Saregama India Ltd: India’s premier music publishing label

Debottlenecking · January 20, 2022, 7:55pm

Saregama Q3 FY22 concall

BUSINESS UPDATE

Film is a lower margin game.

3 movies (Bell Bottom,Kurup, & one Malayalam film)

Pani pani is the biggest hit of the year. Lots of regional songs did great.

Over 165 songs this year.

2 deals for music licensing business- Chingari, Planet Marathi

Industry growing at 11%.

Qip to be used in music acquisitions only.

We will play smart using technology,data analytics & predictive models so that we can get the right content at the right price.

Public performance(shows, parties etc)was hit this quarter. This generally comes near New year

and give a bump to Q4. But it won’t happen this year. It’s not happening for the last 3 years now.

141000 caravan sales with zero marketing spend. No plan to invest in caravan till covid impact is clearly cleared.

2 web series are almost completed & already licensed . Revenue to come in Q4 or Q1 Fy23.

TV serial - Trp wise it’s stable but advertising revenue is high because brands advertise more during Diwali time.

9 streaming platforms in India, paid subscribers are still low and not in our hands, it’s in the hands of our partners.

17 films licensed out in the last 4 years to various platforms.

Rocky Rani & Gangu Bai, Baiju babra music is with us.

Licensed to instagram,Josh,Moj,Share chat,Chingari. Dedicated team for each.

In paid subscribers model 50% to be paid to the Content owner.

Web series - we do pre licensed basic business model, no risk of loss, 15-20% margin after writing off all content cost when revenue comes in.

Music is tested by under 30 year olds.

OIBCID to be 32-33%

Advised to look at revenue on yearly basis because contracts are yearly contracts and minimum guarantee comes in quarter basis but overflow comes at the end of contract, hence you see bump at the end of the year.Every time Saregama renews the contract they try to increase the minimum guarantee by the overflow amount.

MANAGEMENT UPDATE

Hired top data scientists who track every song released in India and do modelling. They were in Tata shy with Vikram mehta.

REVENUE GROWTH UPDATE

Will grow 25-30% by taking market share in New Content.

100 cr revenue in a couple of years.

RISK UPDATE

In a few years streaming platforms will have to move to the paid economy otherwise it’s not substantial on only advertising revenue.

Chaitanya_Motani · January 20, 2022, 8:35pm

Things that give me margin of safety:

Rise in Subscription s if OTTs which can lead to growth upto 70%, as mentioned by Mr. Mehra in the RPSG Investor conference.
Buying out smaller labels who get lower amount per song(6 paise) and then selling them to OTTs for 10 paise.
They close down their Magazine business and sell the land. This is not part of my investment thesis, but just provides a margin of safety as there is a chance this does happen.

Chaitanya_Motani · January 20, 2022, 8:42pm

chikspat · January 21, 2022, 6:07am

Chaitanya_Motani
In addition, my thoughts are;

When company continue to license audio OTT for 10 paisa/stream for years it creates moat. One fine day company may ask them to raise.
When you get intelligent fanatic like Vikram, driving the show, you seat with him and ride. Who knows in 2018, company will increase earning in multifold.
When label get bigger, they have power to negotiate with artist.
Payback period is 5 year compared to 2 to 3 years of tips, it may seen as dampening, however if I see big picture, saregama can re-invest large amount as everybody get good money. For tips may be they can get only distress deals.
With 750 cr of war chest for music and film and web series can add to revenue and profitability YoY.
I will also keep track of artist management when they starts. Because in it, company do not loose much if it fails, but get exponential returns if artist get famous. Consider Guru Randhawa 5 years back.
Let us also remember film IP are with company, when they re license it, money goes to bottom line directly as cost is already written off.
Disclosure: Invested

vikas_singh · January 21, 2022, 6:18am

The company has a case going against the Radio companies. This was mentioned in the concall sometime back. Does anyone have the details of the case.

During the concall the company said they cant comment on it because the matter is subjudice.

shubh0496 · January 21, 2022, 2:35pm

arjunbadola · January 22, 2022, 4:30am

Bigger risk than the radio company case is The Parliamentary Standing Committee on Commerce report which recommended to include internet under section 31D of Copyright Act.

If that happens I feel that all the negotiating power would vanish.

But the report doesn’t have any solid argument- in my view. All they have mentioned in the report is one paragraph where they say that as internet broadcasters contribute a lot to economy, there should be equal level playing with the traditional players in terms of getting content.

I have written about it on twitter: https://twitter.com/badola_arjun/status/1457949752104947715

Sakir_Saiyed · January 25, 2022, 7:51am

Saregama Acquires Telugu Music Catalogue

Buys 1586 songs catalogue from Mango Music.
They fully acquired over 1500+ songs belonging to 280 Telugu films released over the last two decades including songs from super-hits like RX100 and Ninnu Kori from Mango Music
In this deal, Mango Music sold both audio (sound recording and publishing rights) and video rights of this massive repository to Saregama.
Saregama Telugu Youtube channel has now 1.5 Million subscribers… . latest songs from the latest Telugu album of the movie Shyam Singha Roy have been trending across YouTube and various OTT streaming platforms.
The next big Telugu film album will be Mahesh Babu starrer Sarkaru Vaari Paata
Mango Music :

Website : https://themangomusic.com/
Youtube channel : https://www.youtube.com/channel/UCWqyzn3cDkRDh3kRGWrIQwA
Subscribers: 6.22 Million.

