Saregama India Limited analyst Q&A

The first question is from the line of Jyoti Singh from Arihant Capital Markets Limited.

Sir, just wanted to understand the current situation of the more newer platform and then people are shifting from YouTube and Spotify to Instagram reels. They are spending more hours comparatively than they used to spend on YouTube and other platforms. Now the shift of hours and shift of people more on the Instagram toward and how -- I know we are getting some revenue from the Meta, but still a major chunk is coming from YouTube and Spotify. So jus t wanted to understand the technology and then revenue driver for us in a more clear view?

Sure, ma'am. Let me try to answer this. One, if you can go out there and refer to the various third-party data, not related to Saregama, but for the overall music industry in India, and I'm happy to forward some of those findings, which tells us that the a ctual music consumption in India over the last decade has gone up. Over the last 3 years, data also we see right now is constantly rising. I'm 50-plus. When I was in my 30s and part, it was normal that there used to be a time where all of us used to listen to music because music was typically heard using a CD player or a cassette player, and it used to be loud. Today, people consume music using their AirPods, which means that whether they are studying, going to the office, going to their colleges, they're in the gym, they are cooking, all the time people are going out there and consuming music in the background. So, music consumption, in fact, has gone up and not come down. The number of views that YouTube is generating for themselves from music or what Saregama is generating for itself right now from YouTube for its music or on Spotify, the streams, everything is going up. There's absolutely nothing to go back and indicate at this juncture, India and globally, that music consumption is coming down. What Instagram is ensuring here is that the number of hours that people like you, me and children are spending on their device is overall going up. The time we used to spend with each other, with our friends, with we family is being eaten by the time we people are giving on their devices. So, Instagram and YouTube Shorts is also growing and Spotify and YouTube are also growing. Now, the second part of the question on the revenue model, yes, the amount of revenues that we make from the short format app is relatively small at this moment. But our deals with these companies are very, very clear . The day they start opening themselves to full -fledged advertising, they will do the same revenue sharing arrangement with us that a YouTube or a Spotify does for their subscription or advertising. Whatever money they make, 50% of that is going to get shared with the content owners. As much as we are bullish on audio streaming and video streaming, we also understand short format is a very big opportunity of revenue that may get open for us right now in the next 12 to 24 months.

Sure, sir. So sir, our Video and OTT segment revenue saw a sharp decline, that is a drop of around 39% this quarter. So could you walk us through what drove that and timing of release or seasonality or anything?

Unfortunately, unlike the music revenues, which typically work in an annuity in a fashion, the numbers don't fluctuate on a day-to-day basis unless a big deal is going out of the window. Video depends entirely on the fact whether a movie was released, or movie was not released, whether a series was sold and which quarter was the series sold across to a platform. So, it's lumpy in nature. That's why, if you have to go out there and evaluate our video revenue and profitability, request you to do it on a 12-month basis, not on a quarter -on-quarter basis. When I'm saying this, please go back and you can refer to my older statements. When our revenue goes up also, in video I say the same thing. So, I'm not saying it only when the video revenues come down. Video is lumpy in nature. Please read it on a 12-month basis.

The next question is from the line of Nitin Sharma from Seeberg Private Limited.

Two questions. First of all, I want to understand the time line towards seeing the OTT platform shifting towards the subscription -only models. Has that time line changed or shifted further? Where is it, if you can talk about in a general sense?

Sir, I would have loved right now had I given you a firm timeline. Unfortunately, it's in the hands of my partners and not in our hands. As I said in my opening statement also, we are seeing movement happening. For the first time, we are seeing promotions being run and advertising communication being put out by these platforms to push for subscription. If you see Spotify's latest results that have come out, they are showing very handsome growth now in the Latin American markets also. And those numbers are coming at a very high ARPU, too. So, I like to believe right now, it's a question of when India will end up replicating what's happening in Latin America or before that happened in China, where subscription is going to go back and take off. We people internally keep on doing various kind of studies to understand that what is the inclination of people or readiness of people to go back and pay for music content. We see under the age of 35, and I'm repeating under the age of 35, a very high inclination of people who are ready to pay provided the paid subscription is put in a more affordable fashion, and it should be double-digit ARPUs and not a triple-digit monthly pricing. The issue only up till now is that streaming platforms have to just ensure that all the bells and whistles are not available as part of the free business, but they should be limited only as part of the paid business. They have just rolled it out in Latin A merica. They are seeing very positive results. We like to believe that buoyed by that success, something similar may happen in India, too. We are all prepared for that scenario that subscription will take off. And if you see subscription business anywhere in the world, it doesn't take off when it takes off, it's a hockey stick. It moves at a very steep pace.

