The country's leading music companies are grappling with a new problem: how to sell their music. Sale of cassettes and CDs are on the decline, while online sales have been severely undercut by free downloads.

Industry estimates suggest that only 10 per cent of the music downloaded from the Internet is legal. For the remaining 90 per cent, the owners of the rights for the music never get paid.

The International Federation of the Phonographic Industry has estimated that there are 40 illegal downloads for every one legal download. The writing on the wall is clear: Music now needs to be sold online and at very competitive prices.

The Sanjiv Goenka-controlled SaReGaMa, which has the rights for over two-thirds of the music ever recorded in India, will soon put all its music on a website from where customers can download songs on to their computers, iPods or mobile phones. Company insiders say the website will offer downloads for as little as Rs 10 per song.

The company has also started offering customised CD service through www.hamaracd.com. It is also looking to deliver digital content via kiosks at retail stores. "Here a customer can pay by cash. Through a series of collaborative efforts, we have a pilot project running in four cities with over 25 kiosks," says Mukul Kansal, general manager (business unit), SaReGaMa.

SaReGaMa first noticed the changes when offline sales started stagnating at its retail stores. Consumer electronics firms too say that the buyers are now staying away from conventional audio systems.

The company has since started stocking accessories and toys in the stores to drive sales. Next, will be the website for music downloads.

According to projections made by Strategy Analytics, a market intelligence firm, the global online music market will grow 62 per cent in 2007, to reach $2.7 billion and will ramp to over $6.6 billion in 2011.

To hedge its risks, the company has also ventures into films. Though its last venture, Chain Kuli Ki Main Kuli, failed to set the cash registers ringing, SaReGaMa is learnt to have some ambitious projects in hand, including one with noted Kolkata director Rituparna Ghosh.

Yashraj Films' website, www.yashrajfilms.com, offers digital downloads of audio tracks of its own films and uses Microsoft's Digital Rights Management technology that enables one to own copyrighted material in a digital format and use it on the basis of license rights given. This encryption technology makes the content less susceptible to piracy.

"Our audio content is also available on other popular online digital stores such as iTunes, Real, Yahoo and Amazon, among others," says Anand Gurnani, senior manager (Internet & New Media), Yashraj Films.

"The numbers are quite encouraging and we're sure that gradually this stream would evolve into a full-fledged delivery platform for legitimate digital music distribution,'' he adds.

The price for each song is Rs 12 in India and 69 cents outside India for catalogue titles, while new releases are available at a premium price of Rs 15 or 99 cents.

The production house is even considering making its entire audio library available to the consumers in a DRM-free format soon, which will be available at a premium price, informed Gurnani.

But are the prices good enough to get people to switch from free downloads? Even if the songs are priced at as low as Rs 10 or Rs 12, they can't compete with the freely distributed MP3 files on the Internet.