A music industry veteran, Shridhar Subramaniam has been with Sony Music India since 1996 when he joined as Marketing Director. Since 2002 he has been the company's managing director and has overseen the company's growth in a continuously churning market. Since 2008, Sony Music India has grown rapidly in a fast growing market and expanded its footprint in India by entering Regional language music and also moved up the entertainment value chain by producing Bollywood movies. In a chat with Aparna Joshi, Subramaniam talks about the company's vision and outlines a roadmap for the music industry in India.
How has Sony Music evolved in India?
Sony Music came into India in 1996 and the company promised to bring in three things....a level of transparency in an industry which wasn't run professionally till then. The second promise we made was that we would be very quality oriented. We set up a factory which in those days manufactured cassettes and CDs, and now makes DVDs and play station games, and the third promise we made was that at some point we would export Indian music to the international audience. That was around 12 years ago, and we started the journey with A R Rahman and took his music to several markets outside. I think we have delivered on all three.
What was the vision of the company for the Indian market?
The DNA of the company has always been to participate in local music and try to grow our market share in the local markets, inspite of being a multinational company. The industry has witnessed its big shakeout out of which some companies have still not recovered from the round of alignation that happened. Post 2002, fewer companies came up, the competitive landscape changed completely. In 2002, the growth of mobiles started in a big way, the second thing was the advent of film companies as music companies, with the likes of Yashraj and UTV getting into the arena. The studios had themselves decide to become music companies. The third big trend of this phase was the regional market, particularly with television becoming very fragmented and regional, so music companies that were operating in the regional markets became very strong and dominant like they did in Punjab, Andhra Pradesh or Tamil Nadu.
Those of us who operate mainly in Hindi should realise that it works only for 35 per cent of India. So there was a lot of space for the regional guys to grow.
How did Sony Music survive the churn?
Sony Music however has emerged largely unscathed from these trends. We also demerged from BMG around this time, but fortunately in India it wasn't as complicated as the equations were in other countries. We started growing and becoming more aggressive in terms of expanding our market share, in 2002 we had a five per market share which became a 10 per cent market share by 2007 - 08. The biggest music company in India also owns just a 22 to 23 per cent market share. So it's a very fragemented market for an industry that's just Rs four to five billion.
We started scaling up, and started building two or three core businesses. The first was the distribution business, we tried to become a packaged media company, and became a large music and video company. Then came the advent of the MP3. We were the first officially to release our catalogue on the MP3 format, the idea was to engage the trend and engage the customer. The industry then took up the trend, and whatever little sales we have today are because of the Mp3 format.
Then came the slap to the entertainment industry in 2008, the film companies were more impacted than the music companies, because they had been over stretched - by paying for talent, for raising finances, and the ad market had crashed. So the film companies today are far more shakier than the music companies. But there will be an emergence of a whole new set up now. In the music business, we are going to see consolidation finally beginning to happen. There are 350 record companies operating in a Rs four billion market, trying to negotiate with a Rs 400 billion telco. For these telecom companies music is the biggest service they have.
What may happen may not be a function of companies buying each other, but you could see companies just folding up, companies that give up their businesses to others to manage in return for a share. Today, nobody is looking at the music business as an area of investment, because everyone thinks it's ravaged by piracy, there is no money to be made. But actually in India, the music business is set for a massive growth, because of the varied platforms on which music is being consumed - mobile, radio, television.
There are others. The internet, live venues and the management of artistes and talent has not kicked in yet. The overseas potential for Indian artistes and talent has not happened yet. There are seven or eight high growth platforms which are in various stages of development. Some are showing strong development right now, but the music industry now needs to organise itself to capitalise on this growth, knowing the fragmented nature of our companies.
There will be partnerships and alliances that will happen. However, this will still take some time Yes, the multinationals like us are investing hugely in India. That's because all the new platforms are youth centric platforms.
What are Sony Music's plans for the year ahead?
We are looking at a three fold increase in investment this year. We have realised in negotiations with telecom companies, that the brand that goes in first to negotiate takes away a disproportionate share of the money that the company has to spend.
We are following the growth of these platforms, and plan to take the first mover advantage. Last year, we had a very successful operation down south, we set up an office in Chennai and have become the number one company there in one year. The growth is likely to come from the rich states that have their own entertainment and states that are dependent on new content. We are currently big in Tamil, getting there in Telugu and hope to make inroads in Malayalam and Kannada as well.
Between Hindi and the south, we cover nearly 70 per cent of the footprint that is necessary in India.
Were Sony's film production plans driven by the need to have more music rights?
With film studios getting into their own music businesses, out of an approximate 100 films that have good music potential, we realised that there are only about 30 albums that are available to music companies for acquisition. so their value becomes ridiculously expensive. So we too decided to adopt the strategy of making films that will give us music that will allow us to stay in the game.