Understood. And related to this, just an overview, what is your understanding, because you regularly speak to the OTT platform. So, is there a willingness to kind of bringing down the -- to double -digit or they still believe that it is a triple -digit, low triple -digit where they are comfortable and want to stick?

It's a combination of all 3 things, which is going to help subscription to take off. One, the free service cannot be as good as maybe it is today because if you're going to offer everything free, then even you and I will not pay for the paid subscription. So, the free service some changes have to be made by them. Subscription pricing has to be made more affordable and there has to be enough amount of communication out to the customer, wherein all music labels have offered that we will partner with them and ensure that promotions happen in a very big fashion. We will use our own digital footprint. Like I told you, Saregama controls 400 million+ digital footprints today. All of us will help these platforms to achieve a higher subscription penetration because in the end, it's going to help us also. You are asking for a timeline , I continue maintaining part right now that it's just a quarter's impact. We are already seeing a growth on the paid subscription. Unfortunately, the base is very, very small. So even very high double -digit growth also doesn't move the needle to that extent. It's just a matter of time. It's a matter of few quarters where something of this sort is going to be happening. There are only 2 free platforms that are left in the market. We believe something will change.

Understood. And second question is more on the -- if you can provide colour on how was the festive season for the industry since third quarter tends to be the biggest contributor for the sector? Any colour would be helpful.

Yes. So festive, unlike the durable industry where you immediately start seeing impact of Diwali coming in. We were very much governed by festive , Till the time Carvaan was a very big part of our portfolio. In the current scenario, Carvaan is a very small part of our portfolio. The festive season has an impact, but not that much. The impact is an indirect impact. Festive season ends up getting higher advertising on YouTube. And since we get a 55% share of all advertising revenue that comes on our content, so we do get the benefit. Beyond that, festive season doesn't have a massive change that happens. But yes, YouTube will have an impact. It may so happen that closer to December, more bigger films start getting released. That means bigger albums are going to come out. And if those albums do well, then there will be an impact. If you check out our presentation, I think that will be useful for you. In the presentation, there is a slide which is showing how our music revenue, which is licensing plus artist e management, keeps on moving quarter -on-quarter. That will give you some understanding of how much impact seasonality has.

The next question is from the line of Harshit Toshniwal from Premji Investments.

Sir, congratulations for a decent set of numbers. One thing which is not particularly related to this quarter. But if, for example, I look at since '21 to '25, we gave a very good disclosure in terms of the era-wise revenue, which we have received. Now over there, sir, the trend has been that if I look at the songs pre -2020, their revenue in absolute terms have been a bit stagnant at around INR 320 crores, INR330 crores for the last 3, 4 years. And the growth what we have seen in music licensing has actually come from the songs post 2020. So my understanding was that probably in the post 2020 songs -- since we are investing in era, obviously, the first year revenue will be high. Is there any reason why the pre -2020 era songs, their revenue has been a bit more stagnant in the last 3, 4 years, probably because when I compare it with the industry, that segment is also seeing a decent growth for the industry?

Sir, I'll not comment on the industry part. Let me talk about our content. On an apple -to-apple comparison, that means if I take a platform like a YouTube or a Spotify or a JioSaavn and check the revenue of my pre -2020 content, even pre -2000 content, we are seeing a steady revenue increase. I will not comment on the numbers that you arrived at, of how much is catalogue and how much is newer. But yes, on the overall basis, directionally, you're right. We have seen in last year or so some amount of impact. Please keep in mind, the real reason for that is that 3 or 4 of the large 3 platforms that were very big earlier, they have all shut down. The total revenue that we are making from streaming business has not grown. The fact is that, frankly, there's no degrowth happening out here for us because newer content came in the picture. But the fact that the 4 platforms go out of the market completely in a very short frame in about last 18 months, it will have an impact. What I can assure you is we have got a senior level person who has joined the team and a full structure is being built under him, whose only role at this moment is to ensure revenue from catalogues have to go up. what it needs to happen is that some of the catalogue songs we are seeing how recreations can be done. Second objective is how do I ensure those catalogue songs become very, very big on platforms like Instagram and YouTube shots. We are also going out here and creating podcast for many of these platforms. And the point that I had referred earlier, we're using Generative AI to go out there and create brand-new videos for the older songs. So, with all those coming in place, I'm ready to venture my neck out and tell you right now, next couple of years, we see a very steady growth coming in this space.

