Kolkata: Five years ago, it was struggling to sell CDs and was forced to shut its chain of stores, including the biggest one on Park Street in Kolkata which, within a few years of launch, had become a landmark.
Music World is long gone, but Saregama India Ltd has risen from its ashes like a phoenix riding the Carvaan, a personal jukebox.
After being in operation for 16 years, the Music World chain was shut in the summer of 2013 as the business of music retailing could not cope anymore with digital delivery channels and piracy.
But Saregama, or the erstwhile His Master’s Voice and Gramophone Co. of India, still had a huge repository of recordings locked up in its factory on Jessore Road on the outskirts of Kolkata.
Managers came and went, all acknowledging the intellectual wealth of the company, but no one knew how to cash it to revive the enterprise. Saregama ventured into film-making, but from the standpoint of profitability, the outcome was underwhelming.
Not surprisingly, investors almost wrote Saregama off—its shares were trading at a little over Rs200 each a year ago—when the leadership team hit upon the idea of Carvaan, an affordable speaker with pre-recorded music from the company’s own library to be sold to people living in digital darkness.
When mooted at a review meeting, the idea appealed to Sanjiv Goenka, chairman of the RP-Sanjiv Goenka group, which controls Saregama. But little did he know that Carvaan was going to be a game-changer.
“It’s disruptive," he now says as sales of the jukebox priced at Rs5,990-6,390 is set to hit one million in the current financial year. “Sales are topping 50,000 a month and soon we will be selling 100,000 a month," says Goenka, “and by the end of March, we will have sold a million units this financial year."
Saregama has finally found a way to sell its repository of 300,000 songs, and the market is expanding beyond anticipated boundaries.
Positioned as a gift for “your first love, your mother", Carvaan is now being sold with a variety of content, and is even taking on the radio. Apart from 5,000 songs, it comes with an in-built radio and supports external devices such as USB and Bluetooth.
Some people with a taste for retro music prefer Carvaan over the radio because they do not like a radio jockey chatting all the time, says Goenka.
As its latest advertisement indicates, Carvaan is now beginning to step out of the world of digital darkness.
Reflective of Carvaan’s success, Saregama’s revenue has started to move up. In the March quarter for instance, it clocked Rs105.37 crore in sales compared with Rs57.7 crore a year earlier—a jump of 83% led largely by sales of music. Net profit for the quarter rose more than four-fold to Rs21.45 crore from the previous year. For the full year, Saregama’s net revenue was up 66% at Rs345.61 crore, and net profit tripled to Rs30.51 crore.
Margins from Chinese hardware are thin, says Goenka, “but the sheer volume is mind-boggling". As the firm seeks out new customers, Carvaan is being tweaked to include features such as a personal playlist.
The market has taken note. Saregama’s shares are now trading at around Rs840 each, up from Rs600 a year ago.
When pundits question the longevity of the innovation, Goenka quips, “We are a country of 1.3 billion people."