That's how we became a film production business. We would follow a hybrid strategy of making movies that would give us music and we continue to acquire music. If we were going to pay 25 to 30 per cent of the cost of a film for the music, we might as well pay for everything and take all the rights. That's how we decided to have the deal with Vishesh Films. Film production for us is a tactical, strategic thing. We are not essentially a film company, but we have grown our net worth and our relationships in the industry, have lasted through the churn and now have to go to the next step.
Which are the related businesses you are looking at?
Now we also have to build two other businesses which have greater value. The music business has created a lot of high value business outside itself.The radio industry for example built a high value Rs five billion business using music. Also, the music television business built a Rs 20 billion business around the content, including the videos, that we supplied to them for free. The ipod, itunes business was also built on the back of the music business. Out of a Rs one billion music business, the telecom companies have built a Rs 100 billion business. Now we need to use our increased market share and move up the value chain in two or three places. One is the mobile space, because that's where the growth is. We can get into the content aggregation space, the live event space since we have the relationships and the expertise with us, as also into the artiste management space. In Europe for instance, Sony Music runs an advertising agency. In Latin America we have a big concert promotions company. In Japan, we have our own digital platform. Maybe India is not mature for that, for the music companies that will survive, will have to build on music and related services.
Why hasnt anyone tried it yet?
Essentially, music companies in India are traders. We buy from the producer and sell to the telco. No one has pushed and carved a role for themselves in the value chain. We need to create a platform where we talk to customers, or participate in the creative process. Unless you do that, you have no reason to exist in this value chain anymore.
Talent too is being discovered by the producers, composers et al. Music companies can discover talent too, but the only medium that makes the artiste big is cinema.
What are the changes needed in the music industry in India?
There are three challenges and opportunities - the first is to ensure a fair share in the dividends reaped by the content from broadcasters and telcos. The second is that there are 450 million mobile phones in the country today which double up as music devices and that brings with it a whole new kind of mobile chip piracy, apart from the traditional exchange of tones.
The way out is to legitmise this, which is what the IMI has initiated in Andhra Pradesh, and which is showing great results. Thankfully, the judiciary and enforcement agencies have recognised sideloading as a form of piracy. For the first time, we are at the front end of responding to real consumer needs. The difference in this country is that people are willing to pay for the music from the corner shop, unlike in the US, where downloads over the internet are the norm. The music business will get its value, as long as the consumer sees value in paying for the content.
The third is to have a complete music offering and build a robust business on the back of it.
A music industry veteran, Shridhar Subramaniam has been with Sony Music India since 1996 when he joined as Marketing Director. Since 2002 he has been the company's managing director and has overseen the company's growth in a continuously churning market. Since 2008, Sony Music India has grown rapidly in a fast growing market and expanded its footprint in India by entering Regional language music and also moved up the entertainment value chain by producing Bollywood movies. In a chat with Aparna Joshi, Subramaniam talks about the company's vision and outlines a roadmap for the music industry in India.
How has Sony Music evolved in India?
Sony Music came into India in 1996 and the company promised to bring in three things....a level of transparency in an industry which wasn't run professionally till then. The second promise we made was that we would be very quality oriented. We set up a factory which in those days manufactured cassettes and CDs, and now makes DVDs and play station games, and the third promise we made was that at some point we would export Indian music to the international audience. That was around 12 years ago, and we started the journey with A R Rahman and took his music to several markets outside. I think we have delivered on all three.
What was the vision of the company for the Indian market?
The DNA of the company has always been to participate in local music and try to grow our market share in the local markets, inspite of being a multinational company. The industry has witnessed its big shakeout out of which some companies have still not recovered from the round of alignation that happened. Post 2002, fewer companies came up, the competitive landscape changed completely. In 2002, the growth of mobiles started in a big way, the second thing was the advent of film companies as music companies, with the likes of Yashraj and UTV getting into the arena. The studios had themselves decide to become music companies. The third big trend of this phase was the regional market, particularly with television becoming very fragmented and regional, so music companies that were operating in the regional markets became very strong and dominant like they did in Punjab, Andhra Pradesh or Tamil Nadu.
Those of us who operate mainly in Hindi should realise that it works only for 35
per cent of India. So there was a lot of space for the regional guys to grow.
How did Sony Music survive the churn?
Sony Music however has emerged largely unscathed from these trends. We also demerged from BMG around this time, but fortunately in India it wasn't as complicated as the equations were in other countries. We started growing and becoming more aggressive in terms of expanding our market share, in 2002 we had a five per market share which became a 10 per cent market share by 2007 - 08. The biggest music company in India also owns just a 22 to 23 per cent market share. So it's a very fragemented market for an industry that's just Rs four to five billion.
We started scaling up, and started building two or three core businesses. The first was the distribution business, we tried to become a packaged media company, and became a large music and video company. Then came the advent of the MP3. We were the first officially to release our catalogue on the MP3 format, the idea was to engage the trend and engage the customer. The industry then took up the trend, and whatever little sales we have today are because of the Mp3 format.
