Release Date: August 05, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Saregama India Ltd (BOM:532163, Financial) reported a 26% increase in operating revenue, reaching 205 crore for Q1 FY25.
- The company achieved a PBT of 51 crore, aligning with their guidance of a 30% revenue increase for FY25.
- Saregama's music segment saw significant success with multiple songs topping charts on platforms like Spotify and YouTube.
- The company released over 330 original tracks across multiple languages, indicating strong content production capabilities.
- Saregama is investing heavily in new content, with plans to invest over 1,000 crore in new music content over the next three years, aiming for long-term growth.
Negative Points
- There was an apparent drop in the Music segment revenue due to the inclusion of Carvaan numbers, which saw a significant decline.
- The company experienced pressure on YouTube revenue due to a shift in advertising towards political and IPL advertising.
- The Events business, despite holding 11 concerts in Canada and the USA, did not show significant revenue improvement on a sequential basis.
- The transition to new content investments has led to increased content charge-offs, impacting short-term profitability.
- The hardware segment, specifically Carvaan, saw a significant drop in revenue, and the company is planning to exit individual retail stores, which may impact top-line growth.
Q & A Highlights
Highlights of Saregama India Ltd (BOM:532163) Q1 FY25 Earnings Call
Q: What explains the sharp fall in music margins this quarter? Also, any update on the performance of Pocket Aces?
A: Vikram Mehra, Managing Director: Pocket Aces is expected to break even by the end of the year. Regarding music margins, the increase in new content investment has led to higher content charge-offs, which will stabilize in the next 18 months. The combined music and artist management revenue is on track for 26% growth this year.
Q: How much revenue comes from YouTube and Instagram for Saregama across all segments?
A: Vikram Mehra, Managing Director: Specific platform-level information is confidential. However, we do not have overdependence on any one platform. YouTube is significant, but other streaming platforms like Spotify and Instagram also contribute.
Q: Can you shed some light on the event side of performance and the impact on revenue from the US and Canada concerts?
A: Vikram Mehra, Managing Director: The events business involves short-term investments with high IRR despite low margins. The concerts in the US and Canada were managed with local partners, affecting revenue recognition. The strategy focuses on leveraging synergies between various verticals.
Q: What is the strategy behind focusing on younger artists, and how does it benefit the company?
A: Vikram Mehra, Managing Director: Investing in younger artists involves lower artist fees but higher marketing costs. The strategy aims to monetize both the songs and the artists' brand endorsements and live performances, offering higher long-term returns.
Q: Why has the music licensing revenue not grown this quarter?
A: Vikram Mehra, Managing Director: The music revenue includes Carvaan, which saw a decline. Additionally, two platforms moved from free to pay, impacting revenue. From Q2 onwards, this impact will be mitigated, and we expect a 26% growth in music licensing and artist management combined.
Q: What is the impact of platforms moving behind a paywall on piracy and payback periods?
A: Vikram Mehra, Managing Director: Piracy has significantly reduced in larger towns. If platforms move to pay, we expect at least 50 million users to shift to paid subscriptions within 12-18 months. This will improve realization rates and positively impact financial health.
Q: How is the government addressing piracy, and what is the future of subscription models?
A: Vikram Mehra, Managing Director: The government and judiciary are proactive in combating piracy. Subscription models are expected to grow, benefiting content owners. We are confident that telecom-led OTT platforms will also move behind paywalls within 18-24 months.
Q: What is the strategy for video content, and how does it impact the music business?
A: Vikram Mehra, Managing Director: We focus on regional cinema and pre-licensed digital content. Video content enhances music ROI by providing content guarantees and better control over music integration. We aim for 25% CAGR growth in the video business over the next five years.
Q: How does Saregama plan to invest in new content, and what is the expected impact on long-term growth?
A: Vikram Mehra, Managing Director: We plan to invest over 1,000 crore in new music content over the next three years. This will drive immediate growth and prepare the company for long-term success. We aim for a 30% CAGR in consolidated revenue and expect PBT to double in the next 3-4 years.
Q: What are the expected margins for the artist management and influencer segments?
A: Vikram Mehra, Managing Director: Artist management margins range from 20-40%, while influencer management margins are between 15-20%. These segments require minimal capital investment, offering high returns on investment.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