Got it. So, if I look at -- obviously -- just the last 2, 3 years of data, so it might be that there can be many one-offs that's been impacted?

So if you look at my last 18 months data right now, yes, you will see the numbers not growing up that substantially in catalogue. It is only because platforms are gone. If you go before that right now, we were surprised with the growth that people were seeing. Those kinds of growth were running into 20% plus on the catalogue side because multiple new platforms were coming in at that particular time. But on a like-to-like basis, I'm repeating myself, platform-to-platform. So, platform X, if they had catalogue and the platform is still existing and is a free platform even today, you will see a revenue growth coming in.

Got it. And one -- another question if time -- if it's possible, was on the fact that -- so it may not be relevant today, but if I understand there is a 60-year time line for the copyright of a particular song. If you can help us that in our industry, then how do we navigate? Obviously, this might not be relevant until maybe 20, 30, 40s, even for our older contents. But how does this typically work that at the end of the expiry, does it come for renewal and we have a first offer to bid? Or how will that expiry time period work?

See, in a public forum like this, the only thing I can clarify the copyright rules for you. When we buy a song, there are 2 rights that pass across to us. One is called the master right or the sound recording right. That's a right of the song. And you are correct. The Copyright Act says that our ownership is there for 60 years from the release of the song. But there is one more second right that also gets transferred across to us, it's called publishing rights. That's a right of the lyrics of the song and the right of the tune of the song. These are separate rights. A ccording to Indian Copyright Act, the lyrics rights stay with us for 60 years from the death of the artist who wrote the song. And composition rights, the tune rights are valid with us for 60 years from the death of the composer. So we still have a very, very long way to go for many of our superhit songs even a song one right would have come out side 60 years, the other rights are still sitting there with us only.

The next question is from the line of Harsh Shah from JM Financial.

Yes. So firstly, if you could -- in terms of giving better comfort to the entire investment community, right, if you could kind of directionally give a ballpark range in terms of how much our, say, YouTube revenue, say, in FY '24 and '25 has grown and the period before that, say between '22 and '23? So why I'm asking this is that I understand that there were challenges in terms of the consolidation of the industry on OTT platform. But are there any issues that we are facing on an industry level as well on YouTube? Or how is it? I mean some colour on YouTube would be very helpful, please.

See, I'm not going to get into one particular partner. If you just track our performance, and our numbers are there with you, we have been growing our music revenue at a 23% CAGR over the last, 6 or 7 years now. You can't have one vertical completely sitting down and still be managing 23% growth. It's a combination of the growth that we people have seen on video OTT platforms like YouTube and say, Facebook; Audio OTT platforms like Spotify, JioSaavn, Gaana, Apple, and Amazon; Short-format apps like Insta Reels or a YouTube Shorts here and some of the work that we have done on the publishing side. So overall, all parts on a combined basis have grown at 23%. This year because a couple of our very big titles have all got pushed, so I'm getting the projection down to 19% to 20%. But on a mid to long-term, we are maintaining our stand that we should be able to grow music business at 23%.

Correct. I understand that. But safe to assume that our YouTube revenue would be growing, say, in the range of 10% to 15%?

So, let's put it this way. You're asking me a specific thing on a partner, which I can't disclose. I'm not at a liberty to disclose. But please understand, f or most people, YouTube is one of the largest partners for them. If YouTube does not grow at a healthy enough rate, how am I going to go back and live up to my 23% CAGR promise over mid to long-term or even a 19% to 20% number this year. YouTube has to grow. And I said it in the opening statement also; we are very happy with the growth we have seen on the YouTube side.

Any qualitative colour you can give in terms of the consumption behaviour on Spotify post them announcing a price increase in the Indian market that actually happened at the end of August or first week of September? And I know -- I understand that the data sample would be smaller, but just trying to understand the initial signs?

So again, you're asking me for a particular partner information. Please understand. I'm not at a liberty to discuss specific partner part. But overall subscription, we are seeing movement happening in the country. What I can tell you right now is younger people who seem to be taking subscription for streaming apps far more easily than the older people. People who are 50 -plus still believe right now that why should they pay for something digital. People, the younger generation, Gen Z and millennials, people up to the age of 40 think it's an absolutely okay thing to do, to go out there and pay for digital subscription. And the advantage of that is going to flow both through music and video platforms . So, I have every reason to believe that all these audio streaming platforms have a large growth curve sitting in front of them. And by implication, we will end up riding on the same curve.

