Saregama India Limited (532163) Earnings Call Transcript & Summary

Ladies and gentlemen, good day and welcome to the Saregama India Q4 FY '20 Earnings Conference Call hosted by ICICI Securities Limited. [Operator Instructions] Please note that this conference is being recorded. I now hand the conference over to Mr. Bhupendra Tiwary from ICICI Securities. Thank you, and over to you, sir.

Thank you, Ayesha. So we at ICICI Securities welcome you to the Q4 FY '20 and FY '20 Results Conference Call of Saregama India Limited. The management is represented by Mr. Vikram Mehra, the Managing Director; Mr. Vineet Garg, CFO; and Mr. BL Chandak, Executive Director. I will now hand over the call to Mr. Mehra for the opening comments followed by which we'll start the Q&A session. Over to you, Vikram.

Thank you. Good morning, everyone. I don't need to repeat this. This has been a very, very difficult environmental situation phase that we all have been facing right now for the last 3 to 4 months. We people are uniquely placed right now because we are both a B2B player as well as a B2C player. So some of the things work for us when things go into a lockdown to a digital world and some of the things don't work for us, especially the physical product that we are selling. But overall, right now, I think we people are happy the way the final quarter turned out to be. When we -- the corona issue started hitting the world, we were very, very nervous, especially on account of Carvaan. But overall, we people have been able to come out, at least in the fourth quarter of the last financial year, I think, reasonably in a position that we can take pride. We were able to increase our profitability in the fourth quarter compared to the third quarter in a substantial fashion. The other part right now, which is equally important that during the year we were able to pay down our debt by INR 56 crore. So we are now once again under INR 10 crore of debt, and we have intentions to go back and pay it down further as we go ahead. This also happens to be our seventh consecutive year in which we people are paying dividends. And we are happy about right now that we have been able to write that kind of profitability that we can go back and pay this. It's also a lot of comfort for us as a management team. The biggest driver for us clearly has been the music licensing business. That's always has been the cash cow business of the company. That's where we people are using all the assets that we people own in terms of IP and keep on monetizing it more and more. The licensing business grew by 22%. This is in spite of the fact that the public performance revenue, as I've mentioned in many of the earlier calls, there is a -- whenever there's a public event happening and music is getting played, we get paid a license fee. That part completely went out right now in the first quarter of the financial -- or last quarter of the financial year. In spite of that and in spite of the fact that in the month of March, wherever, our revenue is linked to our partner generating advertising revenue, like YouTube, in spite of advertising revenues falling down, hence, our share falling down, in spite of the fact that public performance revenue dried up, we were still able to grow our licensing income by 22% in the year. Our strategy right now that we have been following of digitizing all our content completely, ensuring they're available on every audio OTT platform, India and abroad, keep on licensing this content also to various video OTT platforms. So Netflix, whenever a new series is coming up; Amazon, a series is coming up; Hotstar, a movie is coming up or a series is coming up, there's a lot of effort put in right now from our side to ensure our music features in there, maybe somewhere in the background, but we get a license fee. And with the consumption of all these things going up, audio OTT, video OTT, even television consumption going up, that has helped us right now go back and boost our revenues further. We, during this quarter, also started doing 2 other initiatives. We have started investing in Bhojpuri content in a significant fashion. In fact, the first initiative, first song that we people took was February end, and we are already on the Bhojpuri YouTube page of ours, have more than 400,000 followers and over 110 million song views have already happened. Remember, this is just a 3-month-old operation. Remember, we have not even started marketing that part out here. But we realize that if we people can -- again, we are harnessing a library also while we are creating content. So there's a lot of new content that we people are picking up in Bhojpuri, and we are also encouraging a lot of Bhojpuri artists to take some of the biggest Hindi songs and convert them into contemporary Bhojpuri songs. Maybe they use a piece of music, maybe they use a piece of lyrics, it's all about can you go back and monetize the IP that you own far better. What is this IP? The original song, lyrics of the song, the underlying music of the song. Not just do reinterpretations for today, also do it in different languages. And Hindi, Bhojpuri being that close to each other, that strategy seems to be paying off. Other part that we are very proud of, which we just made a press release this morning is that we use this downtime to speed up a very ambitious project we had started early this year was that there were some 11,000 songs that we had identified which belong to Lata Mangeshkar, Ghulam Ali, M.S. Subbulakshmi, the who's who of movies of '40s, maybe some are films, some are non-film released in '40s and '50s, which were belonging to Saregama, which somewhere were lost out there over time. They were painfully converted from analog to digital, and we take a lot of pain in this process because we don't need machines to do it. We use human beings to do it. There are a lot of people right now who are in their 70s who work as consultants for us out of a Calcutta factory, who were there at the time when these songs were released, who went through the songs, cleaned it up, proper