Ladies and gentlemen, welcome to the Saregama India Limited Q3 FY2024 earnings Conference Call hosted by MK Global Financial Services. As a reminder, all participant lines will be in the listen-only mode, and there will be an opportunity for you to ask questions at the end of today's presentation. Should you need assistance during the conference call, please signal an operator by pressing * then 0 on your touch-tone phone. Please note that this conference is being recorded. I would now like to hand the conference over to Mr. Pulkit Chawla from MK Global Financial Services. Thank you, and over to you, sir. Thank you, Tushad. Good afternoon, everyone, and welcome to the Saregama India Q3 FY2024 earnings call. From the management, we have with us today Mr. Vikram Mehra, Managing Director, Mr. Pankaj Chaturvedi, CFO, Mr. Saket Sah, Group Head, Investor Relations and ESG Reporting, and Mr. Pankaj Kedia, Vice President, Investor Relations. Without any further delay, I shall now hand over the call to the management for their opening remarks. Over to you, sir. Good afternoon, everyone. This is Vikram Mehra. The quarter three for the financial year 2024, so our operating revenues are INR 204 crore, and PBT of INR 70 crore. I've spent now over nine years at Saregama, and every quarter we are, I think, getting more and more clearer about what business are we in and how we're going to reach our final target. If I have to summarize in a single line our strategy about what we want to do, it is to create IP and then monetize that IP. That's the only business we are in and will continue to be. The IP creation can be across audio and video, which includes music as well as film, series, or short-format content. On IP, monetization is primarily done through licensing deals to third-party platforms. Also, we are extending the monetization into not just the content we are creating but also monetizing the artists who are creating this content by getting brand endorsements for those artists or getting live performances for those artists. So over time, what we create and how we monetize would have got changed, but the focus that we will focus only on creation and monetization, not getting to services business, is very, very clear. Secondly, we don't want to sit on the laurels of the past catalog that we have, which if we decide tomorrow that we don't want to invest in new content, we can also very, very easily draw very, very heavy margins. But consciously, as a management team and as a board, we want to prepare this company for 20 years down the line and not just for the next two to three years. Let me start with the first vertical, music licensing. This vertical has been growing at 23% CAGR for the last 5 years or so, 23% CAGR. As I mentioned in my last two calls, this year I've seen a lot of pressure on the OTT audio side. Many of the platforms being under financial pressure have decided to move from free to paid. This, actually, in long run, is very good news for us. All of us labels have joined hands and are, in fact, helping the platforms in their journey. We have removed our conditions of minimum guarantees so that more and more platforms move towards the paywall. It will make the overall music economy far more healthier, but there are short-term pains because of that. As people have moved to pay, the minimum guarantee is going away. Those have resulted into revenues on the OTT side being under serious pressure. We have been able to balance it to some extent by higher numbers in the other verticals, but overall, there is pressure on the music side. The good news is that all the pressure is practically going to get factored in in financial year 2024 itself. After this, we have reached a base whereby anything from now onwards is going to be a positive journey only, resulting back to the growth rates that we will have seen in the past on the music licensing. If you look at the global data, the OTT audio as well as video, which means normal streaming platforms as well as platforms like YouTube, have grown by 34% in calendar year 2023. India finally is showing the highest volume growth globally on audio streaming and audio plus video streaming of music. Keep this in mind, India growth is coming only on the back of just 200 million people streaming audio and some 350 million people streaming video. We are already touching the highest number. There's still a huge headroom of growth in terms of usage sitting in front of us. All that we need to see right now unveiling or revealing itself over the next 12-18 months is this base of users finally going behind a paywall and generating revenues for the platforms as well as labels. It has happened internationally. It's bound to happen in India. It's happening on the film streaming space in India or series space streaming space in India. It will eventually start happening out there in the space from music streaming too. Just give it 12-18 months. This quarter saw the music release of Vidhu Vinod Chopra's 12th Fail, a movie which has won every accolade, and the music is doing very, very well. In Tamil, we had Dhanush Captain Miller's music getting released. In Telugu, we had Venkatesh, the superstar there. His movie Saindhav's music getting released. In Malayalam, we had Mohanlal Malaikottai Vaaliban's music getting released. We also released a song, one of the rarest songs that Arijit has done outside the film industry called Dil Haraya, which is a non-filmy song, which did very well for us. We had multiple songs by Bhojpuri superstar Neelkamal and by Gujarati number one singer Rakesh Barot. But if you ask me, I think the greatest story for us has been, or what I now call is a game changer, is a song released by India's biggest rapper called Divine. A few months back, a year back, nobody would have thought that someone like a Divine is going to come out there and work with Saregama. And mind it, it's not just a song he has released. He has agreed to do a concert tour across India with Saregama. So we have a twin relationship going on with him on the live event side as well as on the music side. It's fulfilling the objective that we all have been trying to pursue over the last few months, is to make the brand younger and get these young-age artists to go and work with us that much more. Whether it's a Pocket Aces acquisition, which has really helped us change our image and profile in the market, or the fact that we are coming out with the latest Bollywood releases, all that is helping. It's not just Divine. We have another very popular rapper in India called Krsna. He has went out there and released a song with us in the month of January. The songs of the quarter two releases, Zara Hatke Zara Bachke, or Rocky Aur Rani Kii Prem Kahaani in Hindi, or Khushi in Telugu, or RDX in Malayalam, continue to do very, very well in quarter three also. If I look at our lineup for the next 12 months, which is a little bit of a step for all of us, are we able to generate enough amount of new content? We don't rely only on our own production studio to create content. We want to work with the best in the market in every major language. A lot of focus on the regional side from our company. Let me share the lineup, and you yourself will believe right now that we have one of the best lineups you can think of. We have three Dharma, that is Karan Johar's production house, three Dharma production films that are going to get released over the next 7-8 months. One of them includes Alia's film as part of this lineup. Second is a Vicky Kaushal and Sriti Dhamra film. There are four Geo Studios films that we will be releasing over this time, including Street 2 and Akshay Kumar's Sky Force. Ajay Devgn's Maidaan is getting released. Diljit Dosanjh and A.R. Rahman's Chamkila is