by John Mark V. Tuazon

In a country where music piracy and digital music downloading runs rampant as the everyday merchandise, setting up an online business offering digital songs for a marginal price may seem like an exercise in futility.

But for Bambi Fonacier, CEO of PinoyTunes.net—an e-store offering OPM music for download—it’s just about time someone starts offering legitimate music downloading the likes of iTunes targeted especially at Filipinos here and around the world.

According to the PARI (Philippine Association of the Recording Industry), the once-P2 billion thriving local music industry has fell captive to treacherous music pirates, posting an average loss of 42.5% in 2001 and subsequently stagnating the industry’s growth the following years.

Fonacier, ever the passionate music lover who was at the forefront of establishing Odyssey, one of the first record bars in the country, remained unfazed by this startling regression in music sales, despite hitting his previous business badly. “Limited CDs are being produced these days, because nobody buys CDs anymore,” he says. “Anyone can just go up the back alleys and buy pirated versions of CDs.”
What others saw as God closing windows on the industry, Fonacier foresaw as a promising opportunity. With an army of music catalogs and years of experience under his belt, he banked on the stellar worldwide popularity of iTunes, a music downloading module developed by Apple, in furthering his business idea.

“The way people consume music is shifting, if it hasn’t already. Music downloading is the trend nowadays,” he excitedly shares. “iTunes is now the number one music retailer in the world, with as much as five million downloads every day.”

Fonacier further adds that according to the IFPI (International Federation of the Phonographic Industry), an international organization of recording companies, seven out of 10 music downloads are legal, which underscores the world’s evolving music download behavior.

Banking on these realities, Fonacier set out to found PinoyTunes.net in 2007, with a nominal seven-figure capital and only 10 people manning the workstations. “It was very difficult to start,” he says, “because we had a lot of back catalogs to update and upload.”
Fonacier noted that setting up the user interface didn’t take a while, but it involved a lot of hits and misses. “Because the website is interactive, we had to configure and test every segment of the site to see if they are working properly,” he explains.

What set them several months to a year back, according to Fonacier, was the laborious process of ripping, editing and uploading their entire 14,000-strong library of songs to their foreign-based server. “We had songs dating several decades back, and we had to painstakingly rip and upload each one of them, including their album covers,” he remarks.

Fonacier’s team initially tried working around the problem by burning the songs on DVDs and sending them to their servers. “But we had problems with the Bureau of Customs, who thought the DVDs were pirated music ready to be shipped abroad,” he says.

Dismayed by the cunning trap that is the bureaucratic red tape, Fonacier decided to enlist the help of colleagues in uploading the music collections. “We only finished uploading all our back catalogs last December, around a year after we started,” he painfully narrates, adding that they are constantly updating their library of offerings as new collections arrive.

Cooperating with suppliers

Acquiring the songs, by itself, proved to be an equally daunting task for Fonacier. Record companies were reluctant to lend him the songs in fear of their products getting pirated or spread around the Internet for free. But with Fonacier at the helm, PinoyTunes had the solid credibility and long history to win the hesitant nods of record companies.

“It took some time for me to convince them,” he recollects. “Because of the very difficult business environment and the proliferation of piracy, they were very hesitant. But because of my previous dealings with Odyssey, there was a matter of trust in the work that I have done with them.”

Fonacier said they had no way of tracking or protecting the files from being spread around, but are instead counting on users to keep the files to themselves. “The problem with Filipinos is that we want everything for free,” he laments. “We don’t have the culture of discipline and accountability that comes naturally in Western countries.”

Carving a niche

Due largely to the chosen medium, PinoyTunes.net’s main market is largely focused on overseas Filipino workers based abroad. “OFWs form majority of our customer base, because they are the ones who don’t have the access and opportunity to buy OPM songs,” he explains, adding that it has since become their company’s mission to service the music needs of Filipinos abroad. “They help our economy, so might as well help them with their simple needs.”

PinoyTunes.net, Fonacier said, taps on the nostalgic sentiments of OFWs abroad—especially those in the US, Canada, Australia and Middle East, their top markets—who are looking to get a taste of Filipino music even if they are in a foreign land. For the same reason, he relates, old Filipino music forms a huge chunk of the music downloaded in their e-store.

“We have an extensive collection of old Filipino music, even those that aren’t available in stores anymore,” he proudly claims. “We even had a customer who bought $45 worth of songs, burned them in a CD and sent it to his mother here in the Philippines.”

Fonacier estimates that at least 60% of the songs downloaded in their site are old OPM songs. “Most of our revenue come from these downloads, especially because of the ‘tingi-tingi’ culture of Filipinos who don’t want to buy whole albums of songs. The beauty of downloading online is that you have the power of choice and mobility at your fingertips.”

Technology pays off

Yet another benefit of running an online business, Fonacier stresses, is the ease of running transactions with customers. PinoyTunes.net uses Paypal, an international payment gateway, to process payments from customer here and abroad.

“I chose Paypal because a lot of people told me that it’s the most widely used gateway around the world,” he says. But when PinoyTunes.net was still starting out, Fonacier says a local bank offered him to use their payment gateway, albeit at a steep price. “I didn’t sign on with them because why would I pay to rent a payment system when I can have one at a much cheaper price?” he explains.
Aside from being widespread and inexpensive, he says they chose Paypal for its user-friendliness, efficiency and robust security. “All you need is a credit card for your transactions. And what’s good with Paypal is that it’s already tried and tested for security because it is owned by eBay,” he says.

Dealing with technology provided Fonacier’s online company a lot of room for innovation. Just recently, they have deployed prepaid card offerings in partnership with a major US supermarket chain that will provide would-be customers the ability to buy songs without the need for a credit card.

Because of the ease provided by technology, Fonacier has nothing but praises for this innovation. “Maintaining an online business is cheaper, compared to establishing a traditional firm,” he explains. “There are no physical goods lost—just digital signals—so you don’t need suppliers. Because of that, there is less paperwork, especially because most of the processes are done automatically.”

Future Perfect

After two painstaking years of careful investment, laborious work and mutual dealings, PinoyTunes.net is slowly getting off the ground. “We are a modest business, but it’s slowly picking up,” he narrates, adding that their website gets a “sizable” amount of traffic these days, especially from users abroad.

Fonacier, however, has not yet received a return on his investments. But this doesn’t stop him from pursuing his passion. “There’s no way e-commerce is going away in the next few years,” he boldly predicts. “With a worldwide audience, you have larger competitors but you also gain a larger market.”

For this reason, Fonacier advises like-minded individuals to find a unique venture to pursue. “You have to do something to differentiate yourself from your competitors,” he explains. “So you have to take a closer look at your competitors as well.”

Running an online business requires dipping one’s toes in both fields calling the owner’s constant attention, Fonacier adds. “You can’t be too focused on the business or technology side of things at once, it should be balanced. Enable collaboration, and source other skills whenever necessary,” he advises.

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