metadata was done out there, and this catalog will get released right now starting today. To give you an idea of what does 11,000 additional songs mean, a typical Bollywood movie is 5 songs. So if you buy 100 songs for next -- 100 movies for next decade, then we just create 5,000 songs IP. On video right now, this is a song of -- a lot of songs of '40s and '50s and '60s, but there's still a decent amount of value sitting out there in these songs. We believe right now -- just one more step to ensure our catalog becomes richer and more and more of our content is going out to our partners. As I do want to address later right now, but in the current quarter we have also closed deals right now with Facebook and Spotify and impact of that will start coming out there from the current quarter onwards, not the last quarter, which puts us in a very decent position. Now if you start talking of the various digital platforms, whether it's Spotify, Gaana, Hungama, JioSaavn, Apple, Amazon, Google, Airtel Wynk, ByteDance is an application called Resso. You name it, Saregama's catalog is present everywhere. You can go to any of these platforms today and go back and listen to a Kishore Kumar song or a Lata Mangeshkar song or a latest Panga movie songs. At the same time, these other platforms that are coming, which a lot of encourage user-generated content. Earlier only on YouTube, we used to put a lot of user-generated content. Now we are seeing huge amount of user-generated content also coming on Facebook, Instagram, TikTok. So Saregama has gone out there and licensed its library and the rights to all these platforms, YouTube, Facebook, Instagram, TikTok so that users can upload their own videos, own picture using Saregama music, and we get paid right now for that for each of these platforms. So as digital consumption becomes more and more, we need to ensure right now that our IP gets monetized that much more, and we are seeing clear-cut benefits of that coming in. We also used this time effectively the lockdown period to ask more and more of the artists who are sitting at home, who were not generating enough revenue, to go back and say that why don't they go back and create cover versions called remixes of all of songs across all languages with a clear-cut understanding right now that they create the song, we put it right on all the digital platforms in social media and there's a revenue-sharing arrangement going on with them. What again it does, it allows me to monetize our existing IP that much better. Artists are also very, very happy because sitting at home, they can create a lot of these versions, which can be put on a Facebook or a Gaana or a Saavn, and it's a win-win situation for everyone. This is the licensing part. Carvaan sales took a big dip in the fourth quarter and -- which is a disappointment for us, but there are things which were just going beyond our control. If you guys remember, we started the financial year '19-'20 with being very, very bullish on Carvaan and the economic condition of the country looked pretty decent, at least, in March '19. And we went out there, doing higher investments on marketing upfront in the first and the second quarter of the financial year. And realized when I had the call with you guys after the end of second quarter, we acknowledged the fact right now that the -- with the economic downturn hitting the country, discretionary products like Carvaan were taking a hit. We realize right now there is no point going out there and keep on pushing that product at this moment. We started cutting our marketing expenses significantly, and you can see the impact of that in quarter 4. Quarter 4, literally, if you see the marketing expenses, we are very, very low. So we were on that trajectory. But then the second bouncer that came away right now was the impact of COVID-19. Last quarter traditionally is for most of the electronic guys, small budget electronic guys, small budget products -- electronic products, quarter 4 is a very big quarter because a lot of corporate buying happens at this time. A lot of people -- a lot of companies run their incentive schemes in the Q4 for the dealer distributor, saying that they will pick up this much amount of stock they will get something free. We had similar -- every year, we have the same thing. This year, also, we had lots of deals that we're working on right now. The corporates were picking up Carvaan or Carvaan Rose or Carvaan Minis and assuring them rewards to their dealers and distributors if the sales targets were met. Since they were not meeting the sales targets, it started affecting us also very, very dramatically. And corporate sell literally went out there close to 0 for us in the quarter, which normal case never happens. The other issue we started seeing right now that the big electronic chains and the big distributors, they started realizing, from February onwards, things started going tight and because of the impact which are happening globally, their supply -- they were not getting enough electronic items also at that time from some of the other companies, they started going very, very slow in building up their own inventory, and we started seeing an adverse pickup from the big chains right now from February onwards. March, we know the entire retail network and all the digital part went to 0. March, typically a time right now for us is 50% of the Q4 sale because that's where the real final pickup starts happening here. So overall, I think the quarter was a huge disappointment. The only way we could have countered it which was anyway planned right now was to reduce our marketing spends, which we have done from November onwards. The only -- the 2 bright sparks I can talk to you about right now: one, that the amount of inventory that our distribution network today has fallen down, which means as market opens up right now they will be more amenable to going and picking it up; the second good thing which happened right now that in spite of majority of our production coming out of 2 factories in China, and China going through