To ensure that its growth-song remains the same, Sony Music India will have to make it big in the film music segment, and hope its international collection does that extra bit.

By Shamni Pande

In the year 2000, India accounted for: a minor 0.6 per cent of world trade, a mere 4.1 per cent of the televisions sold on planet Earth, and an insignificant per cent of mi-2's global takings. Yet, by the end of the year it accounted for 14 per cent of the 7 million copies the Vengaboys' first album, Greatest Hits, had sold around the world since its release in 1999.

That statistical fragment should make Sony Music India (SMI) happy and it does. ''Vengaboys' Greatest Hits is the largest-selling international album in Indian music history,'' gloats Sridhar Subramaniam, Vice-President (Marketing) of the company. ''It's a record that'll be difficult to beat.''

There's another Sony-title-actually an SMI-one-that has sold 7 million copies across 25 countries to date. That's the soundtrack of the motion pic Kuch Kuch Hota Hai (roughly translated it means 'Something Happens').

Still, with estimated revenues of Rs 70 crore this year (Rs 46 crore in 1999-2000), SMI is a minnow in the Rs 1,200-crore market for music in India. Worse, in terms of numbers Sony's sales of 10.5 lakh cassettes and CDs for the year 2000-01 compares unfavourably with the 1.58 crore cassettes and CDs sold in India in 1999-2000. And, oops, the company could find it difficult to maintain its 50 per cent plus growth rate this year, and estimated 70 per cent growth rate in 2001-2 (projected turnover: Rs 120 crore). ''We will stabilise around the Rs 120-crore level. From then on, it's going to be organic growth,'' acknowledges Vijay Singh, the 41-year-old Managing Director of SMI. Purely to complete the array of numbers, SMI's manufacturing facilities at Vikhroli, a Mumbai-suburb have the capacity to produce around 20 million cassettes and 3 million CDs a year.

Neither the Rs 120-crore target SMI has set for itself, nor the 15 per cent share of the market it hopes to corner by 2002 look unrealistic. A continuing emphasis on motion picture soundtracks-Dreamz Unlimited's Ashoka, Aamir Khan Productions' Lagaan ('Tax'), and Karan Johar's Kabhi Kushi Kabhi Gham ('Moments Of Happiness and Sorrow)-indipop albums from artists like Colonial Cousins and Instant Karma, and access to Sony Music's stable of international artists that includes Jennifer Lopez, Ricky Martin, and Aerosmith should keep the numbers ticking.

The acquisition of the Mumbai-based Baba Music which gives SMI a toehold in the Marathi music segment of the market should help. As will the strategic alliances with the Chennai-based AVM Audio, a significant player in the southern Indian motion picture soundtrack segment, the UK-based Navras Records and the Mumbai-based Adishree Records, both companies focusing on the classical- and devotional-music segments.

The 15 per cent aspiration was the moving force behind SMI's low-priced, launch of a sub-label Mega Music last year. A sampling of Mega Music's recent releases-Jagraata (bhajans by Lata Mangeshkar), Holi Hai, and Parvatichyavala-and the price point at which it operates (Rs 35 for cassettes and Rs 225 for CDs) leave no doubt about the strategic intent behind it: to compete with the Tips and the T-series of the world.

SMI estimates that this segment accounts for 15 per cent of the market in terms of volume. ''With the Mega Music and the Sony brands we are the first complete international major in the Indian music market,'' boasts Singh. ''We are the first international company to have a presence, and a substantial one at that, in every segment.''

Warning Notes

The growth-script SMI has chosen to adopt is a little expensive for a company that is even unwilling to discuss whether it's profitable or not, although the numbers may be irrelevant when seen alongside parent Sony Music's revenues of $65 billion and net profits of $122 million.

''While other international music majors are still groping in the dark, Sony Music has managed to get its act together in a very short time,'' concedes Venkat Rolla, the Chief Operating Officer of Music Today (part of the India Today Group that owns this magazine). ''But acquiring film music, which accounts for the bulk of the industry, is an expensive exercise. And the investment is like a gamble.''

Exactly how expensive becomes clear when Siddarth Taparia, a music-industry veteran who runs classical music portal dhadkan.com (it means 'Heartbeat') drops numbers like Rs 11 crore-the amount paid for Kabhi Khushi...by SMI-and Rs 8.5 crore (that paid by Universal for Devdas). Then there are production and marketing costs that could range from between Rs 25 lakh and Rs 1.5 crore. Even to break even, SMI will have to sell at least 30 lakh cassettes and 1.5 lakh CDs of the soundtrack.

Subramaniam shrugs away the risks involved as part of the game: ''We're trying to be predictive and creative at the same time. Obviously there will be misses. The industry track-record is 90 per cent misses and 10 per cent hits.''

The costs are lower when the genre is Indipop. A Colonial Cousins album, for instance, would set the label back by Rs 35 lakh. But the returns will be proportionately lower. Then, there is the issue of longevity. ''All companies begin the year with a marketshare of zero," observes Harish Dayani, the Executive Director of the Gramophone Company of India. ''But companies like us, or T-Series have a huge library of old albums that are perennial best-sellers; Sony, being a new entrant, has few of these best-sellers.''

What does work to the advantage of SMI is the growing roster of international artists in its parent's portfolio. The economics involved makes international music the golden goose in Sony's aviary: it incurs no expenditure on either recording or the video. The only costs it incurs are those associated with manufacturing and marketing, and these typically do not exceed Rs 15 lakh. And since it is a 100-per cent subsidiary of Sony Music, SMI pays no commission (call it marginal contribution if you will) on sales.

Things are certain to look up in this segment. ''I see the youth driving demand for international artists. That should help companies that have strong catalogues in this area...,'' says Raghu Pillai, the Chief Executive of RPG Enterprises' Retail Group, which owns and manages 11 MusicWorld stores across the country. The sting lies in the second part of Pillai's quote: ''...but eventually the industry will settle to an organic growth rate of between 3 and 7 per cent.'' That's bad news for a company that cites organic growth as its main revenue driver beyond 2002.

In the long run, though, it won't be international titles or Indipop ones that make (or break) SMI; it will be soundtracks. That's why cracking the film-music business is critical to the company. And that's why Subramaniam indulges in some blue-sky visioning about an integrated strategy for Sony Entertainment Television (the television channel), Sony Pictures Entertainment (which is in the film distribution business), and Columbia Tristar (in the film production biz).

The synergies are apparent: Columbia can produce movies, SPE can distribute them, and SMI, market the music. But that's a song that's still in the making.

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