Saregama was always perceived as an acquisition target for R-ADAG group after repeated investment by Anil Ambani’s investment arm. The Goenka group company has largely seen a stagnant growth through out the economic and digital boom in India.
Now it seems Saregama is on a changeover track as Business Standard reports that it has stepped up its effort to drive major revenues from digital medium. BS further reports that is targeting upto 65 percent revenue contribution from its digital content in next five years.
The company in tie-up with different telcos would also be launching a website to leverage its digital content and is also pursuing content tie-up with hardware companies like Nokia. The site from Saregama’s fold will have a library of two million songs and it expects to garner anywhere between 50 lacs – 1 crore from each of its handset tie-ups.
The company also expects to lower revenue contribution from the physical format to 10 per cent from 40 per cent in next 5 years. It has also devised a plan to sell music on memory cards and pen drives to leverage the digital boom currently panned out in India.
Why Saregama is facing tough times?
It was not long ago When Airtel proclaimed the Numero Uno position in Indian music industry in terms of music sales it procures from its telecom user base even overtaking the sales of Saregama. Saregama fortunes has also dwindled due to the tough competition from new players like Yashraj music, Big music and other private music companies. This furry of private music companies is hindering the growth of Saregama as it is unable to procure good content.
The recent Bollywood collection boom has also increased the prices of Music content in India thus making it tougher for music companies to break-even in some of their deals. The company is also present in home video market which is also seeing an erosion in prices after the entry of Moser Baer. The increasing dominance of piracy and growing reach of radio has also come in as a big challenge for the company.
The company in FY2008-09 reported Net revenues of Rs. 132 crores Vs 129 crores and Net loss of Rs.8 Crores vs Net profit of Rs.13 crores as compared to FY 2006-07.
Does going digital work in Indian market?
WATBlog earlier reported a stats on projected growth estimates for Indian music industry. According to that report Indian music industry would be a Rs.500 crore industry by 2013 registering null growth as its current value is similar. Even the radio industry would be four time larger than music industry in India. The share of digital music is also expected to move from 16% in 2008 to 60% in 2013 creating the only growth driver for music companies in India.
The digital content in terms of Music stores or handset tie-up can work in India. The doubts are on the success of music selling through pen drives and memory cards as this medium would still increase the cost of acquisition although the strategy seems to be working in foreign markets. The success of music stores also lay on devising correct pricing and payment gateways.
The digital content boom has largely been successful due to growing mobile penetration. The same mobile boom can also help perpetrate companies to gain traction in the market and increase their revenues. Thus if Indian music industry has to grow despite the stagnant growth projections than it needs to embrace the digital boom but with few innovations.