closure literally from mid of January onwards, our supply chain did not get affected. So yes, I acknowledge we could not sell enough, but that was not on account of we people not having enough supply. At least the supply side was completely under control. What we are realizing out here is that as we go forward, a lot of people -- even during the lockdown period, there were humongous amount of queries coming in right now to us asking for Carvaan. The traffic on our website right now went up significantly, right? And this I'm talking about right now, multiple times where people wanted to find out more about Carvaan and wanted to order. But since there were no sale allowed at that particular time, even from our own website, it was not materializing into sale. We are hoping that as it opens up, the story may become a little better. During this time, we people also launched -- in the month of February, we launched a version of Carvaan Mini with Sri Sri Ravi Shankar, which is called Art of Living Carvaan Mini. We, in fact, could not even put it in the retail sector. The only thing we could do right now was to sell it from his ashram and everything went out on the day 1 itself. We are hoping that as markets open up, as we are able to place this unit, this will be also a very interesting variant for all the fans of Art of Living. We were supposed to launch Karaoke in the month of February, which we could not. We took a call at that particular time right now, looking at the situation in China at that time, we were not very sure whether we'll get continued supply. We pushed it to March and then March onwards the COVID-19 problem happened. Hence, we ended up postponing the launch of Karaoke also. So you have 2 products which are ready to get pushed out in the market right now when the timing is right. The other big thing we have done because that could be done very effectively from home is -- I have been talking for some time about moving Carvaan from just being a stand-alone product to a platform. We have realized right now the power of our platform, if provided it is offering something unique to the table. We -- during this time, we were tracking data. The homes which have the Carvaan 2.0 which supports our return path, the amount of listening time out that kept on going up. This is where people were not just listening to music but listening to a lot of third-party podcasts. We added around 20 podcasts during this time. Our overall podcast count that is supported on Carvaan is 282. We are seeing -- if you see all the majors right now globally, whether it's Spotify or Apple, they are all investing heavily out there on podcasts. We believe tomorrow the world will have a large amount of consumption of podcasts also happening. Remember, all our deals of podcast are variable deals. We don't give anybody upfront any amount of money right now. As and when people -- we will be able to get advertising on this podcast part, we will end up sharing revenue right now with our partners. A lot of partners are very happy giving their content to us at this juncture because it gives them access to the uppermost strata of the Indian society that's using Carvaan today. Next was our Tamil TV Roja, our show right now had moved to the #1 rated program right now in the month of December, and we maintained the #1 position right now throughout the last quarter. Till the time [ reruns ] didn't start right now, we were, in terms of TRP, always the #1 program, which has been of great comfort to us also. It's -- we are taking -- getting into the prime time part. We also have another show which is doing very well, which has been doing well and which is #1 show right in the afternoon slot. The last part is the films part. 3 years back right now, when we started films, there were a lot of skepticism about why we're getting into films, and I have been constantly maintaining that the power of content IP is going to become bigger and bigger. We should not limit ourselves only to audio IP or music video IP or TV serial IP. If we can do films right now at tight budgets, and there will be a large amount of market we should be ready to take off. I think overall year has been a good testament, this is the third year. And this has been our best year which is understandably so because we're now getting clearly established as a very quality production house, which gives good quality films at a reasonable cost. We were able to release 6 films during the year. And during this quarter, right now, we released a movie called Bahut Hua Samman to Disney Hotstar. We will -- and we are very happy right now. First year, we had some amount of losses. Second year onwards, we are getting into a breakeven part. As -- and we are producing more and more films, people are acknowledging right now that they should be working with us. We are also realizing that there are now with the lockdowns happening all around and more and more home consumption happening, we are seeing requests coming from other territories for rights of our films either with subtitles or rights of our films right now in dubbing. We're exploring all those possibilities. Once you have good quality IP, life becomes easier. And since we already have relationships with all the channels and the streaming platforms, both audio and video, because of the audio rights we own, it becomes easy to go back and also start licensing the video IP. We, today, are sitting right now on overall, as a company, not just the new films that we have made under Yoodlee, overall, we have a video IP right now of movies of 59 movies, IP is owned by us, including 12 of the latest Yoodlee films. And some of the older movies like a Godmother belongs to us or a Chain Kulii Ki Main Kulii belongs to us. So there are decent quality stuff that we own in terms of films. And our music catalog from being just 120,000-odd has certainly gone up by another 10%. So overall, right now, on the IP side we are becoming stronger and stronger which hopefully is going to help us in the days to come. That will be all, gentlemen and ladies.