Then came the slap to the entertainment industry in 2008, the film companies were more impacted than the music companies, because they had been over stretched - by paying for talent, for raising finances, and the ad market had crashed. So the film companies today are far more shakier than the music companies. But there will be an emergence of a whole new set up now. In the music business, we are going to see consolidation finally beginning to happen. There are 350 record companies operating in a Rs four billion market, trying to negotiate with a Rs 400 billion telco. For these telecom companies music is the biggest service they have.
What may happen may not be a function of companies buying each other, but you could see companies just folding up, companies that give up their businesses to others to manage in return for a share. Today, nobody is looking at the music business as an area of investment, because everyone thinks it's ravaged by piracy, there is no money to be made. But actually in India, the music business is set for a massive growth, because of the varied
platforms on which music is being consumed - mobile, radio, television.
There are others. The internet, live venues and the management of artistes and talent has not kicked in yet. The overseas potential for Indian artistes and talent has not happened yet. There are seven or eight high growth platforms which are in various stages of development. Some are showing strong development right now, but the music industry now needs to organise itself to capitalise on this growth, knowing the fragmented nature of our companies.
There will be partnerships and alliances that will happen. However, this will still take some time Yes, the multinationals like us are investing hugely in India. That's because all the new platforms are youth centric platforms.
What are Sony Music's plans for the year ahead?
We are looking at a three fold increase in investment this year. We have realised in negotiations with telecom companies, that the brand that goes in first to negotiate takes away a disproportionate share of the money that the company has to spend.
We are following the growth of these platforms, and plan to take the first mover advantage. Last year, we had a very successful operation down south, we set up an office in Chennai and have become the number one company there in one year. The growth is likely to come from the rich states that have their own entertainment and states that are dependent on new content. We are currently big in Tamil, getting there in Telugu and hope to make inroads in Malayalam and Kannada as well.
Between Hindi and the south, we cover nearly 70 per cent of the footprint that is necessary in India.
Were Sony's film production plans driven by the need to have more music rights?
With film studios getting into their own music businesses, out of an approximate 100 films that have good music potential, we realised that there are only about 30 albums that are available to music companies for acquisition. so their value becomes ridiculously expensive. So we too decided to adopt the strategy of making films that will give us music that will allow us to stay in the game.
That's how we became a film production business. We would follow a hybrid strategy of making movies that would give us music and we continue to acquire music. If we were going to pay 25 to 30 per cent of the cost of a
film for the music, we might as well pay for everything and take all the rights. That's how we decided to have the deal with Vishesh Films.Film production for us is a tactical, strategic thing. We are not essentially a film company, but we have grown our net worth and our relationships in the industry, have lasted through the churn and now have to go to the next step.
Which are the related businesses you are looking at?
Now we also have to build two other businesses which have greater value. The music business has created a lot of high value business outside itself.The radio industry for example built a high value Rs five billion business using music. Also, the music television business built a Rs 20 billion business around the content, including the videos, that we supplied to them for free. The ipod, itunes business was also built on the back of the music business. Out of a Rs one billion music business, the telecom companies have built a Rs 100 billion business. Now we need to use our increased market share and move up the value chain in two or three places. One is the mobile space, because that's where the growth is. We can get into the content aggregation space, the live event space since we have the relationships and the expertise with us, as also into the artiste management space. In Europe for instance, Sony Music runs an advertising agency. In Latin America we have a big concert promotions company. In Japan, we have our own digital platform. Maybe India is not mature for that, for the music companies that will survive, will have to build on music and related services.
Why hasnt anyone tried it yet?
Essentially, music companies in India are traders. We buy from the producer and sell to the telco. No one has pushed and carved a role for themselves in the value chain. We need to create a platform where we talk to customers, or participate in the creative process. Unless you do that, you have no reason to exist in this value chain anymore.
Talent too is being discovered by the producers, composers et al. Music companies can discover talent too, but the only medium that makes the artiste big is cinema.
What are the changes needed in the music industry in India?
There are three challenges and opportunities - the first is to ensure a fair
share in the dividends reaped by the content from broadcasters and telcos. The second is that there are 450 million mobile phones in the country today which double up as music devices and that brings with it a whole new kind of mobile chip piracy, apart from the traditional exchange of tones.
The way out is to legitmise this, which is what the IMI has initiated in Andhra Pradesh, and which is showing great results. Thankfully, the judiciary and enforcement agencies have recognised sideloading as a form of piracy. For the first time, we are at the front end of responding to real consumer needs. The difference in this country is that people are willing to pay for the music from the corner shop, unlike in the US, where downloads over the internet are the norm. The music business will get its value, as long as the consumer sees value in paying for the content.
The third is to have a complete music offering and build a robust business on the back of it.
