Music label and film production company Saregama’s Carvaan physical music player suffered as the lockdown almost completely halted physical retail sales. Even with e-commerce platforms coming back on track later in Q1FY21, only 15,000 units of Carvaan were sold, compared to 198,000 units in Q3FY20 and 74,000 in Q4FY20.

Source: Saregama

The company said it heavily cut marketing and personnel costs for Carvaan, though it did not specify how much was saved in this exercise — Saregama Managing Director Vikram Mehra said Monday in the company’s earnings call for the quarter that marketing for Carvaan in the coming months would be near-zero, and that the company would bank on “natural pull”, i.e. demand from customers, to bring the device’s sales numbers back to normal. Mehra said that only media buying agencies and external PR firms have not been cut from the company’s books, and that too only on a retainer basis. He added that spending on marketing for Carvaan would be too risky for the company, especially if restrictions on retail stores return.

Movie, TV production comes to total halt

  • Production stalls amid pandemic: Mehra said that the company’s bottom line was helped by the fact that it had no production costs this quarter due to COVID-19 driven shutdowns of production. Saregama’s film and TV business is a small percentage of its income, and its revenue still comes largely from licensing music. Saregama’s deals with Spotify and Facebook were finalised in this quarter, so that contributed to its revenue significantly, though Mehra said the exact numbers wouldn’t be disclosed due to the competitive nature of the information:

Source: Saregama

  • Increase in music consumption: As people stay in their homes, legal music streaming has boosted licensing revenues, Mehra said. “We have deals with 45 streaming platforms worldwide and all major TV channels. Our deals are there everywhere, and our content is being used by big OTT apps. Netflix and Amazon have series that use our content. Our songs are used somewhere in their films or series,” Mehra said, adding that since piracy is reducing and consumption is increasing, the revenues from music licensing will continue to grow. He estimated that in the medium to long term basis, licensing revenues would grow 15-20%, after having grown by 20-25% YoY in the last two financial years.

Source: Saregama

  • Public performance revenue down: The only part [of our licensing business] that was affected is public performances,” Mehra said. “That business stream has taken a hit. Q1 is typically not the quarter where we get performing society revenues, but if [restrictions on performances] continue, there will be an impact. But this is a small part of our revenue.”
  • Not competing with platforms: We are not getting into launching a Netflix or Gaana competitor app,” Mehra said. “We will remain a content IP company. The only area where we’re going directly to customers is the Carvaan platforms. We want to further cement on that positioning of the product.” Carvaan has a digital platform with podcasts and older music, and Mehra said Saregama hopes to monetise it with ad revenue in the next 12-18 months.
  • Film business is a tight ship: Mehra said that the company’s film business is a very frugal operation, finishing shoots in under a month with shoestring budgets. On monetisation, he said that the company retains the IP of its films, and only licenses them out in multi-year deals, with decade-long deals providing a profit on a film and shorter-duration deals taking some more time to do so.

Financial highlights for Q1FY21

Revenue: Rs 74.4 crore (down 38% YoY, down 29% QoQ)
EBITDA: Rs 26 crore (up 420% YoY, down 21% QoQ)
Profit After Tax: Rs 176 crore (up 3420% YoY, down 23% QoQ)