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How Zee can impact the music label business

MUMBAI: Zee Entertainment Enterprises Ltd’s (ZEEL) re-entry in the music label business with its new venture Zee Music Company (ZMC) will see the former taking T-Series head on.

In 1994, Zee had first launched its music-publishing arm Zee Music (later Zee Records), which ran for almost 10 years. It had music rights to films including ‘Adharm’ (2003), ‘Agnisakshi’, ‘Gadar’, ‘Darna Mana hai’ and ‘Main Madhuri Dixit Banna Chahti Hoon’.

However, as the music industry started feeling pressure on margins and a few players started growing bigger, Zee Records faded away and became history. So what has changed now?

For starters, many musicians have been voicing their grievances against T-Series, claiming that the dominant music label insists on them signing illegal contracts. As a result, many in the music fraternity will be happy to support any challenge to T-Series’ monopoly.

Incidentally, top bosses at Zee had last month called a meeting with the music composers and film producers for their views and inform them about Zee’s re-entry in the music label business. In fact, sources also say that Zee has even agreed to sign on the new agreement that Music Composers’ Association of India (MCAI) and Singers’ Association of India (SAI) have come up with.

Competition to up acquisition prices

On competition, industry experts are of different views. While some believe that Zee Music Company will give direct competition to T-Series, some others believe that it will be bigger competition to Sony Music India, the second biggest player in the Bollywood music, the mainstay of music industry in India.

“Looking at the announcement, it seems they [ZMC] will go after T-Series. They have a massive distribution network, 34+ channels, a DTH, which will be a strong advantage,” said Universal Music & EMI Music MD Devraj Sanyal.

Sanyal’s concern is that Zee’s entry will increase the acquisition prices for music rights. “The only flipside is that with a new aggressive player, the acquisition prices will hit the roof.”

However, a senior executive of another label said that Zee will take a lot of time, and first it may give competition to Sony Music. “T-Series is too big today. They have over 70 per cent of new and popular Bollywood music. It is too far ahead. What ZMC will do is shake up others like Sony Music, which had gone aggressive last year, acquiring music. Many of Fox Star Studio films were with Sony Music, but ZMC has now stitched a deal,” he said, on condition of anonymity.

Sony Music has rights to the music of films including ‘Bhaag Milkha Bhaag’, ‘Raanjhana’, ‘Yeh Jawani Hai Deewani’, ‘Murder 3’ and ‘Student of the Year’.

However, when asked about competition, T-Series president Neeraj Kalyan said that there is no problem. “There are challenges in the industry and it is struggling as of now, but not because of multiple players. There are Yash Raj, Tips, Sony Music and UTV Music. Addition of Zee is not a challenge.”

Kalyan added that real challenges are amendments to the Copyright Act and lopsided revenue share with telcos. Apart from that, TRAI’s directive of double verification, which has affected VAS revenues and piracy, are issues.

Incidentally, T-Series CMD Bhushan Kumar was quoted in media reports as saying that the company had suffered losses in many of the big films’ music they had acquired and they had thus shifted focus to co-producing films.

Zee’s game plan

ZMC will be looking to acquire the music rights to over 20 major movies in the financial year 2014–15. It has already acquired the music rights to Akshay Kumar-Sonakshi Sinha starrer ‘Holiday’ from Reliance Entertainment. Incidentally, most of the Reliance Entertainment movies’ music rights were with T-Series.

ZMC has also partnered with Fox Star Studios and signed for 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 ‘Bombay Velvet’, starring Ranbir Kapoor and Anushka Sharma. It has also signed partnerships with Dharma Productions, Excel Entertainment and a few other studios.

“Like Yash Raj, Zee also wants to keep the IP rights to the films to exploit them in long run. For the broadcaster, it makes sense as it can sign bundled deals for satellite as well as music rights and producers also won’t have to go to different players for different rights,” commented a music industry expert.

Moreover, ZMC will find synergy in the form of broadcasting, as it runs a pure-play music channel Zing and has multiple Hindi general entertainment channels, which regularly need music content.

punit goenkaZee’s parent company Essel Group also owns Dish TV, where ZMCC can find synergy in providing music.

The company is also looking to explore the digital revenue stream. As per industry experts, out of the Rs 1000 crore ( Rs 10 billion) almost Rs 450 crore ( Rs 4.50 billion) comes from digital streams (YouTube alone is over Rs 50 crore).

ZEEL MD and CEO Punit Goenka also mentioned that digital revenues are driving the growth. “The music industry is a large playing field and there is scope for us to explore the opportunity in this market. Technology has also emerged as a key transformer of the music industry and digital revenues are driving growth in the market. Since we are a content company, it is essential to own intellectual property as content is king,” Goenka stated.

The two listed music labels, Saregama, which owns a huge library of old songs, and Tips Industries posted revenues of Rs 131.7 crore ( Rs 1.32 billion) and 30.43 crore ( Rs 304.3 million) respectively in the fiscal ended 31 March 2013. While Saregama’s music segment profit was Rs 51.3 crore ( Rs 513 million), Tips’ was Rs 19.94 crore ( Rs 199.4 million).

Also read:

Zee forays into music label biz
Mobile devices to drive digital revenues in music in India