getting released. In Kannada, we have a couple of superstar movies. Darshan's movie Devil is coming out. Sudeep Kiccha's next film is coming out. The music is sitting there with us. In Malayalam, we have Mammootty's Bazooka's music coming out. In Tamil, we have Suriya's fantasy film Kanguva, which is creating a lot of hype and publicity there. The music is sitting there with us. And I think one of the biggest will be the Telugu film Game Changer, which has got Ram Charan. It's a Shankar's film which has got Ram Charan and Kiara Advani. Ram Charan is doing a big film after RRR. This will become his biggest film, and Shankar is making a film after a very, very long time. Then in Punjabi, their number one star, Gippy, two of his films come out. Music is sitting there with us, Warning 2 and Shinda Shinda. As you heard the lineup from my side, you'll realize that we are not just a Hindi-Bollywood music company. We people are playing wide in all the major languages, especially wherever there is still music. We want to dominate all those regional languages, which will give us a good negotiation position when we talk to all the platforms. But yeah, with all the investment that we people have been making, the content charge, which includes just the content charge and the corresponding marketing, has gone up by 54% year-on-year. I'll repeat. We are in a transitional state. Our content spends are not going up in a linear fashion. Post-QIP, we people were clear we are going to step up, not in an incremental fashion but in a step-jump fashion, our investments in content, which means in the short run, the investments will go up very, very steeply, which will result in the revenues just about matching the content charges that we are taking given another 18 months or so. And you will start seeing that the incremental revenues we are getting from these investments will start far outweighing the charges that we are taking corresponding to the newer content because the step function jumps are needed only for two, three years. We want a company which was not investing in content to a company which is now taking a pole position in primarily all the languages. So this is the transitional time that we are going through. The absolute numbers and profits are never going to go and dip. They may, in the short run, continue to go up, but they will go up far more steeply after another 18 months or so. With all the new investment, we are holding to our internal guideline as well as guidance to you that the payback periods have to be five years. They cannot exceed five years. The language mix is decided, keeping in mind a payback period of five years. And post that, you have another 55-75 years left in front of you to keep on making money from these songs. Remember, Lag Ja Gale is already a 60-year-old song, and we are still making money from it. While we invest in new content, we continue working on our catalog, both in promoting our existing songs, using Instagram, or ensuring those songs are made available in some of the newer movies that are coming in, using technology in a very big fashion right now to push these songs. And also, we are creating a lot of versions of these songs, whether it's the tech-based lo-fi versions or asking the new-age artist to reimagine and recreate these songs and put it on and then promote these songs using Instagram. All this is giving a fresh life to the catalog, and this work will continue happening. There are enough amounts of precedents that we see at the global level done by some of the biggest music companies whom we very closely follow and learn from, and we are realizing a lot more money can be made from the catalog. If I go by the last two years' track record, our catalog has been comfortably growing at 12% per annum, and I don't see any reason why it will get hit. Over the next 12-18 months, once the OTT platforms start moving behind the paywall, I see a catalog easily managing a 14%-16% growth. The newer vertical under music licensing, music monetization, is artist management. There, we sign up various artists, and then we make them popular by placing them in our IP releases. The majority of them are music, but we are also using the power of our IP releases on the short-format side, which is housed in Pocket Aces, or maybe putting some of them under Yoodlee Films. Once the artist is made popular, we then monetize these artists by getting brands for them who want to use them for the reach these guys have created on Instagram or YouTube and also place them in various live events. Whatever money the artist makes, Saregama gets a share of it. It's an interesting model. We are making songs with them. Songs are anyway paying for themselves. Rather than using random people right now for our songs, we sign up artists, and you work with them only in the songs. The money comes not only from the songs but by also monetizing the artists themselves. We currently have some 123-odd artists which are sitting under Pocket Aces and around 15 which are sitting under the Saregama website. As the investment in newer IP becomes more and more, we see these artists as a result of it becoming bigger and bigger, allowing us to make more money. Remember, digital advertising is growing at 31% per annum, and we believe a large chunk of this investment which is moving on the digital side will finally start following artists/influencers. You know who will be the biggest beneficiary? Team Saregama because Clout, our artist management, influencer management business that we have under Pocket Aces, is the number one player in this market. In fact, recently, they won the most innovative marketing agency at the Entrepreneurship Awards of 2023. With Saregama and Pocket Aces coming together, it's going to give us a massive edge because compared to every other artist management agency who just managed the artists, we are the only people who can give breaks to artists in our own content, which means if an artist joins or works with Agency X, they may agree to give a margin A to them. But if they work with us, we can get, in fact, two-way margin from the artists because we are also allowing the artists to feature in the videos that we people are doing. None of the other artist management agencies have a content business going on. Net net, with a stated goal of acquiring 25%-30% of all new music which is getting released in India, we are very confident that our music licensing business. Licensing business. That vertical should be able to double their revenues in the next 3-3.5 years. And all this new content that we are talking about is going to be funded through our internal approvals or the QIP money. Let me now shift gears and move to the video vertical, where we make films under the brand name Yoodlee, digital content under the brand name of Dice, which is a vertical under Pocket Aces. On Instagram, we make content right now under the brand name FilterCopy and Nutshell. It's the explosion in the smartphone penetration and the relatively cheaper data, which is the biggest driver of this vertical. We are still in very early stages of video. Unlike music, where we have got over 120 years of experience now, the video vertical is a very, very new vertical for us. We believe over the next five years, we should be able to grow this vertical at a CAGR of 25% and in a stable state should be able to give us a 15% margin. The way our deal structuring is done in terms of cash inflows and outflows, what I'm very happy to share with you is that a 15% margin will result into a 21% IRR on this business. And the only capital actually you need out there for this is more in the nature of working capital, which again is going to be managed through internal approvals or maybe a small working capital