Okay. Got it. And one more thing on -- just a clarification on Pocket Aces. So the revenue is kind of -- forms part of artist managed completely or there's something that flows to the Video segment as well?

Yes, it flows both on the artist side as well as the video side.

Any split you have?

No.

And lastly, do you retain the earlier guidance on Pocket Aces being breakeven in FY '26?

Yes, we maintain that.

The next question is from the line of Swapnil Potdukhe from JM Financial.

So my question is regarding your guidance of 19% to 20% growth this year in the music business. Now, just wanted to understand, is this music licensing only or it includes artist management also?

Sir, for us, music always means licensing plus artist e management because it's the same artist e with whom I'm creating music. It's always combined guidance from our side.

Got it. And given that this number has been tracking around 12% in the first half, how do we see this guidance getting achieved in the second half? I mean, are we expecting a significant jump in your revenues in 3Q or 4Q? I mean, is that how we should look at it?

Yes. See, in our case, things like YouTube revenues are completely dependent on new music releases, they jump there, and you immediately see an impact on it. You don't see an impact on audio streaming platforms with immediate effect; they typically trail with some kind of a lag. But YouTube sees an implication immediately. All our movies that were planned for Q1 and Q2 across languages, except Thug Life, everything has got pushed to Q3 and Q4. So, basis that, we see that revenues going up substantially. Yes, the fact that some of the movies have got pushed across now to next year, because of which there is some dent on what I believe music will be able to achieve, but 19% to 20% looks an achievable number.

I've already given you enough colour on this. So, by the time we end the year, you should see those kinds of numbers. Yes, at this juncture we are fairly confident we should be able to go and touch those numbers.

Okay. And the second question is on your artist management vertical within your music space. Just to help us understand how big is this opportunity? Or how do you -- how big this opportunity do you expect it to become, let's say, 2, 3 years down the line i n terms of revenue or time perspective? And what kind of steady-state margins should we be expecting from this business? Currently, I think we are trending around single-digit margins, but...

Again, artiste management and my music part are completely interlinked with each other. So artists like Maahi, whom we people are promoting, or some of the bigger names like poet Kumar Vishwas. Now some of their stuff is sitting in artist management while they create the content, which may be sitting on music. So, when you are looking at margin analysis also, please look at both the things combined. Please don't look at things separately because the way we look at it is why did we get into artiste management. Whenever we were creating music, we realized that we are making songs -- because of songs, the artist e is becoming big. When the artist becomes big, we don't get any upside because of the artist es becoming big. Artist e goes out there, starts singing in corporate functions and weddings and ends up making a large amount of revenue. Hence, we relooked at this model, saw what some of the global peers of ours were doing. All of them had a very strong talent management arm, and they were making money from the talent also. Hence, we just followed what Universal, Sony, Warner do globally, is that also invest in the artist so that if the songs on a repeated basis keep on becoming bigger, then we have also an upside on the revenues that the artists may be making from non-Saregama sources. That was the thought process behind artiste management. Seems to be going steady at this moment. We believe there's a large potential for this to go up. The potential for this to go up right now comes only from 2 sides primarily; booking for live events, that live events can be ticketed shows, corporate functions or weddings, weddings being the biggest one. And then brands. we are realizing, brands are moving out of these Bollywood and cricket only and also want to go out there and talk to the next level of stars, which is primarily the kind of talent we people are representing, and because this talent is more relatable to their fan base. Every time any of these artistes does a brand endorsement, we get a share of that, too. That's the thought process. So, when you're looking at the margins, please see both these things together.

Some colour in the presentation that we people have won out and floated. Our guidance to this is we will grow on a mid to long-term basis at a 23% CAGR. Does it have the potential to become far bigger than that? Yes. But at this moment, as I talk to you, I maintain my 23% number only and not going more bullish than that. But if you see any of the independent reports that will tell you that talent management part is growing very, very steeply, not just in India, globally, too.

Okay. Got it. And just a related question to that. Can you suggest who would be the peers in this talent management space who would be big enough to talk about, or for us to understand this space some better?

All of the unlisted companies, there is no listed company there.

But any names you can call out?

This is Saregama part right now. I don't want to go there, but I'll be happy to hare that information separately with you. But we have clear benchmarks right now which we are working. These are all unlisted entities. The very good part is all of those guys are just plain talent management companies. They don't have an opportunity to go back and create their own content and give their own talent a chance to become bigger. What places Saregama unique and literally in that sense, there is no competition we have. We are unique because not only we are representing talent, but we are also very big on the music and the video side, so that talent can get plugged in, in each of these places. Talent likes it because talent says, you are genuinely helping me become bigger. Rest of the people are just managing their talent and going to third- party companies and saying, can you please plug in my talent in your content? We have our own content piece going on. So, every time a music video is getting generated here is, you will 9 out of 10 times see our own talent working in it.

