Saregama to shift focus to content for online viewers
Latest News »
- After buying Ibibo, MakeMyTrip is spending more on promotions than its net revenue
- Grasim Industries: holding company discount remains a concern
- NBCC investors wait for revenue growth with indomitable faith
- Opening bell: Asian markets open lower; PNB, HDFC Bank, Infosys in news
- Motherson Sumi: is revenue growth coming at cost of profitability?
Kolkata: Saregama India Ltd, the RP-Sanjiv Goenka Group’s music company, is being turned into a production house to create content for online consumption. Apart from creating original content, Saregama has ambitious plans of dredging out its large collection of Indian film music, “evergreen tracks to be repackaged” for today’s online audience, chairman Sanjiv Goenka said.
The company, which enjoyed a near monopoly in Indian film music for generations, has so far digitized 117,000 tracks in 14 languages. Much more remains locked up in its archives in Kolkata, according to officials.
Operationally headquartered in Mumbai now, Saregama has commissioned 14 full-length films to be produced within 2-3 months with small budgets of Rs1-1.5 crore each. “I am not saying that they are not to be released in theatres, but the primary aim is to release them online,” Goenka said, adding that the format of production of these films is geared towards online viewing.
“With data getting cheaper across mobile networks, we are of the view that the demand for content is only going to grow,” he said, adding that company was now eyeing the online audience as the key growth driver.
Saregama, which in 2015-16 turned in a net profit of Rs7.5 crore from revenue of Rs215 crore, used to produce big-budget movies previously but stopped doing so because it didn’t turn out to be profitable.
“Our films won awards and accolades, but we didn’t make money,” Goenka said.
Still, he turned to producing films again “after years of break” because in the digital era, production costs have come down substantially and demand for original content is fast expanding.
Formerly known as the Gramophone Co. of India Ltd, Saregama traditionally sold music and films in CDs and DVDs. But that line of business is collapsing, and Saregama now sells music online from its archives for as little as Rs2 a track.
“Clearly, consumers are no longer willing to pay for entertainment,” Goenka said.
To make money, companies such as Saregama must look elsewhere.
According to a recent research report by US-based Wright Investors’ Service Inc., music sales accounted for about 60% of Saregama’s 2015-16 revenue, down from 80% four years ago. But the return from music sales was much higher than other lines of business—operating profit margin from the segment was at 28.4% of sales, the report said.
As an experiment, Saregama is now looking to “repackage” evergreen tracks by creating music videos with A-line stars. If things go according to plan, these videos are to be created by the “most celebrated directors” in Bollywood and made available for viewing online, said Goenka. “Who knows, these could turn out to be major hits with today’s online audience.”
Sensing the need to transform itself, the company turned to making television serials, starting in south Indian languages. But returns are small in regional languages. According to the Wright Investors’ Service report, television content yielded an operating profit margin of only 11.4% of sales—the lowest among all segments.
Lately, though, Saregema has broken into the more profitable Hindi mainstream space with one of its serials being selected to be telecast on a national network at prime time, according to Goenka.
But shareholder returns have not been satisfactory in the past few years, shows the Wright Investors’ Service report. In 2015-16, the company’s gross profit margin of 14.1% was the lowest in five years and its earnings before extraordinary items at Rs6.8 crore was 3.1% of sales, half a percentage point narrower than the previous year, according to the report.