Saregama India Ltd
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Saregama India Ltd
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Ladies and gentlemen, good day, and welcome to the Q3 FY '25 Results Conference Call of Saregama India Limited hosted by Emkay Global Financial Service. [Operator Instructions] Please note that this conference is being recorded.
I now hand the conference over to Mr. Pulkit Chawla from Emkay Global Financial Services. Thank you, and over to you, sir.
Thank you, and a very good evening, and welcome to the Q3 FY '25 Earnings Conference for Saregama India Limited.
From the management, we have with us today, Mr. Vikram Mehra, Managing Director; Mr. Pankaj Chaturvedi, CFO; Mr. Saket Sah, Group Head, Investor Relations and ESG Reporting; and Mr. Pankaj Kedia, Vice President, Investor Relations. Without any delay, I'll now hand over the call to the management for their opening remarks. Over to you, Vikram.
Thank you, and a very good evening to everyone. This quarter saw our operating revenue of INR 483 crores and a PBT of INR 84 crores. Our revenue has seen a substantial growth and is running at a speed faster than our guidance of 30% revenue increase for the financial year '25. Our adjusted [Technical Difficulty] year-on-year basis.
Our disproportionate 58% of this quarter's revenue has come through events, which, as I've shared in the past, is a lower margin percentage business. To put it in perspective, INR 278 crores revenue came from live events with a INR 22 crore profit. This disproportionate share of live events has resulted in adjusted EBITDA falling down to 21%. If for a moment, we exclude events, then our adjusted EBITDA is maintained at a healthy 40%. Although this quarter has been very good, I still request all of you to evaluate us only on a rolling 12-month basis and not on 1 quarter performance.
Let me start, as always, with the music business, which comprises of licensing and artist management. It grew by close to 19% on a year-on-year basis. Our revenues from YouTube maintained their growth trajectory. Audio streaming moved another step closer to the ultimate goal of going fully behind a paid subscription wall. One of the remaining 3 audio platforms offering free service, Airtel Wynk, decided to shut business during this quarter. This leaves only 2 players in the market now with free offering, and we are hopeful that they will also turn pay over the next 4 to 5 quarters.
Because of the shutting down of Wynk, there will be a short-term pain, but we believe that the closure of their free service is good for the industry in the long run as it will further motivate the remaining 2 guys to turn pay. Our publishing business, wherein we give rights of our songs to be used in various videos continues to grow handsomely. Every major web show release in quarter 3, starting from Fabulous Wives Vs Bollywood to Roshans or big movie like Pushpa 2 and Shahid's Deva have one thing in common. They have licensed a Saregama song to be used for the show or the film.
Brands like Air India, Urban Ladder, Mondelez also ended up licensing our song for use in their advertising. Being aware of the power of our catalog, we are constantly fine-tuning our approach in keeping our catalog relevant and top of mind, which is done through dedicated marketing teams who work on the placement of these catalog songs at high traction places.
We continue with our strategy of future-proofing our company by investing in new content. The 9 months of this year have seen the most aggressive content release ever from Saregama. We spent close to INR 235 crores in this content and relevant marketing for the content which has been released over the 9 months. Many of our albums that we released this financial year are charting at top positions across various languages.
On a full year basis, we will be spending or we will be releasing content this year, costing us upwards of INR 300 crores. Our August released Stree 2 songs are still on top of every possible chart. They are still generating daily streams of 10 million, daily 10 million additional streams are generated on YouTube and Spotify combined. If I look at cumulative basis, the 4 songs of Stree 2 have generated 1.9 billion views on YouTube and 450 million views on Spotify in just 6 months.
Our Tamil album, Amaran turned out to be the biggest hit of the Tamil industry of the last calendar year. During Q3, we also ended up releasing music of other big films like Singham Returns, Jigra and Kanguva. Another big move from our side in the last quarter was a movement into the extremely popular space of Hip Hop music. We tied up with MTV's Hustle Season 4 to acquire all the 130 songs that were produced under that season. We are also signing the winner of MTV Hustle 4 and all the major contestants as our exclusive artist and we'll be creating more content with them and also monetize these artists through live events. Please remember, Hip Hop is one of the fastest growing categories, which is talking to the youth of the country. And it is not limited to any one language. They do very well in Hindi as well a Malayalam or a Punjabi or even Bhojpuri.
One thing which we are consistently able to deliver is a better hit ratio compared to everybody else in the market. And we attribute this completely to our data-driven approach to music acquisition. Rather than relying on only human ear, we rely on predictive models to help us decide what to pick up and how much money should we be ready to pay for that content. Overall, during the quarter, we ended up releasing close to 1,200 original or premium recreations across Hindi, Bhojpuri, Gujarati, Punjabi, Tamil, Telugu, Malayalam, Marathi and Bengali languages. So what I said earlier, I'd like to reiterate it. While we keep on working on the original content, we -- there's a lot of focus and emphasis within the company to keep our catalog relevant, which is by either placing them in the high-profile events or doing recreation of that content to make them relevant for the younger people.
Our lineup for the next 12 months is all in place. Wherein we will have music of some of the biggest films of the year. This includes Maddock's Sky Force, which got released in the month of January, then Maddock's next movie called Thama, Mammootty's Bazooka, Dharma's Sarzameen, Sanjay Leela Bhansali, Love & War, et cetera.