line. Quarter three saw the release from the Pocket Aces side of Crushed Season three and Half Love Half Arranged. These all came under the brand name DICE and were released on Amazon. They were part of they were released by Pocket Aces before 11th of November, and the financial numbers you are seeing right now, only Pocket Aces numbers post-11th November have been taken in. So we don't have the benefit of the revenues of these two, but it's also just to, I'm sharing this information just to tell you how strong our other business of Pocket Aces is. FilterCopy, the biggest youth Instagram channel that we people that is owned by Saregama through Pocket Aces, actually completed 1 billion views on Instagram between January to November of 2023, making it by far the biggest thing that you're seeing on Instagram today. What is it resulting into? Resulting into lots of brands now chasing FilterCopy to get their products integrated into the video, and we see this business going up multiple fold. There were not too much of action happening on the Yoodlee side in Quarter three. Quarter four, we'll see two Malayalam films and two Punjabi films getting released. The live events business of us, whose primary objective is to go and support the music business, saw a successful Australia tour of Diljit Dosanjh, and we also did a show with Javed Akhtar Sahib on the stories behind the biggest songs that have ever been released. Everywhere, it's a music element which is important. Working with them, whether it's with Diljit Dosanjh or Divine, also helps us to go out there and get into deeper relationships with our artists, which facilitates more and more of their music coming across to us. Last call, I had spoken to you people about the music learning app that we people plan to launch, which will teach music fans how to sing or play instruments using artificial intelligence. All the hit songs of Saregama, from Lata Mangeshkar's Lag Ja Gale to Arijit Singh's Jhumka of Rocky Aur Rani Kii Prem Kahaani, are going to be taught using this app. The best part is the people who do well in these courses, which are all going to be paid courses, will be given a chance to release a song and an album with Saregama, something that nobody else in the market can go back and support. Just like what we did many years ago with Karma, this will be one more way for us to monetize our incredible music library. We are hoping to launch this app sometime in March or April this year. The way the app has been built, it's seamlessly integrated with every other vertical we have in the company. Just on the topic of technology, we are really going very heavy on converting all our older songs which were recorded using that-time's technology into Dolby Atmos for spatial audio. Over 2,500 songs have already been converted. The good news is a lot of platforms like Apple are actually now incentivizing labels who are putting out their content in these newer formats. Also, a presence in these newer formats means that many more younger people are more open to the idea of listening to the older songs. Carvaan saw a marginal decline in revenues this quarter. Though the unit sale numbers have gone up, we are seeing more and more of we are selling more and more of the lower-priced units. This is a very conscious effort or activity happening from our side. We have significantly, in this quarter, reduced further reduced sales and marketing expenses that we are making on Carvaan. We are comfortable with the Carvaan revenues going down. In fact, the general thought in the company is that as we move ahead, more and more we are going to move Carvaan from a retail product to only an e-commerce selling product. Over the next three years, we should be three, three and a half years, I would say, we should be investing over INR 1,000 crore in new content, all coming out of our internal approvals and QIP money. This will not only contribute to the immediate growth but also put the company on a long-term growth path. The only reason that our numbers or we are number two today and not number 1 in the music market is because we did not invest enough between 2000- 2018, 2019. We want to go back and correct that and invest heavy. While we're investing heavy, we will, for the first 12-18 months, hold on to our absolute profitability. After 18 months, you will start seeing a steep increase in profitability. And from year three onwards, you are then looking when the step function jump in investment will go away and a linear increase is going to be happening, the profitability should go up in a significant fashion. If I look at overall revenue for the company, excluding Carvaan please keep Carvaan out for the time being. We expect overall revenue of the company to continue growing over a 3-5-year period at 25%-26% CAGR and up. The overall profitability of the company, the PBD of the company, to double in the next 3-4 years. Both the music vertical and the video vertical are going to contribute to this. As I end, I'll again repeat, it's easy for us to stop all investments and just focus on short-term profitability. We have taken a conscious call that it's not the track we are going to follow. We will invest heavy on content while ensuring right now that we maintain our short-term profitability, but in the midterm, we keep on increasing our profitability. In the long run, this company will be much more stronger than what this company is today. You have just touched the tip of the iceberg. As subscription economy starts taking off in the next 18-24 months, you will see lots of money being made. That's what is happening in every other part of the world. It's happening in the video space in India also. It is bound to happen. The company which is investing heavy, company that is using artificial intelligence to go out there and make the right content selection and has got technology to ensure there's no revenue leakage that's going to be happening, is the company which is going to have the last laugh. We are very, very confident that we are on track to be in that position. Lastly, I'm thankful to the board which has declared a 400% interim dividend. This is both ways of thanking our investors for the faith and confidence they've shown in the company. Thank you, and I'll be happy to take questions now. Thank you very much. We will now begin the question-and-answer session. Anyone who wishes to ask a question may press star and one on their touch-tone phone. If you wish to remove yourself from the question queue, you may Press Star and two. Participants are requested to use hands-free while asking a question. Ladies and gentlemen, we'll wait for a moment while the question queue assembles. The first question is from the line of Pulkit Chawla from Emkay Global Financial Services Limited. Please go ahead, sir. Hi Vikram. Vikram, so just wanted some understanding in this transition of moving to a paid platform. Now, I'm assuming that these three players that have actually transitioned to the complete paid platform would not have had a major market share. The impact on your revenues seems to be quite decent, and particularly, your competitor hasn't really seen any impact here. So is there any difference in the way the deals are structured here? So could you throw some color on this first? So let me not talk about competition. That's wrong on my part. All I can tell you is that we people had a significant part of our revenue from all these platforms. Unlike some of the other overall music industry players listed and unlisted, Saregama had gone out there and struck relationships with all the nine platforms and got that efficiency level 2.5-3 years ago. Some of the other guys have been able to do it over the last 12 months. So we already had a step jump that we had