distressingly different. Music is booming but the music industry is going bust. After touching a high of a Rs 1,200 crore in 2000, music sales have halved (see graphic). The industry is likely to post a loss of over Rs 150 crore in 2002-3. At least three of the 12 big music companies in the country are reportedly up for sale. Many music companies are diversifying into producing films and TV programmes or exploring avenues like theme parks, home videos and games.

The biggest reason for falling sales in the times of rising interest in music is the proliferation of cheap-even free-music, almost entirely pirated. "Everybody is listening to our music but nobody is buying it," says V.J. Lazarus, president and managing director, Universal Music. The loss to piracy is pegged at Rs 700 crore, which is higher than the industry's 2002 turnover of Rs 600 crore. Music freaks find it cheaper to create their own CDs. And why not? A CD writer costs about Rs 2,500 and blank disks Rs 12-15 whereas an original music CD is priced around Rs 150. An estimated 180 million blank CDs were sold in India last year; this is projected to grow at 50 per cent annually. The rampant piracy is affecting the industry's sales figures. During the 1990s, albums of hit movies like Hum Aapke Hain Koun and Dilwale Dulhaniya Le Jayenge sold over 10 million copies. Last year's hit Raaz barely sold 35 lakh copies.

The Internet is only making the nightmare scarier. Despite the low Internet penetration in India, free downloading of MP3 music has caught on in the country. There are over 600 websites from where Indian music can be downloaded for free. This has given a significant boost to music piracy.

Insipid copyright laws have not been much of a help. "Our copyright laws are weak, prosecution is lax and punishment is lenient," says Shridhar Subramaniam, managing director, Sony Music. Of the estimated 5,500 cases of piracy registered in the past five years, there were convictions in only 300. Only 30 of these were serious convictions. Punishments like a one-day imprisonment or Rs 500 fine hardly deter piracy. In a desperate bid to curb piracy, the music industry had cut CD prices by 25-50 per cent in December 2001. The strategy backfired because sales perked up but the discounts dented the industry's bottom line.

Another problem facing the music industry is the poor showing by Bollywood last year. Hindi film songs constitute over 70 per cent of the music industry's business. There was no major hit from Bollywood last year. Most mega-budget (over Rs 20 crore) releases like Om Jai Jagdish, The Legend of Bhagat Singh and Hum Tumko Na Bhool Payenge bombed at the box office.

Even hits like Devdas provided no solace. Companies were unable to recover the huge sums they paid to acquire music rights. Universal Music bought the rights of the film for Rs 12 crore but has not reportedly recovered its investment. Films touted as musicals did no better. Tips, which acquired the music rights of Yaadein for over Rs 6 crore, lost a chunk of its investment. It has now stopped buying film music. The diminishing returns from Bollywood have brought down the price of music rights, from Rs 7-8 crore in 1998 to Rs 1-1.5 crore now.

As if all this was not enough, music lovers are changing their tastes faster than DJs can change CDs. Bhangra pop, a rage barely two years ago, is no longer selling. Daler Mehndi, once a sizzling star, is no longer considered hot. "The shelf life of singers and music albums is getting shorter," says Lazarus.

Faced with dropping sales and eroding profits and buffeted by piracy, music companies are chalking out strategies to tide over the bad times. Perhaps the best-and cheapest-way to do that is to package old wine in a new bottle. Companies like Saregama, which has the largest music archives, are recompiling old Hindi film songs into new albums at just a fraction of the costs. So Dard is a collection of dirges, Mohabbat has love songs and the Golden Collection is, well, an album of evergreen hits.

The new bottle also has a come hither label. Remixes, repackaging of old film hits with steamy videos and contemporary beats, are a cost-efficient route to the top of the charts. Whether it is Aaja piya tohe pyaar doon or Kaanta laga, at least four of the top 10 numbers on music charts today are remixes. Remix veterans like T-Series, whose DJ Doll and Aur Ek Hasina Thi are currently the top selling albums, and UMI10 are doing brisk business. Even companies like Sony Music have joined in with its Dance Masti series.

Piracy, however, remains enemy No. 1. The industry is investing 1 per cent of its turnover in spreading awareness about how piracy is killing music and preventing the emergence of talent. It recently organised a workshop for police officers on copyright laws. At another level, the industry is lobbying with the Government for amending the law which limits the copyright of an original work to just two years after production, compared to the global norm of 60 years.

To reduce the risk from piracy, many companies have changed the structure of payment to artists: they make smaller upfront payments and offer higher royalties which are linked to album sales. Others have become very choosy when it comes to artists. "We have become extremely cautious while choosing albums," says Abhik Mitra, managing director, Saregama India Ltd.

Companies are also exploring other genres of music-lounge, fusion, Sufi pop, hip-hop-to reduce their dependence on Bollywood. Music Today's Ishqa Ishqa-a Sufi pop album-is doing well. Similarly, Wordwide Records' Buddha Bar has sold well in India despite a steep price tag of Rs 1,200.

Companies like Music Today are also leveraging their distribution and marketing network to get more business. Smaller companies like Isha Music and Ninaad have tied up with Music Today for marketing and distribution of their albums. Says Venkat Rolla, coo, Music Today: "Smaller companies prefer to focus their limited resources on creativity, leaving distribution and marketing to third parties."

These measures may bring some relief but the Indian music industry desperately needs some Bollywood hits to start singing again. More importantly, it needs to find a way to plug the piracy leak that has been draining its profits. Till that is done, music may boom but business will not.

-with S. Sahaya Ranjit