As shared with you at the beginning of this financial year, the next 3 years, which includes '25, '26, '27 will be our period to future-proof our company by investing aggressively in newer content. This is also our endeavor to move from the #2 position to the #1 position that we enjoyed in the 20th century. To do this, we will buy big, but we will buy smart. This quarter, the charge-off on account of the new content was 29% higher than the same quarter last year. We are in a transitional state currently where our new content expenses are going up in a step function fashion, resulting in incremental revenue just about matching the content charge-off. Over the period or next 4 quarters, this will stabilize with content investment going up linearly and not in a step fraction after that, resulting in additional revenue that will be generated by the content that we have invested in the first 2 years being exceeding the content charge-off that we may be taking right now from the year 3 onwards.
With all this investment in new content, we maintain our guidance of a 5 year payback period and then an additional 55 to 75 years of returns coming from this content. Artist management, the other vertical within music monetization, where artists are made popular through our IP releases and then we monetize these artists by booking them for live events, weddings and brand endorsements from which Saregama gets a share. During this quarter, 2 big artists got added to our roster, Tony Kakkar with an 8 million follower base and Rehaan Roy with a 6 million follower base.
We overall now manage around 200 artists. As our investment in new content goes up, these artists are going to become bigger and bigger. On top of that, the phenomena that digital advertising is growing upwards of 15%. We believe that this entire artist management piece, including the influencer management, is going to become a huge beneficiary out of this. You finally are seeing in this country that music-based artists are also becoming a very sought-after brand ambassadors. There was a time that the most coveted brand ambassadors used to come only out of the film industry or cricket. Now you have the likes of Diljit Dosanjh, a big music-based artists, which are getting very, very popular and coveted with the top brands of the country. Net-net, with our stated goal of acquiring 25% to 30% of all new music released in India, the music licensing vertical should double its revenue in the next 3 to 3.5 years. And this entire content is going to be fund through internal accruals and the QIP money.
Now let me shift to the video vertical, where we make films under the brand Yoodlee, digital series under the brand name of Dice Media and short videos under the brand name of FilterCopy and Nutshell. The explosion in the smartphone ownership and the cheap data are the bigger drivers of this vertical. It's common to see everybody from a 16 year old boy or a girl at home to 40 and 50 year olds who are waiting maybe at a restaurant or a taxi driver who's waiting for his next rental. If they have 2 minutes free also, they are constantly glued on to the short-format apps and are consuming content that we people are putting out.
We are still at the very early stages of building this entire video particular path. Over the next 5 years, we expect it to grow at a 25% CAGR. As for this quarter is concerned, it was quite a quarter for us as for video is concerned. While the TV serials continue to dominate on Sun TV, there was no movie that was released in this quarter. We had a branded web series called Arranged Patchup Season 2, which was done in partnership with IKEA and Peter England, which was released by Dice Media and has already generated over 25 million views.
We had, at the beginning of this quarter, one unsold movie lying on our balance sheet. Based our conservative management position, we have decided to charge it off completely in this quarter. This is a noncash expense. Future monetization, if any, that comes out of this movie is going to straight flow to the bottom line. The Game Changer in this quarter was the live event business. In partnership with Diljit Dosanjh, we brought the Dil-Luminati Tour to India, which became the most successful tour of any artist ever in India. We had 14 shows in India, and I think our biggest show was in Abu Dhabi. We also did in this quarter 2 shows under Carvaan Live with Zeenat Aman and another 2 sold-out shows with Viraj Ghelani.
As shared earlier, events business is a high revenue, low margin, but a very high IRR business. So in quarters there's a lot of concerts, it may make our EBITDA margin look low, but the fact is that the capital gets locked for very short durations in this business, thus resulting in high IRRs. Also, it has got a lot of strategic relevance to our overall music business. Quarter 3 actually saw this phenomenon playing out. While Diljit's India tour success may not get repeated every quarter or even in a year, what is clearly -- the success of the show clearly shows us is the long-term business potential of live events vertical.
As disposable incomes in the country go up, the discretionary spends are going to increase. And world over, we have seen this phenomena, this story playing out that when discretionary spends go up, one of the biggest beneficiaries is experiential entertainment, whether it's live events or its movies. We will -- we believe in this live events vertical a lot, and we will continue to experiment and scale up in this vertical. We believe this vertical to be one of the verticals of future.
Then we move to Carvaan. The transition of Carvaan from retail stores to e-commerce product continues. We have scaled down our product portfolio and also the retail infrastructure that was there in place. We are fairly confident that while the volumes and the top line may shrink, the profitability margins will start improving right now as we go quarter-to-quarter. This quarter saw the retail revenue of INR 22 crores, which was a 39% drop over the last year. Overall, if I may say, our long-term strategy of diversifying from just being a music label to an overall entertainment IP company is paying off. It has not only reduced the overdependence on any one vertical, which may have its own swing, but has also allowed us to drive massive cost and revenue synergies between various verticals.
Between FY '25 to '27, we will be investing over INR 1,000 crores in new music content. Of this content -- of this amount of INR 1,000 crores, content worth INR 500 crores has already been secured. This will contribute not only to the immediate growth of the company, but also put the company on a long-term growth path. We are here not only to drive profitability of today, but more importantly, ensure that the profitability as we go forward keeps on being secured. We believe that our music vertical comprising our licensing and artist management will grow at 22% to 23% CAGR over medium-term basis. There will be ups and downs, but our medium to long-term projection of 22%, 23% stays.
Overall, at the consolidated company level, we expect PBT to double over the next 3 to 4 years. Both music and video verticals are going to contribute to this. We maintain our annual adjusted EBITDA guidance of 32% to 33%, excluding any sudden highs in live events business if it happens. On an annual basis, our PBT will show modest growth compared to last year, but this is expected to correct after another 4 quarters where PBT will also start growing rapidly in sync with the revenue line growth.
Saregama's growth narrative will continue to be steady in the medium to long-term, thanks to the overall increase in the digital consumption, both in terms of new customers coming and joining the digital market and existing customers consuming that much more. I'm very happy to share that the digital footprint of Saregama owned and controlled channels, which was under 300 million as of last quarter, has grown up to 324 million followers across YouTube, Instagram and Facebook. We are on a strong wicket. We are using and relying on data and technology to charter our way, and we are thinking long-term. We will continue to focus on businesses which have got a long-term IP value creation. And while doing this, we will keep an eye on a short-term profitability, too. Lastly, I'm pleased to share that the Board has declared an interim dividend of INR 4.5 per share.
Thank you, and I'm open to questions now.
[Operator Instructions] First question is from the line of Harssh K Shah from Dalal & Broacha.
A few questions from my side. So firstly, if I dissect the revenue vertical, right? So what I observe is that the pure music licensing revenue, so that is excluding Carvaan or the artist management has grown by just 12% on a year-on-year basis. So considering the views that we have on YouTube and the plays on the OTT platform, doesn't this growth seem to be a tad lower? So essentially, what I'm trying to understand here is, is it a case wherein the catalog music is not growing so much maybe in single-digits? If you could help us understand.
Yes. Your analysis is a little incorrect because you have, for whatever reason, have decided to keep artist management out. Remember, what is artist -- what is music. There is film music, there is non-film music. In non-film music, we end up going out there investing in artists to put the music out and actually make money by licensing that artist across to live events. So doing an artificial division between licensing and artist management is a tad bit unfair. So you should be seeing the numbers on a combined basis only, and the numbers are showing right now 18% to 19% growth that we have on the music business of ours.
The other part you asked right now, has the catalog numbers gone down? No, they have not gone down. Catalog numbers are growing on a steady enough basis as we people go forward. There will be quarterly pressures coming in if suddenly any platform decides like what happened with Airtel Wynk to shut shop. But those are very short-term impact that starts affecting us. In medium to long run, we all understand that shutting of one free platform results into either the free customers joining other platforms -- becoming other platforms' free customer and the revenue goes up there because all are minimum guarantee deals or many of them will start moving towards a paid side.
Okay. So if you could kind of call out approximately what rate is the Catalog Music growing at?
I will not be able to comment on that. We don't give that much amount of details about -- because the big question also after that, you're going to ask me how do you define Catalog Music. Different people define Catalog Music in a different fashion, some define as 15 months, some define as 5 years, some define as the way we used to define it one time right now before 2000. So overall, what I can give you a comfort here is, that this kind of a growth that we people are showing cannot come unless both Catalog Music as well as [ Neo Music ] are growing. Because remember, we have a large enough base of music licensing revenue. So -- and a large chunk of that, if you go by my last year numbers, over 50% of that are still belonging to 20th century. So unless we grow, we will not be able to show growth here.
Got it. Any number you would like to quantify as to what would be the impact of the closure of the Wynk app?
Not individual platforms, no, please. Can't comment on that.
Okay. Secondly, on the Video segment, right? So if I look at the absolute EBIT for the 9 months of FY '25, it's still negative. So I understand that this quarter, there was a bit of write-off that you have done on a conservative basis. But how should one look at the profitability of this division? If you could give a ballpark range of the margin one should expect on an annual basis, not a quarterly basis?
So the Video business should be able to give you high single-digits margin percentages. Again, the great thing about the Video business is that if you play it properly, the IRRs are far higher because you don't end up investing a lot of your own money in the movie, and you're able to turn around that cash multiple times during the year. That's how we look at the Video business. There are ups and downs that keep on happening. It's still a relatively newer business for us. We took over Pocket Aces just a year back, and we are still stabilizing that part of the business. So you will see as we people go ahead, Video business also generating single-digit margin percentages.
Sir single-digit EBITDA or EBIT?
Single-digit EBITDA.
Okay.
But right now, in the film business, we charge off the entire cost of the video in the first year itself. There's nothing which is sitting out there in the balance sheet.
Correct. Got it. And lastly, one clarification. So the shows that we are doing in collaboration with Viraj Ghelani, who is one of our artists. So the revenue is booked within the live events vertical or within artist management?
It's live events vertical.
Live events, okay.
Next question is from the line of Robert Marshall-Lee from Cusana Capital LLP.
Hello. Can you hear me okay?
Yes, we can.
Just be interested in -- when you're talking about the aggressive '25, '26, '27 investment, just how you're thinking in terms of return on capital on that? And if you could just explain a little bit the kind of the sequencing of the P&L, how that comes through. I'm fully supportive of kind of investing for growth, but I just want to understand how the impact of that and how you see in terms of value generation.
So the only guidance we people have on the [ new ] music investment is that we people adhere to a 5-year payback guideline on a cumulative basis of all the content that we procure in a financial year. And we are doing over the last 4 years on new content investment, we are faring better than a 5-year payback period. Does that answer your question?
When you say a 5-year payback, could you just clarify how you're calculating that?
So the entire money that we people are spending on the new -- on the content acquisition and the marketing cost that is incurred on the content. So typically, our ratios are INR 80 on content and INR 20 on marketing. So if I spend INR 100 without loading the cost -- time period cost of money, we will be recovering these INR 100 over the next 5 years.
Okay. And so given the aggression of your investment at the moment, you effectively -- your write-offs through the P&L are just exceeding the kind of the marginal gains on the kind of the P&L benefit side during that kind of period, but then they'll -- they're expected to inflect back the other direction. Is that correct?
Sorry, I did not get you.
So when you're -- as you're accelerating your investments as you're going through the accelerated investment phase, then the P&L kind of dilutive effect of the upfront write-off exceeds the benefit temporarily. Is that correct?
Yes. So we people typically charge off 38% of the new content investment in the first year itself because it's not a linear increase in our content investment. It's a step function jump we are doing in the content investment side. That's why 2 quarters back, we had given the guidance that for the next 6 to 7 quarters, we will see a situation where increase in revenue on account of the newer content will just about match the charge-off that we people are taking. As we jump across that after 4 quarters, after which the growth in the content investment is going to start falling more on linear nature, that's a time that these revenue growth is going to become faster than the charge-off and hence, profitability will start coming in on account of the newer content.
Yes. Understood. And could I just ask about the kind of the impact you're expecting from the exits of free platforms. So you talked about the 2 which have already shut up shop. Does that impact you kind of temporarily in terms of any kind of monetization you're putting through those platforms? And how do you see that shaking out?
So over the last 18 months or so, 4 of the platforms have either shut shop or have gone completely behind the paid wall. Gaana and Hungama have gone fully behind the paid wall, while Resso and Airtel Wynk have shut shop. The immediate impact of that is that the minimum guarantees that we were getting from these platforms have overnight gone away. As you can see, the -- looking at the 4 out of 8 platforms in India have shut shop, the impact should have been massive on our bottom lines, but we have been able to cover ourselves because many of the customers who were there on these free platforms have either transitioned to other free platforms or have moved towards a paid service.
So we believe this journey will continue. And of the remaining 2 platforms, there will be one of them, which is an Indian platform. I think if they go out there and turn pay, the international platform is going to follow suit. And over the next 4 quarters or 5 quarters, you will have India transitioning from a free model to a paid model on the audio side also. You're already seeing trends on -- in the past on the cable and satellite TV world, the transition happened from free to paid. We have also seen a video-on-demand part where SVOD numbers have gone up substantially. We believe something similar is going to be happening on the audio side, too.
Next question is from the line of Jyoti Singh from Arihant Capital Markets Limited.
Thank you for the opportunity.
Sorry to interrupt Ms. Singh, your voice is very low. Please use your handset.
Yes, I'm using handset only. My question is on the event side business. Like we have done very good in this quarter. So what's our expectation going forward? We are expecting similar kind of performance? And also how much margin we are expecting going forward? Or we are seeing similar kind of trend, so it will going to impact on the margin?
So Jyoti, what we -- 1 year, 1.5 years back when we started the events business, we started it because we were seeing some initial amount of interest from the Indian customer in experiential music. And that's why we were bullish on that. Secondly, we saw serious synergy between the live events business and our licensing business. We were not very sure which way this events business is going to pan out. What our performance of quarter 3 has shown us that Indian customer is getting more and more open to the idea of experiencing live music. It's not just our concerts that have done well. There are some of the international artists who also performed around the same time and have been able to draw large amount of crowds.
So we believe that as we people go forward over 3 to 5 years, there may be a large amount of growth coming out of the events vertical itself in the company, compared to everybody else, we have an edge at this moment. Firstly, we are the only music label in this country that also has a live event vertical, which allows us to get a massive edge. We have relationships already going on with the artists. We are also releasing songs of the same artist right now whose live events we people are doing, nobody else has got the same position in the market.
You may not see this performance that you saw in quarter 3 getting repeated every quarter. But as I -- let me repeat myself, over a period of next 3 to 5 years, directionally, we'll move in here. And the margins in events business are at best high single-digits. But because your money gets locked for very short durations, at times 30, 60 or 90 days only, never more than that, you are able to go back and generate very high IRR.
Okay. And sir, on the margins side, basically, margin is the main concern with Saregama compared to our competitor. So when we are going to see the stable or good margins?
Ma'am, if we decide as a company tomorrow to follow a policy that we just want to be comfortable with whatever content we people own today, we can also go back and end up driving margins, which are upwards of 75% because our real cost structure that we people are sitting on within the company is the new content that we people are acquiring. Saregama for the longest time for close to 2 decades had taken a call not to invest in new content, and we have realized top volley because if you don't invest in newer content, the company starts becoming irrelevant for the younger audience. And there's a conscious call that we people have taken that we will invest in content in a very heavy fashion, which means there will be in short-term basis, our cost structures are going to go back and hit content does not come free of cost. But we believe in a period of next 3 to 5 years, it will boost our profitability in a significant fashion.
Next question is from the line of Mr. Pulkit Chawla from Emkay Global Financial Service.
So the first part, I think do you somehow feel that with the growing popularity of the shorts format, does something like a YouTube Shorts cannibalize your long-term format? Given that today, at this point of time, monetization is slightly better on the long format as compared to the short format. Does that make monetization slightly more difficult?
And second, if you could just help me today, it's been a year since you've now acquired Pocket Aces, where we are on the path to profitability. So the last year was slightly weaker on the revenue growth front also. So if you could just highlight what steps have you taken for Pocket Aces.
Okay. So let's talk about the short format content. When we look at all of the short format apps, we see a massive potential upside that has not been factored in yet in terms of share of advertising revenue that we people can generate. You see these apps as cannibalizing. We see these apps as something that can generate fresh set of eyeballs and hence, fresh advertising, which will eventually get shared with the content creators, it's a matter of time. Some of these short-format apps even have contracts with us, which say that the day they start sharing revenues with any content creator, they will share it there with us also.
So we see these as the future growth potential points there. Often, people ask me on music, what are the 2 unexpected growth triggers that may come in. Expected is market share from our side or the basic growth that industry is seeing. The unplanned or unexpected or untimed, I may say, will be growth of subscription that may really surprise us. It may grow that rapidly on the streaming side. And second is short-format apps ability to convert these eyeballs into advertising dollars that will get shared with us. That's part one answer. Part 2, you were asking...
The Pocket Aces profitability part, the revenue growth trajectory.
We had gone Pocket -- if people had written about that at a consolidated level, Saregama is going to be growing its revenue upwards of 30%. Pocket Aces cannot lag behind. They have to go out there and grow at the same revenue. Otherwise, we will have pressure. So they are growing right now at a healthy enough fashion, and we are reasonably confident that we will be able to get these guys to breakeven or very close to breakeven as promised earlier by the end of this financial year.
Next question is from the line of Rucheeta Kadge from iWealth.
Sir my question was on the events business. So what are the kind of events that are lined up for the next year? If you can give me a sense on that?
We are working with a range of different kind of artists, artists who are signed with us, artists who are coming to us seeing our ability to produce India's biggest tool with Diljit Dosanjh. There is more work that may happen in international markets, maybe Diljit itself. There are Punjabi artists, there are South Indian artists. So there are a range of people that we are working with. We are also developing in parallel IP-based shows, which are independent of an individual artist, but the IP becomes bigger, like the series that we people have wherein we get a big Bollywood star of yesterday who tells us the stories of his or her movies and the songs behind it. We did it with Javed Akhtar Shah in the -- in this financial year, we've already done with Javed Akhtar Shah. We just did it with Zeenat Aman ji. And you will see right now us pursuing this with more number of stars.
Similarly, we are doing musicals for kids. Say Cheese Grandpa is the brand name and [ vendor ] which we people work, whereby we take some of the most iconic songs of Saregama like Lakdi Ki Kathi, which were aimed at the younger children, combine it with some of the newer age music, give it some amount of prominence on digital platforms and then also turn them into live events where younger kids can come with or without their parents and also get some moral learnings out of that show.
So all that is happening. Events has got a dedicated team, which is exploring all possible opportunities. Good part is that there is a lot of conviction internally in the system after the success that we people are seeing. And in the market, we are treated as the #1 producer in the country today as far as live and shows are concerned.
Okay. So sir, my question was in the direction that in the last 9 months or 12 months, if I see, on an average, our growth has been very massive. So going ahead, obviously, the base is going to be higher. So would that growth taper down or you see directionally, it should grow in maybe 50%, 60%?
Let me comment right now vertical-by-vertical. On the music side, we maintain our mid to long-term period growth position of 22% to 23%. On video, we are projecting a growth of 25%. On Carvaan, there will be further degrowth that will happen and then it will stabilize and hopefully start showing a marginal growth upwards. On live event side, honestly, it's very early for me to go back and give any number. It will depend right now, one big show comes from our partnership happens from outside and the numbers keep on changing. So live events, give us another few quarters for us to stabilize it. After that, we'll be happy to share our growth projections. But on the more stable businesses, I've shared my projections with you.
Got it. And sir, just one last question. Sorry, I'm repeating it, but just wanted to understand and get a sense on the content cost, which is amortized. So if you could give an example, if INR 100 content we are acquiring, how much of it are we amortizing? How much of it is marketing? And going ahead, then how do we amortize that?
So I'll ask Pankaj, our CFO, to go back and take this.
So see, the ratio between content acquisition and marketing is typically 80-20. So if content is acquired at INR 100, INR 80 is the content acquisition, INR 20 is the marketing. The INR 20 of marketing gets charged off immediately. While of INR 80, we write off 20% in year 1, which is INR 16. So if you just add up, it's about 36% that get charged off in year 1. At an overall level, the entire content is charged off in a period of 10 years.
So from second year, would it become lower and lower, like 20% in year 1, so then maybe 10...
20% becomes 15%, and then remaining 8 years are equal.
Next question is from the line of Priyankar Sarkar from Square 64 Capital Advisors LLP.
Vikram, a couple of questions. If Airtel Wynk did not go out of the market, how much more revenue growth could we have done in this quarter? Any ballpark figure, if you can help us with that?
Pass that one. [Foreign Language]
Because the thing is when we speak to the industry, we are seeing the growth in music licensing at an industry level has slowed down, right, to the early teens. And I wanted to get your view because you have been very bullish on that, but that's not the feedback I get when I speak to all the people in the industry. So where is the disconnect?
So I'm assuming you're giving us a pat on the back.
I mean, sir, I would look at you without the artist management. So for me, you have grown at 12.5%, this [ lane you ] are going to 19.5%, so...
When you're looking at music, then you can remove my catalog also and say, I'm going to look at -- see, that is your call. Everybody else has got the same artist management sitting in. All my competitors have signed artists and their revenues are coming part of it. It just so happens right now, we are splitting them. Every major label that you pick up globally or India has an artist management piece connected to it. It's integral part of music. Tomorrow, you may say, I will not include YouTube as part of your music licensing and what do I do? So sir, that's entirely your prerogative, but I'll again repeat, I think it's flawed. You need to combine both these to understand music, what is the potential of music, because I invest in artists who is going out there and singing my song. I make money not just from the song from the artists at the same time and everybody is following that methodology.
But that notwithstanding your part that is there a kind of a slower fee, you need to understand when 4 of the platforms decide to go from free to either paid or they shut down, there will be some amount of pressure that will start getting generated in the market. What we are very bullish about there as an industry is that, that shutdown is resulting into subscription slowly growing. At the end of the year right now, which is the end of next quarter, I will be sharing some flavor of how revenue that Saregama makes from subscription is going up. These are still early shoots, but we can see subscription economy is really moving as we people go forward, which is a great part.
For us, the fact that our growth numbers have gone up is because our market share has gone up. Market share has gone up, one, because we are actively investing in newer content. So is the #1 player in the market. They are also actively investing in newer content. We have a higher hit rate and that you can go back and judge by yourself by looking at the numbers of all the newer content that will come out. There's a far higher hit rate compared to a direct competitor, the #1 guy across all the languages, which is helping us grow faster than the rate at which industry is moving.
Fair enough. Sir, if I can squeeze in one more. How is the growth in areas such as Punjabi, Bhojpuri and other regional language, except barring the bigger Southern industries?
So the growth is there across all languages for a player like us because our market share is going up. What you can -- a nice way of doing it, I'll tell you how we people look at market share of the newer content. We go out there and take any calendar year, so take a calendar year of 2024. Check out every song across every language released by every label in the year 2024, check out the cumulative views of each of these songs as of 31st December 2024. So everybody gets an equal chance out here and then start looking at the market share. You will see Saregama's market share going up across all languages. We have one language where we are relatively weak and one language that we have not entered ourselves into. Apart from that, every major language right now, you will see us either #1 or #2 position, including now we -- last quarter, quarter 2, we actually entered Chhattisgarhi, and we are now sitting at #1 position in Chhattisgarhi also.
Next question is from the line of Swapnil Potdukhe from JM Financial.
My question is with respect to your guidance at the start of the year, wherein we had said that music licensing plus artist management will grow around 25% to 26%. Now if I were to look at your numbers till [ 9, ] it appears that we are somewhere in between 17% to 18%. So we are quite far away from our original guidance for this particular year. So any thoughts around how...
See our guidance is 22% to 23% right now on this entire music vertical. Are we going a little slower than that in this financial year? Yes, you are absolutely right. But we maintain our guidance right now on a medium to long-term basis of 22%, 23%. You will have a quarter or 2 quarters here and there slowing down slightly unexpected things like a platform like Airtel Wynk shut shop, which are not expected. So there are some amount of dents that we end up taking. But we believe that on a medium to long-term basis, we are on solid grounds, and we will come back on this 22%, 23%. So if you're going to be looking at us on a 5 year basis, you will see a CAGR of that percentage. Some year, it will be higher, some year it will be slightly lower.
Okay. And secondly, on your cost side, if you look at your employee expenses, there has been some volatility in terms of how much employee costs have been there quarter-on-quarter basis. So you started with roughly around INR 26 crores in 1Q, then it went up to INR 30 crores. Now it's down to INR 27 crores. Just wanted to get -- I mean, what's bringing such...
That's only on the basis of 2 quarters, I think you'll need to go back and look at the number maybe on a 12 quarter basis, then you will start seeing a clear pattern coming in. We people announce our bonuses and increments in the month of July. So Q2 ends up typically being higher. Also remember, this year onwards, what you are seeing is entire Pocket Aces salaries are also getting combined with our numbers, which was not the case necessarily in the past. So that's the jump that you are seeing. We very closely monitor employee expenses as a percentage of the revenue, and we are comfortable at the rate at which it's moving. There is nothing suddenly on the employee expenses right now, which is going up.
I'll just add to it. Swapnil, if you see the quarterly percentages of employee cost as a percentage to revenue from operations, you will see some ups and downs because of the denominator impact. One is the consolidation of Pocket Aces. Just like if you see this current quarter, because of the [ used ] surge in revenues led by live events, the percentage appears to be 6%, which again is artificially low. Just look at our last year numbers, the percentages have been stable at about 11%, 12%. Some quarters, yes, there will be an impact on account of the bonuses payout. But otherwise, the percentages are in control. Just see the revenue numbers, how they have moved, otherwise, the employee costs are pretty much stable.
Understood, Pankaj. And just the last one, if I can squeeze in. So we have been talking about our Carvaan business, some -- we're taking some efficiency efforts over there, right, trying to bump up the margins on that side. Anything that you can call out as to where are we in terms of that effort? Any improvement in the margins -- the business?
The end of Q4, all the cost correction initiatives that needed to be rolled out will get rolled out because there was a large workforce that we people had as part of the Carvaan team that were responsible for selling the products in the retail market, and we also had inventory lying with us, so we could not take a call on an overnight basis to make any changes. It's a slow process that has happened here, whereby we have brought down the inventory and a lot of people from the retail side have been helped by getting them jobs out there in the outside area. So you will see from Q1 of the next financial year, the full impact of that coming in.
Right now, all we are seeing is that the revenue is falling down, but is not always resulting into a greater efficiency because the -- some of the manpower reduction has not been exactly in sync with the fall in revenue. Give us one more quarter. Q4 will be the last quarter in which this process is going to continue. Q1 onwards, you will start seeing numbers coming on account of Carvaan.
Next question is from the line of Abhishek Kumar from Sanctum Wealth.
So my question, I guess most of it is answered. I had the first question on the Hip Hop foray. So just [Technical Difficulty] my question was on the Hip Hop foray, which we have made this quarter and our partnership with Hustle 4 and where we have acquired the songs and plus the artist. So just wanted to know the thought process behind it and how our strategy would be going ahead in this. That's our first question.
This is one of my favorite areas, Abhi. Listen, very consciously within Saregama, we want to correct the fact that majority of our content appeal is to the middle age or the older people because this was the company which was used to live on the [ HMV ] legacy. Over the last few years, we have made -- taken a lot of steps to go back and correct it so the company starts becoming relevant to the younger people also because they will -- once they get used to my music here, they will also give us revenue for the next 40, 50 years of their life. There have been moves right now in picking up new film music, creating new pop music, creating video content, which is relevant to the younger people. In the same direction, we realized that the youth of the country, you are not talking about 14 to 26, 27, that age group is very, very big on the Hip Hop side.
Hip Hop is not the kind of music which is consumed by everyone in this age group, but people who consume it, consume a lot of it and also go out there and attend the live events of the artists whose music they are fond of. That's what has got us excited. We experimented in December, January of -- January of '24 with -- working with people like Krishna and Raftaar, who are the big boys of Hip Hop music. They started tasting success with that. They also took time to accept the fact that, that giant of pop music is ready to go out there and make a foray into Hip Hop also. Our next experiment was with MTV Hustle, whereby we did a deal with them, whereby we had not picked up ever their music in the past. We had nothing to do with it. And this time, we ended up picking up the music. And if you go by just by the data, Hip Hop Season 4 has been the best performing Hustle ever. Hustle has never done as well as they have done right in partnership with us.
We are also now signing their #1 artist who won this Hustle and some 3 other artists as part of an exclusive deal, whereby they will record music with us, and we will also manage their live events business. As we go forward, you will see more activity happening out there in this space. Attempt is, again, to create music which is relevant to various stratas of the society. Sometimes we do it on the basis of language cuts, sometimes we do it on the basis of film or non-film. While I'm talking about Hip Hop, you will also see some more action happening in Q4 on Carnatic music, which is more traditional side we are moving right now. We have not done too much of investment in the recent times on Carnatic. You will see us creating a property and getting some of the younger Carnatic guys and also putting up their content.
So it's a diversified approach that we people take at Saregama across each of our verticals, so that we are never too dependent on any one area, while we also keep on monitoring the return on investment profile of various areas to decide how much budget we should be giving right now to each of these.
And it's really good to know that we are moving towards the more younger audience of 14 to [ 26, ] which you mentioned. So that is something which is, I guess, really appreciated. And last question, I know the previous participants have asked about live events. So this is a bit different aspect given that we have kind of set a benchmark with respect to Diljit's concert this year and which was a super success. So how do we kind of move ahead from this one? So the benchmark which you have set is really high? And how do you think about the artists which they will have throughout this year, Indian artist, Punjabi artists, Hindi or maybe if you think of any Western artist. So if you could kind of...
I had answered this question earlier also. We are looking at a range of artists with whom we can go out there and work. The fact of life is there is only one Diljit Dosanjh in this country. You also have other artists who are very good like Arijit. But Diljit Dosanjh he is the ultimate ambassador of non-film music and a brand in his own right. So can I go back and replicate the success of this tour every quarter? It may not go back and happen. What it has done is, is put serious amount of confidence in the minds of the management team, our partners and our investors that this moment of investing in live events is the right moment and Indian customers are ready to pay provided the experience is right, provided the artist is a brand in his own right. So on the artist management vertical, the artists with whom we are working, the kind of music we are giving to them, we are keeping in mind that eventually, we need to turn them into huge live artists also at the same time.
We are also in dialogue with some other Punjabi and South India-based artists and working with them and seeing how do we go back and create, if not as big as Diljit Dosanjh tour, multiple tours, maybe half their size. So please don't expect every quarter or every year immediately this to happen, but it's very, very clear that live business is here to stay, and it is going to eventually become a huge chunk of our revenue as we will go forward.
Next question is from the line of [ Purab Rathi ] from RBA Finance and Investments.
Congratulations on a record set of numbers. So sir, my question would be on more of a -- you see how live events are getting traction from, as you said, the younger audiences. I would want to know if Saregama would be open to touring like how we send Diljit Dosanjh abroad. Would we be seeing artists abroad such as a Taylor Swift or a Coldplay who just backed Bombay, Saregama touring them and producing shows with them?
Conceptual level, yes.
Saregama does have scope of touring of Diljit abroad, but also getting artists from abroad in India, right?
Yes. See conceptually in agreement with you. But remember, we are not an event production company. We are an IP-based company, which invests in artists. So are we talking to some of the international guys? Yes, we are in dialogue. But everywhere, we are also finding ways in which even if an international artist comes in, can I do the opening act of the international artist with a Saregama artist? Can I create some more music with that artist out here as a collab between that artist and an Indian artist. We are looking at all those kind of possibilities. But that also opens me up right now to audience living outside India, non-Indians, consuming our music. When I -- one other participant when I said that artist management and music licensing are completely connected to each other, literally one and the same thing, that's the point I was trying to drive. And the extension of this is the live business. So short answer to your question is yes.
Sir, one last question. As you said [Technical Difficulty] for live events this ticket sponsorship. Just curious, we had [Technical Difficulty] Dil Luminati tour in U.S.A. and Canada. Why were the ticketing revenues of those shows not accounted for in our books?
So it all depends on the kind of structured deals that we people were doing there. We there were working in partnership with the local guy, again, it also depends right now because there were bigger shows, and we wanted to go out there and hedge our risk. So our role was relatively more limited. While in India, the entire show was 100% produced by us. So our roles also keeps on varying depending on our strength in any individual markets.
Next question is from the line of Ravi Kumar Naredi from Naredi Investments Private Limited.
[Foreign Language]
[Foreign Language] Sir, again, I congratulate good numbers you had given. But in last 9 months results, our revenue rise by 72%, but not -- net profit is barely no rise. So will you comment on that?
Sir, revenue has gone up by 72% [Indiscernible]
Net profit is barely no rise.
[Foreign Language] every call for the last 4 quarters, I'm saying this, as we have started the journey of investing heavily in content, my charge-off of the new content will just about go back and match the increase in the revenue that is coming on account of the new content. So that's been -- and we have taken a conscious call to go out there and do it and I've shared with the entire investor community before we ended up starting to spend this money. So this is going to continue for another 4 quarters. It was a 6 quarter story, 2 quarters have got over. 4 more quarters, this is going to go back and happen. Because after that, you will see the spends that we are doing in the newer content will start increasing only in a linear fashion. And hence, the revenue growth is going to be far higher than the growth on the cost charge-off that we will be taking -- and start growing substantially.
Yes. And this cost of content rises now higher side. Now it is almost 40% to 50% of film cost. So how we earn more in this scenario?
Sir, we are earning more meaning -- sorry, I'm not very clear about your question.
Sir, our content cost is very higher side. It is almost 40% to 50% of film cost. So how we earn more money from this higher content cost?
How did you say 40% to 50% of the film cost?
Almost I am seeing with some producer, they are saying they are...
Sir, then people may be buying the music very, very expensive. We don't buy that way. Ravi ji, I've shared in multiple forums and multiple calls also with you is that our entire buying process is a data analytics-based process, whereby predictive models are used to go back and understand how much money will we be able to generate from an album over the next 5 years because you know that internal guidelines of payback is 5 years. Whatever models are showing, we don't go and pay beyond that. So we are never [Technical Difficulty] to 40% to 50%, not even anywhere half close to that.
Okay. So it is in our mind, we have to recover in 5 years, right?
Yes, sir. That's a guiding principle for everybody in the management team. If there is one thing that binds the entire music business, both licensing and artist management, it is that the total investment you are making has to get recovered in less than 5-year period. 5 is the outer number.
Right. Sir, is this Yoodlee movies, we will come in profit soon or it takes another few years?
It will -- you will see right now Yoodlee model transitioning. Yoodlee has started showing profits, then -- the old model of Yoodlee, if you remember, we used to make films and license them directly to the digital platforms. During COVID, we realized that the digital platforms were refusing now to take movies which are non-big star directly onto their platform. So we have changed our strategy and saying we will make movies that are taken to theatrical part first, and then we are moving across to the platforms.
OTT platform.
What you are seeing in this quarter is literally one movie of the past that was sitting there with us. That's the only movie which was an unsold movie. And in our prudence, we have taken to -- decided to go back and completely charge it off.
Thank you. Ladies and gentlemen, we will take this as the last question for the day. I would now like to hand the conference over to the management for the closing comments.
We can see this quarter as an aberration or we can see this quarter as a definite proof that the strategic steps that we people are taking at Saregama are all moving in the right direction. Diversifying ourselves right now beyond the music business alone cement even within the music business, not being dependent only on one kind of music, whether we are investing right now in film as well as non-film, popular as well as Hip Hop, Carnatic as well as Gazelles and devotional.
We are investing in all the major languages of the country. We are investing -- we are not relying on making money in music only out of what a YouTube or a Spotify will give us. We are also investing along with the music on the artist who is making that music so that the recovery of the music can also happen from that individual artist who's raw material here, to also getting into other entertainment IP areas like live events or video business or within video business, short-format content. It just tells you that at Saregama, we are very, very open right now to trying and exploring various other entertainment IP verticals. It not only allows us to diversify or hedge our risk, but also allows us to create large synergy across between all these verticals that we people have.
Second, use of technology and data over human's ability to decide what's going to work and how much to pay. I think that's helping us in a very big fashion. And having a managerial strength, which has not been taken out of only the music industry, but we are picking up people right now who are the best from FMCG and durable in services also and getting them in. It's the combination of all these 3 factors, which is giving us a massive edge over our competitors. We are growing at a rate which is faster. We have a hit rate ratio right now, which is better. Hopefully, we will be able to drive -- as we drive more synergy between various verticals, the efficiency levels are also going to go up and scale will start giving its own cost advantage. So overall, we as a management team are extremely bullish on the future side, and we believe that the company will go strength to strength. Thank you and look forward to all your support.
Thank you. On behalf of Emkay Global Financial Services, that concludes this conference. Thank you all for joining us, and you may now disconnect your lines.