seen in our revenues in the past. So there was no new platform coming in my life. We already had were running on a full efficiency there. That's why the impact was a little bigger on us. These three people were significant: Resso, Gaana, and Hungama. The impact you are seeing on the revenue, we have been able to counter it. So I think as we become comfortable, we are going to be able to counter it significantly now through an increase in revenue from the other verticals. The good news is that come Quarter four, the entire thing will be factored in. After that, we will and that's why I'm assuring you right now, we will be back on track to go out there and at the company level, start achieving 25%-26% revenue growth. Sure. Thanks. That's helpful. Second on Resso, I think now that Resso has exited the market of India, do we see any financial impact here? All these users that transitioned to a different platform and consequently, a company like ours is not affected at all? No, it's been completely. Resso had moved from a free to paid. So the revenues had come down dramatically, and that has been factored in. This is the third quarter in which that has been factored in. Do you also foresee that some more players might shut shop and maybe consolidation in the industry? So see, shut shop doesn't matter. Right now, who are the players that are left here? On the paid side, you have Apple, Amazon sitting in. Who are the big players that are sitting in here? You have YouTube Premium, which is sitting in. All significant big players. Nothing is going to happen there. You have on the paid side, Gaana and Hangama. The moment they went to the paid side, minimum guarantee went away. So the negative adverse impact on revenue has already been completely got factored in. If anything, the numbers are going to go up as and when the pay business starts taking off. The other three big guys who are there left, which is Spotify, Wynk, and Saavn, if they move to pay, the overall industry is going to go up and jump on the OTT side by 2-2.5x in revenue. We're just waiting for these three people to go and turn pay. Yeah. Thanks. That's helpful. Finally, just the plan for the remaining QIP funds, is it to be used for more acquisitions or just for picking up new content? No. So it will be used for centering a position in the space of music, both organic and inorganic being looked at as and when an opportunity rises. It will be only and only for music. We have no intent to use it for our video vertical. Sure. That's very helpful. Thanks, Vikram. Thank you. The next question is from the line of CA Garvit Gohil from Navis Analysis Advisory LLP. Please go ahead, sir. Hi. Am I audible? Yes, please. Last month, first question is on the guidance side. So is the guidance that we have been provided for this year, is the means intact or not? Sorry. So you need to clarify. What guidance are we talking? Which guidance are we talking about? Top-line guidance, sir. We were targeting the ballpark number of INR 930 crore-INR 940 crore for FY2024. I've never given that guidance, so sorry. I'll have to. We have given in the terms of CAGR. It's 22%-25% CAGR. Sorry. I'll again go back on this. What we people have said in the beginning is that we expected music part to grow, licensing part to grow at 23%. At the corporate level, we have not given a guidance. We are maintaining our part that on a three-year basis, we see our 25%-26% CAGR at the corporate level. Then this 25%-26% CAGR is for overall basis or for the music segment only? Corporate level, we are giving a guidance of 25%-26% CAGR over the next three to five years. Understood. Sir, you mentioned Q4 onwards, the growth will be there in the music segment, all the pay is factored in. So I need to understand by growth, do you mean the do you mean the benefit in the terms of the subscription model is likely to come in from FY2025 only or it will take some time to ramp? So let me further qualify. When I'm saying 25%-26%, please, you have to remove the Carvaan revenues out of it completely. And end of the year, we always end up declaring right now what the Carvaan revenue is. Carve out the Carvaan revenues on the remaining base, which is the core business of the company. We are looking at 25%-26% growth. First, that's a point. This growth that we are seeing is basically the business being the way it is today. It's just a new content strategy which is going to help us achieve this. As and when the business OTT business starts turning towards pay in 18-24 months, our growth and our profitability can become even better. Understood, sir. Sir, you also mentioned Spotify, Zinc, and Saavn going behind the paywall. Is there any expected timeline to the negotiations happening or what is the scenario right now for them? I'm not saying they are going behind the paywall and nobody to go and declare that. I'm saying they are the only ones who are left who are not gone behind a paywall. When they go behind a paywall, it will result into the entire industry behind a paywall, and the revenues that music labels make from OTT platform should go up by 2-3x. My personal belief is in the next 12-18 months, you will end up getting these guys also moving. A year back, we had maintained a stand that in two to three years, industry will go behind a paywall. During this in the last one year, already three years moved. Hopefully, the second part of my projection and hope is also going to come true. Understood, sir. That's it from my side for all the best for the future. Thank you. The next question is from the line of Nitin Sharma from MC Pro Research. Please go ahead. Yeah. Hi. Thank you. So two questions. First of all, this INR 1,000 crore content investment, is there a broader breakup in mind for how much will be spent on a different category? And also, some visibility on the event segment would be helpful. So our music part, this investment that we are talking about right now is going to be spread between both Hindi and regional, with the large share going to on the regional side. We believe that regional music ends up giving you better return on investment. The competitive intensity out there is also on the lower side, and we are very, very strongly placed to take pole position in all the regional languages of the country. Also, we are realizing that over the last 10 years, the consumption pattern of people is changing from on entertainment side, both video and music, is changing from listening only to Hindi or English music to consuming more and more of content in their own languages, their local languages. And we are just trying to take benefit of the change in the culture. Now, your second part was on the live event side. See, live event side, we are just a year old on the live event side. We are still testing waters. We have not gone out there and done any massive investments. And actually, there is no investment needed in live event. It's literally a working capital that gets stuck out there for a month to 45 days at any particular time. Our focus is to primarily work with the top singers, allowing us to build deeper relationships. Till now, we have worked primarily with Diljit Dosanjh, resulting into Diljit Dosanjh giving us a song for the first time. Diljit, as you may know, is one of the biggest Punjabi singers in India. And getting a song from Diljit is a very big thing. It speaks to the strength of a relationship, especially the live event business, that we ended up releasing a song with Diljit in the first week of January this year. And with Divine, who's the biggest rapper, something similar is happening. We are doing the work on the live event side, which already has helped us release a song of Divine. So we will use live events in a more strategic fashion to just go