Corporate: Entertainment - At GCI, the Music's Playing the Band

ENTERTAINMENT
At GCI, the Music's Playing the Band

Post-turnaround, the Calcutta-based company's strategies revolve around its wealthy cache of catalogue music.

By Rakhi Mazumdar

At the Rs 146-crore Gramophone Company of India's (GCI) Calcutta headquarters, the tune being hummed is all about going global. Pradipta Mahapatra, 50, the RPG Enterprises' Chief Executive (Retail & Entertainment), is busy preparing the company for a listing on the New York Stock Exchange (NYSE). That shouldn't surprise RPG watchers. Entertainment, along with retailing, has been identified as the group's thrust areas. GCI's first-quarter results-revenues are up 52 per cent and profits have grown 13 times-have left the company's brass feeling as pleased as punch.

Up until 1996, GCI was a sick company. But group patriarch Rama Prasad Goenka realised early on that GCI was a treasure chest waiting to be opened. Mahapatra recalls how, back in 1996, Goenka had called him and said: ''Do something, the company is sitting on a wealth of Indian music.''

That wealth translates into a vault that has more than 10,000 Indian music albums, comprising a mind-boggling 1,65,000 tunes. Valued at Rs 800-1,000 crore, GCI's music ''wealth'' accounts for half of the company's asset base. Not surprisingly, much of the strategy that Mahapatra and GCI's CEO K. Krishnan are putting together revolves around this valuable cache. GCI has copyrights to nearly 50 per cent of all the Indian music recorded, and it wants to leverage its library by recycling content. Its on-line music store saregama.com, headquartered in London targets non-resident Indians in the US, the UK, and Europe. In 1999-2000, saregama.com succeeded in racking up monthly sales of around 50,000 CDs in the US and 12,000 in UK, respectively.

A global concerto

Now, GCI is trying to replicate Saregama's success by launching a 100 per cent subsidiary, RPG Global Music, which caters to the demand for Indian music in South East Asia. Between April 1998 and June 2000, GCI acquired three Tamil labels-Sangeetha, Sargam and Pyramid International-bolstering its repertoire and helping to notch up a volume of 15,000-20,000 just 12 months after its launch. GCI, says Krishnan, is now going to set up a third subsidiary targetting the Middle-East NRIs.

But that's not all of GCI's global strategy. The market for ethnic Indian music overseas may be growing but it is a niche with growth limitations. Says Rahul Dhawan, 29, Analyst, SKP Securities: ''While setting up subsidiaries and opening offices in major cities abroad will give it access to the market for Indian music, there is a limit to growth. Sooner than later, it will have to acquire international labels to fuel its growth.'' The GCI brass agrees, but thinks it's better to play safe. Says Krishnan: ''This is something we have to consider seriously. Not only does it involve a lot of money, it also requires a good distribution system in advanced in the US and Europe.''

In the domestic market too, GCI intends to adopt the saregama.com strategy to deliver music on-line. But the focus is also on brick-and-mortar channels.

An ethnic melody

To tie-in neatly with its domestic retailing strategy, recently, GCI has picked up a 40 per cent stake in the Goenka family-promoted MusicWorld Entertainment, which has plans to bump up the number of retail outlets it has from the eight at present to 15 by March, 2001.

But GCI's domestic strategy is not just about retailing. Although the company's repertoire is impressive, it has formidable competition breathing down its neck.

Analysts believe global biggies like Warner Music, Sony Music, Universal, BMG, and EMI could replicate their dominant positions in the global market in India too. Says Vandana Gangwar, 24, Senior Analyst, ICRA: ''The big five in the global music industry are here. So are home-grown players like Zee Music. They have the financial muscle to tide over risks and take up elaborate marketing and promotional expenses. Sony or even Zee Music, for instance, makes use of its own TV channels to promote its music. GCIl is weak in that respect.'' Sony is the challenger that GCI has to watch out for on its home turf. The Japanese giant has snapped up rights to Kuch Kuch Hota Hai, Dil Kya Kare, and Phir Bhi Dil Hai Hindustani (Hindi), and strong Tamil and Marathi catalogues like AVM and Baba Music. Says Shanujit, 31, Group Product Manager, Sony Music: ''Our strategy in India is to initially build a repertoire by increasing our presence in new releases of Hindi film music significantly.''

How exactly does GCI plan to combat such moves? Of course, like Sony Music and the other players, GCI will step up its film music business. As of now, film music accounts for 10 per cent of its revenues. For big budget films, music rights can cost Rs 5-10 crore and success is not always assured. But the stakes are high. Says Mahapatra: ''Even if two out of 10 are big hits we are home and dry.'' GCI has been having a good spell. Of the 10 film music albums it produced in 1999, Kaho Na Pyar Hai, Thakshak in Hindi and Tamil films like Alay Payudhe and Kandukonden were hits. Adds Deepak Jaswani, 27, Chief Manager, tips, a GCI rival: ''It's a business in which one has to take risks. One mega-success and one or two average hits can cover the cost of a few failures.''

But GCI must address other challenges too. Like whether it should stay a plain-vanilla music company or straddle the whole gamut of entertainment-like TV software production or rich audio-video content for the Net. Says Sanjiv Goenka, 38, GCI's Vice-Chairman: ''In the next three months, we will get down to it.'' Till then, keep your eyes, sorry, ears open.

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