The next question is from the line of Ravi Naredi from Naredi Investments.

It is not so energetic result, but the segment revenue Video shown major downfall. So, what are the reasons?

Sir, I told before also. Video revenues are always lumpy in nature. It depends on which quarter a series has been released or a film has been released. So last year Q2, there were 2 very big releases. The biggest series we've ever done got released in Q2 last year. But if you start seeing the numbers right now on a steady gross basis, then you are not going to be seeing this kind of an impact coming in. Video segment always sees this kind of a lumpy nature. I believe right now, by the time we'll end the year, we will again be on a stable basis. Unlike the music business, which keeps on growing on a steady basis because songs are being listen on Spotify and YouTube on daily basis. Movies and series you prepare for a period of a few quarters and then you release it in the quarter that it gets released, is where the revenue gets booked.

Right. Sir, this video we are doing since last 7 years, I think. So ultimately, can you tell what is our gain or profit or loss in 7 years?

Sir, I have been doing this for 7 years but I am Literally close to sitting on break-even in video business. We have not made the losses and video business ends up ensuring to me that I have a very decent grip on my music side because all the movies that we are producing, we end up getting the music at a much lower price because it our own movie . That's what my competitors also do. And on the short format side, which is the work we work with Pocket Ac cess, the fact we're in video business keeps the marketing of music at a lower cost. Also, all the talent management part that I'm doing, talent comes to us because they have a chance to get plugged into our videos. So, what I assure you that the total amount of capital that will ever go on the video side is not going to be big. we have given the guidance that at any particular time, total capital invested in video and live will not exceed more than 18% of the capital employed. We are far lower than that. Also, I'm assuring you that we will never get into the large budget movie, its beyond our capacity. We don't have it in our DNA. If we have to do it, we might as well partner with somebody else. Within Saregama, we are comfortable if we have to do something right now, working on the smaller budget stuff where the highs and lows are very, very little and very little capital gets employed.

And sir, second question, I want to know, in these days, acquisition cost of music rights is as usual or it is a very higher side?

Sir, we are maintaining a 5 -year payback period. Let me put it this way. In some languages its increases. One south Indian language where it was low, suddenly went up very high, and now fallen down once again. So, if there a lot of hits and our recovery is good. Then producer increases the cost. Where our numbers are started coming less, ROA is not coming, we all start coming down. But if those 5 years above, Saregama won't do payback, all of ours bonus won't come. All of us are completely particular about 5 years and above there is no payback period.

How is going this music industry on paid basis? According to you, in how many years it will be 100% paid basis?

Just now given this answer to someone else. Good part is there are only two guys who are left on the free side. And they are also making all the right noises, Spotify and JioSaavn. JioSaavn has, in fact, made a lot of positive moves in this space. Spotify, I'm very encouraged with what they have done in the Latin American market. They just declared the results. They went and started pushing for paid in Latin America, as you know Latin American market is very similar to our market. It's not that the disposable incomes are that much higher there. And Spotify is seeing a massive growth in the revenue from those markets. China has already gone through the same cycle. It's a matter of the timing. It's going to happen, now this going to happen in 2 quarters, 1 quarter, 4 quarter? Wish I had the answer for you, but we believe in it strongly. We are continuing to invest in newer content, especially in languages where we believe that the markets from which the paid subscribers enter first, will be given more focus on acquisitions. So, I continue to be bullish on this space.

As there are no further questions, I would now like to hand the conference over to the management for closing comments. Over to you, sir.

No, no, I have nothing else to add, except the fact that there are quarters where some segment goes up and other segment goes down. But I think overall, we people are on very, very firm ground. We have a good feeling that in next 2 to 3 quarters, almost al l the decisions that we people are taking will start bearing fruit. We continue with the guidance that we people have given that the music will be growing on a mid to long-term basis on a 23% and the adjusted EBITDA guidance of our remains at 32% to 33%. We should be able to grow consolidated revenue of the company, excluding Carvaan, between FY '24 to '27 at 30%. So, keep supporting us. Look forward to your blessings. Thank you.

On behalf of Emkay Global Financial Services Limited, that concludes this conference. Thank you for joining us, and you may now disconnect your lines.