and more build, cultivate relationships. Will live events become a loss leader? No. Give us a year or so for us to stabilize this business. And we believe right now that there will be some amount of margin up. It will be single-digit margin business, but much higher IRR because the capital gets locked out there for a very, very short time. Is there any thought process in terms of how many live events you would have in a particular? Very early in the day, all I can tell you, our live event business will be limited only to music. We are not competing with other people right now who do live events. We are focusing only and only on musical concerts or musical plays and nothing else. We will go and grow this in a very slow and steady fashion and not in a big bang approach. Understood. My second question, it's a bookkeeping one. What are going to be the other non-current financial liabilities, and what lets us rise at the end of December? I'll request Pankaj, please, if you can take this. Yeah. Sure. So we have recorded the investment in Pocket Aces. So when Saregama has got consolidated, we've recorded investment in the standalone book, as well as there is a derivative liability for the future acquisition. So basically, that's all gone in the unallocated bucket. This is the purchase price allocation that we have done for our valuation of Pocket Aces investment. Understood. Thank you. Thank you. The next question is from the line of Lokesh Maru from Vallum Capital. Please go ahead. Yeah. Did I have to look up on my Audible? Yes, Lokesh. Vikram, the first question is on your thesis that we will in 18 months see many people go behind the paywall. He used to play a devil's advocate. We've seen this in the global markets in India. Again, we are quite lower on the per capita income fund. So just want to get a sense of what gives you the confidence that people will shift towards the pay economy. That was the first part. And the second. We don't break the chain of thought here. The growth projection that we have been giving right now, which is that we will be able to grow the company minus the Carvaan numbers excluding, at 25%-26% and should be able to double our profits in the next three to four years. This is independent of OTT business turning going behind the paywall. So I want to make that point very clear. As in when we move behind the paywall, that's a cherry on the top. Now, the second part is what gives us the confidence? I was asked a very similar question in 2006 when I was part of a different company on the DTH side, saying that what was giving us confidence that DTH will ever take off in India when the rates of DTH were twice that of cable in 2006? And here you had not one, not two, at that time, three platforms going very, very big. And even today, they are at a very, very significant scale in spite of having a rate which is higher than cable. If you start looking at the video OTT platforms, whether it's Jio or it's Hotstar or it's Voot, SonyLIV, Zee5, Netflix, Amazon, the numbers are significantly high. So it's not that Indians don't want to pay, but if you need to give me value and you'd need to stop somewhere the availability of free, then people are ready to pay for entertainment. The other very so the key part is the three guys who are giving it free have to go behind the paywall. Piracy is dying in the larger cities. So somebody sitting in Mumbai, Delhi, Bangalore, Kolkata, Lucknow, Jaipur, if we go back and shut the tap on the free side, the customer will go back and go behind the paywall as long as the pricing is a reasonable pricing. India's not a INR 500 per month market for the music side. But a double-digit number on a per-monthly subscription is something most Indians will be very comfortable paying. So yes, I'm very confident that these three players, as they start moving more aggressive on the pay side and start putting their content completely behind a paywall, which as music labels, we will very strongly support, you will see that economy taking off in a very big fashion. If you already see on the biggest platform, Spotify, they made the free experience reasonably bad. It's still available free, but the amount of breaks and advertising and the catch that they started putting in here is pushing people towards the pay side, and you will see this number growing up significantly. Right. Right. Right. Mika, my second question was on the live events vertical. So globally, what we have seen is music is dominated usually by the non-film music and single artists. Is that a trend we are seeing in India if you would have some statistics in terms of what percentage is film music and non-film music? I'm not very clear. But you said your voice right now was echoing. In the international market, we see what? In the international market, music is dominated by non-film music. So there's no film music in the international market. You have independent artists, like a Taylor Swift. The live event business, live music business is based on all the non-film artists only. The two names I gave you with whom we have been working at this juncture, Diljit Dosanjh, the biggest non-film artist coming out of India, Divine, the biggest rapper coming out of India, we are in this quarter four, which I'll talk about when we talk about quarter four, three months from now, have just launched a new vertical under the talent management called Saregama Talent, whereby we are now grooming young kids who are very talented or musical prodigies to become great performers with the eye not only to make their music videos and songs big, but also to start pitching them for live concerts and shows so that three to four years from now, Saregama becomes a label which has a Taylor Swift or a Justin Bieber equivalent artist coming out there from our table who will become big both on the recorded music circuit as well as the live circuit. Right. I'm sorry to interrupt. My question was actually, are you seeing a trend change in the industry where you are seeing non-film music picking up in India versus film music? Are you? I think I just said we are seeing that trend. That's it. We are investing in these artists. Okay. What percentage would this be? Any idea? I think that's not getting too grand enough. In general, see, film music still dominates. There is nothing that compares with Ranveer Singh and Alia Bhatt dancing to Tum Kya Mile or What Jhumka. The magic is something very, very different. We are a movie-crazy country. But the younger generation is also very open to listening to non-film music. And that's why we want to strengthen our relationships with all the major non-film big artists across languages, whether it's Hindi or Bhojpuri or Gujarati or Bengali or Punjabi, and also start creating some of the artists of our own. Got it. Got it. Great. That's it from my side, Vikram. Thank you so much. Thank you. The next question is from the line of Govindarajan from CSIM. Please go ahead. Yeah. Hi. Hi. I have two or three questions. First, you said the industry has done away with minimum guarantees. Is this limited to these three players who've gone behind paid, or the minimum guarantees are done away with for Spotify, Saavn, and? In general, Minimum Guarantees are taken out for the guys who've gone fully behind paid. Okay. So the other three are still with minimum guarantees? I can't comment on that part. But the ones who have gone behind paywalls don't have minimum guarantees. Okay. But you're not telling me whether the others are with minimum or without? There are all kinds of models that are going. You're getting into a very specific part right now, and there are only three guys left. So I'll leave it there. But the pay guys are all now sitting without minimum guarantees. There, we get a