Impressive walk the talk : Continuously investing in the regional market, this acquisition of Mango Music catalogue, will strengthen Saregama’s position in the Telugu market.

Azlan · January 25, 2022, 8:51am

Deal price was disclosed?

Worldlywiseinvestors · January 25, 2022, 8:58am

It’s a small deal in my understanding. As catalogue is only of 1500+ songs. We might see mutlple small sized Acquisitions given the large sized capital they have amassed. Let’s see

Worldlywiseinvestors · January 25, 2022, 11:09am

Decent subscriber base for a small label, especially the Film channel

sahil_vi · January 25, 2022, 11:27am

It bears understanding & repeating why this is an epic capital allocation decision & the huge competitive advantage size gives you in this industry.

A generic Smaller label gets 5-7 p/stream for 1000 songs. This is because it has limited bargaining power.
Because Smaller label has lower bargaining power it generally should have Lower valuation.
Saregama raises money at 70 p/e (high valuations)
Aquires smaller label at lower valuation (20-30 pe Maybe, just a guess).
Charges 10p/stream for the same content.

In this way, there are 2 engines of p/e reduction.

Assuming this catalog fetches them (as an example) 10 cr per year in earnings. Assuming that they paid a 20x multiple for it. That 200cr was raised at 70 p/e. That 10cr would become 15-20cr as part of saregama. In this way saregama gets disproportionate benefit in bottomline.

For context, tips recently revealed that they get
Disc : invested, biased. Will try to ask management in next concall on specifics of this deal if they reveal.

Chaitanya_Motani · January 26, 2022, 9:48am

Another International player who entered Indian music industry.

Sakir_Saiyed · January 26, 2022, 3:34pm

Venus Music

India-based record label Venus Music, acquired by Believe in 2019, rebrands as Ishtar

Now : Ishtar Music : https://www.youtube.com/c/IshtarMusic
subscribers : 35.8 million .

Ishtar (previously known as Venus Music) is an Indian iconic music catalogue company in the Indian music industry was originally a movie and soundtrack production house founded in the 80’s that originated with the manufacturing of audio cassettes.
It has created a unique portfolio in the music world with some of the biggest hits from the 1990’s to early 2000’s, building up a huge catalogue of Copyrights in Music of over 700 Hindi and Regional Movies and more than 3000 original titles.

At 27.10 onwards, this ‘Venus entered Indian music industry and got indian catalogue of music and films’ question was asked in virtual conference…

Do you think such international brands can come and acquire other music labels?

Vikram Mehra:

Sony and Universal already there and active in indian market, also Warner has recently opened shop in india market but do keep in mind music business has got very high entry barrier and its not that easy for new company to setup shop that easily because what is primary source of collecting music ? In india, it is film. Everywhere else in the world, the music is known by singer whereas in India, music is known by actor or actress on whom the film is picturized, so all of us go to film producers to acquire films music. Even if I am so active and acquire 100 films during the year, the catalog that I will end up building would be around say 500 songs. I would need a decade to even build catalog of 5000 songs so foriegn guys coming into indian market are constantly facing these 2 challenges. 1) They don’t understand film music. 2) It is very difficult for them to get catalogue of a large size and there are very few catalogue available in the market which have got a large sizes. Now only 2 left, apart from top 2 guys ( may be T-series and Sony Music ?) and as we have also stated at the fund raises that we are very very open to the idea of acquisition of other small and mid size music labels across all languages.

Note: As music industry is evolving and growing so fast and so If any of experts have different perspective or data points on this then please share. Also, if you don’t find this useful then feel free to flag it so I will delete it after sometime. Thanks

madhug · January 28, 2022, 3:20pm

Has there been any mention of how much they have paid for this? Without this number, it may be a bit early to judge their capital allocation.

chikspat · January 28, 2022, 5:12pm

What saregama demonstrated is to take small steps, verify thesis and if it works, develop that stream.
I remember in 2018/2019, Vikram talked about Miramax model. It a model followed by Miramax studio in America, where they create small budget movies, if some of them turn block buster rewards are exponential.
What I get from different concall, zombivali is made out of 7 cr. budget.
If it earn 20 to 25cr as projected on below article. I presume thesis is verified. We can see further developments. Also we note that, 60% cost is secured by licensing movie to OTT.
Head I win, Tail I do not loose much.
For movies made for OTT on pre order they do not have upside potential. They get 15 to 20% margin.
For movies made for theater, they may develop this model where 60% of cost is secured by tie up with OTT. With remaining 40% cost take plunge of theatre release.
Interesting time ahead.

https://www.bollywoodcrazies.com/zombivli-box-office-collection-prediction-from-day-1-to-lifetime/
Disclosure: Invested

Chaitanya_Motani · February 1, 2022, 4:55am

Chaitanya_Motani · February 1, 2022, 9:06pm

Chaitanya_Motani · February 2, 2022, 7:27pm

Just came across another acquisition by Believe Music. It is another Tamil Music Label. When they acquired the label they had 10 MN subscribers which has increased to 11.4 Mn as if today. That is a 14% growth within 2 months.

Simrat · February 2, 2022, 10:43pm

Some concall notes from UMG: