You spoke about how changes in TRAI regulations will result in shrinkage of revenues. How have various producers / film production houses reacted to these recent changes? Have they been understanding enough to your demands with respect to the current environment?
No…nobody understands. Frankly let's put it this way…it's not entirely their problem. It's not like they don't care but they have so many other issues of their own to worry about. Over the last few years, with this entire sudden craze for the 100 crore club, the film industry has been growing at about 20- 25%. Every element of the film business has been growing. Box office business is growing; revenues from satellite deals have sky-rocketed; but only 2 businesses have not kept pace with the film business' growth- 1) the music industry business and 2) the Home Video (DVD) business. At one point the revenues from music and home video business combined used to generate about 30- 35% of a film's production cost. Now these 2 areas combined contribute less than 10%. So the relevance of music to a film producer is not as big as it used to be but it's still an area they cannot overlook. After all it's the music that drives a film's promotions. So it has a huge marking in the promotional value of a film but not that much in the overall revenue model.
Could you throw some light on the other revenue sources for a music company such as revenues from licensing, publishing, broadcasting etc?
They are the future but still at a very nascent stage. Since we are a movie obsessed music industry, we are a very visual and video driven music market. Licensing of music videos to television, to a channel like YouTube is a rich chunk and so you move to a richer interactive experience as the pipe becomes fatter and fatter. With high speed internet connections, you can download a movie or play a console game on your iPad, so the sheer nature of where your monies will come from will be vastly different. With device improvement, internet bandwidth improvement, quality of application and software improvement and consumer evolution from audio to video to games to apps to interactive, the role of licensing becomes all the more crucial.
There are 2 inevitable things that music companies need to focus on. First is our key job is always to remain a music company. We need to be operating in current music scenario, by being engaged in music, owning, buying and retaining music. Music companies cannot just sit back and let the shape of the future of the industry be handed over to people who are not necessarily from the music business. By that I mean technology companies, device manufacturers etc. We can't afford to be passive about that. There is a need to be constantly engaged in working with producers, talent and creating, owning and encouraging new music. You need to be in the game to be a part of the game. You can't suddenly say I want to be a technology company; a lot of music companies are venturing into other areas like film production etc. and going all over the place. It's strategically erroneous as a concept. You need to be a contemporarily relevant large music company that can shape the outcome of the music industry. Second element of what needs to happen in terms of forward thinking is that we have to enable and encourage people who come up with business ideas and solutions and new services to grow and develop. Music companies tend to get nervous and at times behave like extortionists. We need to enable robust players to come up with innovative music services that use technology that consumers will like. We have to encourage the technology services to grow in this market and to do that you need to be a relevant music company so it's kind of hand in hand. The key things for all of us is to find a balance as to how to grow in the eco- system yet stay in the game. Some companies are successful at it while some are not.
We actually operate in 5 different segments and each of them are unique in their own way. Each of these segments are run like separate businesses because that's the only way they'll succeed. Moving from the smallest to the largest of our businesses, first up we have a huge independent music business under the Day 1 label which kind of works on independent music, artists, musicians giving them a platform, and by organizing show bouquets, live gigs, festivals etc. We've been at it for 2 years now and are hugely committed towards it and want it to grow in a really big way. It's a talent facing driven business more than a film driven business. This year we will have some huge music festivals that will eventually mature across multiple cities representing a lot of international bands in this market as we see a lot of growth in that space. Next up is our classical music business. We are hugely bullish about it as we are probably right now the only active Indian classical music label in the country which is rather unfortunate and bizarre. It's part of our commitment to be engaged culturally in this market place and our responsibility towards the fine arts. The third area is the regional music business which is what we do in the South (pre-dominantly Tamil) and a little bit in Punjab. Tamil music market is disproportionately large and doing very well for us. The market in the South is very obsessive and fans are crazy. Then we have our International music business which is also really popular. We plan to break some new acts and come up with interesting music services in that space. And finally we have the Hindi film music (Bollywood) business which is of course the most popular. We are getting formidable with each passing year in this segment as well and have an interesting line-up of films like Murder 3, Kai Po Che, Ghanchakkar etc this year. We are quite clear and focused on our job which is to own, make and create hits which we will be doing. Besides there will be different people out there who come up with interesting music services and solutions and to build on those things and encourage and support them is also something that we plan to do actively this year.