percentage of actuals, which is the way business is done in all other parts of the world. Sure. The reason I ask is there's been big disruption to revenues because of these guys going away from minimum guarantee, and that could happen with the other three as well. But I guess. So the beauty part is that other three, the moment they go behind the paywall, the paid economy takes off because then user has no option. Right now, we are in the worst phase as a company is that three people have gone behind paywall, so money from there stopped, which was significantly there in financial year 2023, has become zero in financial year 2024 for us, while the paid hasn't taken off because the other three continue to be there on the free side. So consumer has been able to shift to those guys. The moment those three also go, then everybody goes behind a paywall, and then the paid economy takes off, which is 2-3x higher revenue paying than a free guy. For us, the redeeming feature is that unlike some other people, we had a significant revenue coming from these guys in the FY 2023 revenue base. That's why we are on a like-to-like basis. FY 2024 is under pressure. But in FY 2024, you don't have revenues from any of these people now. So starting base right now from 1st April, you will once again see a very significant growth coming in. Okay. Okay. I get that. Second, you'd mentioned the total music acquisition of about INR 1,000 crore. I mean, we are roughly talking about INR 300 crore a year. Now, if I look at your cash flow statements, for the nine months, you've invested about INR 160 crore in new music spent on new content. Is that the equivalent number that we are talking about, INR 160 crore in nine months going to INR 300 crore a year? Say roughly, yes. Broadly, yes. Okay. Given your accounting policy, content charges should go to INR 300 crore in about 3-4 years. It should catch up with the regular spend in 3-4 years once we transition. Yeah. So the previous years, in any year, marketing expenses are charged up immediately. Just keep that in mind. And the ratio of marketing to content varies from language to language. There are languages where marketing is pretty high, while in other languages, the marketing is very, very low. So depending on the mix, year-on-year basis right now, the marketing gets charged up immediately. And then you take the first-year charge-off of that year's investment and the second or the third or fourth-year charge-off of the previous year's investments. Sure. Sure. I think a couple of years back, you'd mentioned generally marketing is about 25% of the spend. Yes, it is. On an aggregate level, yes, it is. Okay. Okay. I'm just a little confused on the one statement that you made that you expect to hold on to profitability in the next 12-18 months. Are we talking about percentage margins, or are we talking about absolute profits? The absolute numbers hold on. I mean, there will be an improvement in profitability going all throughout. What you will see is that the revenue will grow at a rate slightly faster over the next 18 months than the rate in which profitability is growing. But over a period of 3.5 years right now, you are talking of profitability also doubling as revenue also comes close to doubling. Okay. Yeah. It's a tricky period because this is when your content charges will go up a lot from INR 25 crore to. Yeah. The absolute numbers, you will never have a situation. The growth rate on profitability may be lower than the growth rate in revenue, but the growth rate is going to be a significant positive growth rate. Okay. I hope I'm clear. Yeah. Yeah. I understand. And lastly, for the three guys who haven't moved to paid, especially one of them who's made Spotify, you mentioned, has made free not so attractive, are we seeing any change in the mix of paid versus subscriber? Yes, we are. I'll just leave it there. Yes, we are. Okay. Okay. Okay. The green shoots are there all across, so we are happy with the way things are moving. Okay. Yeah. I got my answer. Thank you. Thank you. The next question is from the line of Keval from DSP Investment Managers. Please go ahead. Thanks for taking my question. So first of all, sir, can you throw some light on how are the payment terms different under free subscription and paywall? So typically, on the free side, we get paid on an average INR 0.10 per stream every time somebody listens to a song. If it's a free customer, on an average, we get paid INR 0.10. And if it's a paid customer, we get a share which is roughly 50% of what the customer is paying. We get a share of that 50% based on actual consumption. So if you have heard 50 songs so suppose you're a INR 100 subscriber, then around INR 50 will be treated as the content pool, which will get equally divided across all the songs you heard during the month. So if you heard 50 songs, then every song starts becoming worth INR 1. If you heard 100 songs, every song starts becoming worth INR 0.50. That's a pay part. Free part is INR 0.10 flat on per stream heard. In the case the platform is offering both free and paid, we charge a minimum guarantee, typically. If the platform is only paid, we take away this condition of minimum guarantee. Understood, sir. So again, a question on that. So let's say it's on a paid customer. He listens to 100 songs, and he's paid INR 500 for subscription. So now I understand that that INR 500, 50% of that divides between 100 songs, and it's paid to the particular labels. Now, in the case, let's say he hears 1,000 songs for that INR 500 of subscription. So isn't it a double-edged sword that on paywall, we might even get lower remuneration compared to free side? We're not sure. If we get 100 million customers and all of them spend 14 hours a day just listening to music, maybe you're right. In that case, these structures are going to get changed once again. But what we are asking is the probable part because we are seeing global standards also. The younger segment, which is the early-mover segment that comes in, is that intense music listening part, and they end up doing 100 songs odd on a per-month basis. People like you and me typically don't get that kind of a time to listen to music on a daily basis, month after month, at that significant number. But right now, deals are all done keeping in mind the amount of consumption which is happening. We are getting data on a consumption basis also. So we know what we are getting with the guys who have turned pay. We believe at this juncture, looking at the data, the value of a song heard by a paid customer is anytime between 2.5-5x of a song heard by a free customer. Understood, sir. And sir, last question that you mentioned, payments from three platforms have been stopped. So what is the reason, and how big is the impact of that? So, corrections out here. Minimum guarantees are stopped because they have moved from free to pay. And in pay, we don't charge minimum guarantees. Their pay business is yet to build up. These three are a significant player out there with us. I can't give you the specifics now. But whatever it is, 3 quarters have already been factored in. There's only one quarter left. After that, the entire impact of these three players going out is going to be wiped out. And we, people, start building right now once again, giving me the confidence that we should be able to grow the revenue of the company at a 25%-26% CAGR over the next 3-5 years. Understood, sir. Thanks a lot, and thanks for the clarification. Thank you. Thank you. The next question is from the line of Uday Prakash from Value Research. Please go ahead. Yeah. Hi, sir. I want to understand how the performance of a movie affects your streaming, let's say, after movies. Can you give in the context of, let's say, an