Financial Daily from THE HINDU group of publications
Saturday, Jan 26, 2002
Saregama to tone down on FM
KOLKATA, Jan. 25
WITH a net loss staring it in the face, Saregama India Ltd (erstwhile Gramophone Company) has decided to substantially downsize its FM operations.
Mr A. Mitra, SIL Managing Director, said that after spending nearly Rs 6 crore in expectation of a booming business, FM operations have been a big disappointment. ``We are looking at several options including forming strategic alliances or even offering our FM studios to the existing players under revenue-sharing arrangements,'' he said at a press conference.
Nearly Rs 2 crore of the Rs 9.9-crore loss made during the third quarter is on account of the FM business, according to Mr Mitra. He said that of the proposed 107 FM stations, only 37 were set up and that too, very late.
Owing to the high licence fees, the major players were consolidating their position and were optimising content through in-house production, showing little interest in buying content.
However, in anticipation of this business, the RPG group had set up four studios, one in each metro and now had a Rs 2-crore revenue expenditure running its FM division.
Net sales were at Rs 78.03 crore till the third quarter of 2002 (Rs 115.7 crore) and licence fees was high. The SIL Managing Director said that this had been one of the worst years for the music industry globally and his company was no exception.
Lack of major hits in the new Hindi film segment (NHF) coupled with falling CD prices also affected the bottomline with the yield to date net loss touching Rs 10.4 crore (Rs 7.2 crore).
He indicated that the year's loss would be around this level as compared to a net profit of Rs 5.1 crore in 2000-01.
As part of its `de-risking plans', SIL was now placing increased focus on a new product mass music comprising the folk and devotional genres. This market, with a volume of 10 lakh cassettes per month, is now ruled by the T Series.
SIL has emerged as the No. 2 player with its releases of Hindi devotional and Punjabi and Bhojpuri music. Referring to the production of TV serials, Mr Mitra said that after the success of the Tamil serials Shoolam and Velan SIL was now planning to ``institutionalise its set-up" with perhaps a software production division.
"We plan to scale up our TV software operations,'' Mr Mitra said.
He said that despite an increase in interest (mainly on account of borrowings for financing acquisitions), SIL was able to reduce its operating costs by nearly Rs 5 crore this year. He expected an equivalent saving in 2002-03. Savings would also be made through the re-negotiations and collateral arrangements being made for the NHF sector.
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