Saregama India Ltd: India’s premier music publishing label

Lets look the business from Michael porter’s 5 forces lens –

1. Competition in the industry

   • Industry seems to be competitive as management itself said that music rights of catalogue are sold at very high valuations. They said they want to capture 30% of music produced in India in some concall but capex numbers do not indicate this.

2. Potential of new entrants into the industry

   • Big labels might be limited and film music might be going into fewer hands but lot of independent music goes into plenty of smaller, regional channels on youtube dedicated to artists or group of artists

3. Power of suppliers

   • At the moment with most of big film music in hands of big production houses, suppliers also seem limited. Hence this might be driving cost of music up.

4. Power of customers

   • This also does not seem favourable to me for music labels. If I actually think that music platforms are consolidating, this would mean they could dictate the music label share in the value chain as these platforms like Youtube, Spotify have users in their hands. This could somewhat neutralize the paid streaming kicker that is expected to come.

Some of other things I am observing –

• Since this notion is gaining some prominence that big film music might not be accretive thing, can management play smart and acquire regional or small-mid size film music. Most top punjabi singers clock similar or sometimes better views, and their content would be available at fraction of big film music cost. I am sure similar model would be applicable in other regional music. Can that be somehow an engine of growth? Management did hint at this when they said that they are gonna acquire minority stakes in regional/smaller music labels. But I don’t know if this business model gives them any long lasting competitive edge or is just a short term profit enabler?

• Management also said they started stage events business and did shows with Diljit. His upcoming album should be coming sooner. Has relationship become strong enough that he lets his album go live on Saregama?

Disc: Invested from around Oct 2020, holding some still and observing what can happen.