album that hasn't been? I'm not clear. Can you please repeat the question? Yes, sir. Am I audible right now, Mr. Eddy? Oh, you are. Sir, I want to understand how? Yes, sir? Hello, Uday, sir. Can you take the device closer to you? Your voice is a little muffled. Yeah. Am I audible right now? Is it clear right now? Sir, can you speak a little bit louder? Just a minute. Am I audible right now? Yes, sir. Sir, I want to understand how the streaming of a particular album or a song continues after the release of a movie. How does the reception of a movie affect the number of streams going forward? Can you give in the context of, let's say, an album that hasn't been received as well, but the movie has performed well? On the other hand, an album that has been received very well, but the movie didn't perform well. How much impact does it make, and how does it affect? Because we acquire content based on the story and based on we have our own calculations, payback period, and everything. But performance of a movie, does it change those things? Does it have a huge impact on it? So see, at a very broad level, movie performance does impact. But does it impact very significantly? No. If you look at earlier days, '60s, '70s, '80s, if I'm going to give you some of the songs, I can bet that you won't even know the names of the movies because the songs became very, very big. It very often happens even today that songs which are coming from smaller movies suddenly become very, very big. But in general, if the movie is also a hit, a very good example I'll take for you right now is a movie called 12th Fail. I don't know. Have you heard of the movie? It's a Vidhu Vinod Chopra movie which has become a massive hit. It's a very small-budget film which has become a raging hit at this moment. When the actors were they are not the A-category actors. They are amazing actors, but they are not the A-category actors. So the monies that we paid for the movie's music rights now are also on the lower side. The songs opened on the lower side of traction. We released the song before the release of the film. It was not a very big number in terms of streams that we were getting or video views. As the movie became a hit in the theater and has become an even bigger hit on Hotstar, the performance of the songs on a daily stream has gone up by eight times. So it has an impact. And there's another way also. If you look at a movie called Zara Hatke Zara Bachke, and the producer of Zara Hatke Zara Bachke has gone on record saying that the only reason the movie opened up that big is because the songs became a cult even before the release of the film. So there is a relationship between the music and films, but it's not a complete causal-effect relationship. I'll call it more of a linearity effect out here. There is a correlation between the two, but not a 100% causal effect. So one success or one failure doesn't necessarily result into other things also failing or successful. On YouTube, if it's my favorite actor dancing and I like the video of that very, very well, it really doesn't matter right now whether the movie became a very hit or not. We can say that if the movie is performing well, we'll have a multiplier effect on the album. But on the other hand, even if the movie doesn't perform well, that doesn't mean there will be an equal downside, but there will be a slight impact on the performance of the number of streams we see going forward. What we also realized is that sometimes when the music is not as per our expectations, even if the movie does well right now, it does nothing to the song. So it's a combination. See, when we pay on films, what we are ensuring is that some of the biggest stars whose face has got a crazy amount of fan following, they get connected to the music or the video of that song. And hence, we get a massive amount of sampling upfront, which means the marketing monies I have to spend to make that song popular come down dramatically because every fan is going to go out there and listen to the song at least once or twice. And then the song is to start working on its own. And sir, my second question is on the difference between your approach to, let's say, a big movie and a small movie. When you're approaching a big movie that has big stars and a big production house behind it, also, we cannot necessarily give a number that you will achieve this number of streams, but you will know that a certain set of audience will listen to the song. But the same cannot be assured or expected for a small movie. So can we say that when we are also still paying lower amounts when we acquire content for smaller movies? It is more of a volume game, can we say, let it be in Bollywood or regional languages. So what often happens when you're working on smaller movies means not working with the top actors and actresses or directors, right? At that time, we pay a lot of importance also on the quality of music that's coming out. We definitely see the whole idea of applying Predictive AI to decide whether to take it or not, even with the smaller actors and what is the amount of money we can make from it. That applies to every song that we, people, acquire in the company. So Predictive AI has got a big role there. But after that, on the smaller movies, if the quality of songs is very, very decent, we just go out and pick it up. If the quality of the music is also not something that we, people, enjoy, in that case, there are bigger movies. Some of the movies that got released recently, we have said no to those movies in the past. Okay, sir. My final question is on, sir, always been aggressive at the front of marketing, I mean, for our music. How will Pocket Aces come into play in this area, sir, marketing of our new content? Sir, in a short I'll just give you one stat out here. In this very, very short period of some 45 days that we, people, have worked together with Pocket Aces in Q3, we already had managed to get a reach of 60 million on the digital side for our music using Pocket Aces' assets. So it's helping us magnify the popularity of our songs manifold using the footprint that Pocket Aces has. If I remember my numbers correctly, Pocket Aces has added over 110-120 million to our overall digital footprint. Today, as a company I mean, very few companies can go back and claim what I'm going to be saying next to you. But as a company, if I look at our stuff, we have got over 230 million subscribers/followers on digital media. This is the biggest currency we are investing in. Tomorrow, when customers want to listen to something and brands want to advertise anywhere, this is what's going to help us and put us on a pole position compared to all other players who are playing it out and maybe driving current profitability rather than preparing the company for 3-5 years down the line. Sir, since we right now own significant stake in Pocket Aces, and we also use them for marketing new content, can we also expect cost synergies in terms of marketing going forward? There will be. So right now, rather than trying to go out there and just reduce cost, we are saying, "How can we go out there and give bigger growth?" Our focus, the cost there are areas in which cost efficiencies are being driven, not necessarily just to go out there and cut marketing expenses. I think the growth opportunity is the very much bigger one sitting in front of us. How do I make my songs which are released by the music side become that much bigger using that digital power of Pocket Aces? And how do I make the influencer business that Pocket Aces has become that much bigger using our ability to create music and music videos so that both businesses grow at a much faster pace than they were doing in the past to achieve the synergies? That's the reason