zee
At a time when music labels are trying to diversify into films, Essel group company Zee Entertainment Enterprises Ltd (ZEEL) has launched a music label called Zee Music Company (ZMC), with plans to acquire music rights of over 20 major motion pictures in this financial year. It has already acquired the rights for Akshay Kumar’s upcoming movie Holiday which is jointly produced by Reliance Big Entertainment, Sunshine Pictures and Hari Om Entertainment Company. It has also partnered with Fox Star Studios and will handle the music of five of its Hindi releases for the year, including the Saif Ali Khan and Riteish Deshmukh starrer ‘Humshakals’, Hrithik Roshan and Katrina Kaif starrer Bang Bang and Ranbir Kapoor and Anushka Sharma starrer Bombay Velvet. The company is working for similar deals with Dharma Productions, Excel Entertainment and other top studios as well, it says.

This is still likely to be one of ZEEL’s smaller plays. Saregama, a leading player in this space, reported revenues of Rs 174.69 crore in FY13, and a profit of Rs 10.88 crore

Why this matters

1. This is a significant development, particularly because ZEEL comes into the business with two key things: Firstly, it has the financial resources to shake things up, and can afford to make losses for a couple of years to gain marketshare away from T-Series without getting particularly worried. ZEEL reported revenues of Rs 850.38 crore and net profit of Rs 158.37 crore; for the last financial year alone, it reported revenues for Rs 2565.88 crore, and a net profit of Rs 640.69 crore. By ZEEL’s estimates, the music industry in India currently stands at Rs 960 crores. It expects the industry to reach Rs 1010 crores by 2014 and Rs 1780 crores by 2018, but such predictions aren’t necessarily reliable.

What matters is what else ZEEL brings to the table: its channels and the advertising inventory. As we had pointed out earlier, a significant reason for film producers to partner with large music labels is the agency function they provide by tying up with TV channels. Zee would typically have been a client for the promotional of such films. Now, ZEEL can offer remnant inventory across its 34 odd channels to movie producers, apart from looking at tie-ups with other TV channels.

2. With a player like Zee entering the market, expect competition for rights to increase. Bollywood operates on relationships, but this is territory that Zee is familiar with. Apart from that, there is also some amount of discontent with existing labels.  Actor-turned movie producer Abhay Deol had earlier this year questioned the legal practises of record labels, after which the label had decided to relinquish the music rights for his movie.

The bigger music labels have also been criticized of stifling innovation in music distribution end, but we’ll have to wait and see whether Zee tries to change the industry, or merely try and replace existing players, and continue with an existing system.

What we’re hoping for is that the company is a little more open about licensing music than the incumbents.

Also read:

– Want To Disrupt The Music Business In India? Here’s How

ZEEL’s detailed earnings press release from Q3-FY14

(with inputs from NT Balanarayan)