if I'm saying we are really growing at 25%-26% on a sustained basis, that's where all these growth numbers are coming from. Okay, sir. Thank you. That's it from my side. Thank you. Ladies and gentlemen, the last question for today is from the line of Chirag Shah from White Pine Investment Management, Pvt. Ltd. Please go ahead. Thanks for the opportunity. Sir, first, just basic question of clarification. So, for example, YouTube has gone behind the paywall. So even if there is a free subscriber who's listening to YouTube and listening to a particular music, how would you be paid for that, and how different it is? What is the gap versus a paid subscriber over here? Sir, for YouTube, there are two services. There's YouTube, and there's YouTube Premium. On YouTube, it's a free part. On a YouTube free part, if an ad is presented on any IP that we, people, control, either on our own channel or user-generated content, if an ad is being put, we get 55% of it. YouTube retains 45% of it. That's a freak of a business model. Yeah, yeah. I'm asking about that only. Yeah, yeah. That's free. If you move to the paid part of YouTube, you're a paid subscriber of YouTube, which means no ads are going to be presented to you. In that case, whatever you're paying to YouTube, it follows a very similar model like audio streaming platforms. Whatever you pay to YouTube, a percentage of that is earmarked as content pool, which will be divided equally across all the content you consume during that. So look, staying on the free part, so you are saying if the ad is played suppose the music is played and the ad is played, whichever, you get 55% of that ad. I didn't understand that. Suppose you are a Hindustan Lever, and you are put up an ad. Your campaign is going on. You have paid INR X rupees right now for every time your ad is presented behind. Okay, yeah, yeah. For a video and between a video. Okay, I understood now. I'll get 55%. 55% of that money will come to us. But I presume that would be far lower on per song basis as compared to what you're getting paid. Maybe on the paid subscriber, it would be 4-5x more than this, right? That is the right way to. In the paid economy, I'll repeat what I said earlier. In general, a paid customer, when he or she consumes our music, ends up being 2-3x more valuable. 2-3x more. Okay. Sir, second, a basic query. Suppose in the case of a paid subscriber, okay, now if the song is downloaded by him in his mobile library, I'm just using a mobile as an example. And if he repeatedly hears it when either he's offline or online, in both the cases, it will be counted a number of times, right? So there are algos. Even if he listens to the song offline, it goes on. Contractually, we are protected there. All these platforms have the technology whereby at the local cache level in the app, they will be keeping a track of how many times you heard, if you are a paid customer or free customer. Also, when you offline something, they also often offline ads along with it so that when you are watching something offline, ads are also presented there. We get advantage of all that. Okay. There are algos or softwares available even if it is offline, especially in the case of free subscribers. Not now. This is over five year-old technology. Yeah, yeah. I know that. Just a bit. Sir, last thing is, if I have to ask you that the music content acquisition payback, how do you look at it over the next three years as compared to past three years, maybe for yourself as well as industry? So has the payback got elongated? And if yes, how much it has got elongated versus what you have seen in the last three years? Actually, it has not got elongated right now. When we started investing in new content, when literally we were buying music in INR lakhs or INR 1 crore max, that time also, I maintained the policy of five year payback period. If you go through every call of mine over the last seven, eight years, you will consistently hear that our internal benchmark is five years. We buy only content right now where we are confident that we should be able to manage things in payback period of five years. Wherever we believe that the numbers are going to become on the much longer side, that means the content is overvalued, we just walk out of the deals. So you're saying despite there having been some aggression in the industry because some of this content has even gone for INR 30 crore and INR 40 crore kind of numbers, you're saying the paybacks are not getting affected. That is how. So I'll give it twin answers to this. One, if the value of the content has gone up, then the revenue from that content has also gone up. YouTubes of the world or streaming apps or short-format apps like Instagrams were not giving you money five years ago the way they're giving now. So content pricing goes in sync with the realization we, people, are having. Also, the competitive intensity in every language, there are only two to three players. There's nobody else. There's not actually 20 players fighting this out because entry barriers are very, very high in the music industry. So it's between two to three players. Okay, great. So this is helpful. This was nice. Because I was under the impression that given the way recent bidding has happened for albums, maintaining movie albums, is there a risk that paybacks have got elongated? No, I'll just give you just something I posted two days ago. I'll give you an example of this. We had done a Bhojpuri song a year back called Lal Ghagra by Bhojpuri's number one star called Neelkamal Singh. And that song, just two days ago, crossed 300 million views on YouTube. 100 million was an unheard-of thought from four years ago in our country. No, I was more referring to movie albums, the way. Oh, same movie album on Rocky Aur Rani Kii Prem Kahaani. three of the songs have already crossed 100 million number. I have Badshah Ka Gana of Pani Pani, touching 700 million. I have the songs of Zara Hatke Zara Bachke, two of them crossing 120 million. Many of them are crossing over 100 million number on Spotify alone. So as digital explosion is happening, more people are coming as part of this digital bandwagon. The overall consumption has gone up in a significant fashion. I have What Jhumka, which is sitting at over 260 million views on YouTube today. I have Sir Aur Kya Cheya sitting at 240 million. I have a Telugu song called From the Movie Dasara sitting at 210 million. From Telugu movie Khushi sitting at 170 million. So you have Tere Vaaste from Zara Hatke sitting at 420 million. The movie is not even one year old. The numbers are looking much, much massive. The key part out here is that the fundamentals that are used to buy music have to be very strong. We have invested very heavily on Predictive AI, which is becoming a big aid to us. Second, we have a decentralized decision-making mechanism so that somebody sitting in Bombay at the senior level is not taking all the decisions. Somebody who understands the local languages is taking a decision so that the person and that person taking the decision is also responsible for the revenue numbers that are coming in. Their bonuses are tied to what kind of a payback is the music selected by them giving. These mechanisms that we have built in this setup of ours, which is 100% professionally driven, is what gives me the confidence that we will be able to sustain this five-year payback. On payback period, I don't even give you a guidance of five to seven. I'm very clear about it. It can't exceed five. Okay. This will help you. Thank you very much and all that. Thank you. Ladies and gentlemen, that was the last question for today. On behalf of MK Global Financial Services, that concludes this conference. Thank you for joining us. You may now disconnect.