[Operator Instructions] The first question is from the line of Abneesh Roy from Edelweiss.

Congratulations on good set of results. My first question is on Carvaan. So PM Modi has been driving all this Making in India. So what would be your medium, long-term strategy on sourcing of Carvaan?

Move it more and more to India. We already have 1 factory in India. We are increasing the amount that they will be producing right now, and you will see us moving more and more stuff out there to India.

Second question is on movies. So you must have seen this streaming and -- versus multiplex. You also mentioned that you would be doing mostly tight budget movie. So one is, how do you see OTT-only releases? Is there a significant increase in revenue for IP producers like you? And second, will you be doing largely streaming-only movies? Or you're open to the multiplex whenever things improve in the next 2 quarters?

Abneesh, if you go by the last 3 years' track record, we are primarily doing films which are targeted at the digital streaming world. We, today, have around 12 movies that we people have released and all of them are sitting on Netflix and Hotstar. So yes, our focus will continue being a digital -- movies that are made for the digital world. In the short term right now, honestly, I don't see too much of people going back into multiplexes. Medium run, things may just go all okay. And we people believe right now that with the strength of a music IP and the kind of films we are able to do with the budget that we're able to go back and do, we are in a good position to provide our content right now to the platforms. Also, remember, if you look at India, for all these platforms, we are the only people who are supplying digital movies. Almost everybody else is making only series. No other studio in India has been able to provide 12 films to Hotstar and to any digital platform combined right now in this country, forget 3, 5 years, I'll say. So we have got a very good reputation build for us, and we'll keep on capitalizing on it.

One follow-up question on TV shows, et cetera, and movies also. Because of the social distancing norms which have been put in place in the near term, so will your cost go up and will that be compensated by broadcasters because broadcasters also struggling a lot and first 6 months will be very tough for them. So do you get compensated for the higher cost?

That has been -- so all I can go back and say because I have only 1 broadcaster that I make my TV serials for. So let me not give you exact answer, but yes, that is very much factored in. See, TV business for us right now -- and remember, our Sun TV business right now functions in 2 fashions here. We people pay telecast fee to them and then we provide our content. And then that content -- they give us advertising money. Advertising time that we go back and can sell in the market. So all this has been factored in. But the interesting part which is happening right now with more and more digital content getting consumed, why we people have been constantly working with Sun TV because our nature of partnership is of mutual respect. We take the risk, but we also end up retaining the IP of the content that we people create. And now there is market developing where people want to dub or people want to subtitle some of the TV serials that we people produce for Sun TV into other languages and which means there is an additional source of revenue coming from the content which has fully been written off.

Sir, my last question is on Sun TV part only. So Sun TV has been struggling in terms of ratings last 2, 3 years. But last few months, it's a significant ramp up. Your show itself is #1. So is this a structural thing, in your view, at least if you could comment on your serial what is driving the ramp-up in the Sun TV rating?

I think that will be wrong on my part to comment.

So -- but your own show -- is it just because of the differential story or...

No, no. Let me put it right now, I'll say -- my only answer is our show is doing that well right now and not just on them, we have also put that show on Saregama YouTube page and it does extremely well right now there also. Every episode is garnering more than 1 million views. So it's just the quality of show. Remember, we are making content for Sun TV for 20 years right now. And however proud we maybe of our content, the fact is the first time we have put up a serial which is overall #1 program. Otherwise, our programs are typically afternoon band [Foreign Language] #1 programs. It's just a quality of show.

The next question is from the line of Kush Gangar from Care PMS.

So my first question is on music licensing. What might be the user base of Spotify compared to other licensing partners, say, JioSaavn, Gaana, et cetera?

Listen, I can't comment on that right now. It's -- that's their internal information.

Any public data if it's available or...

It will not -- I don't think this data is available publicly. We can all, I think, safely come to the conclusion right now that Spotify is making a big dent in the Indian market. It's one of the biggest global streaming platform. We were available on Spotify outside India earlier. It was the India deal which we were negotiating. And now with -- we're available on Spotify also, we are in this great position right now where we are available on every platform in India, small to big.

Right, right, right. And -- so post the signing of these 2 deals, Spotify and Facebook, we were earlier expecting around 15% to 20% growth as it is for our music licensing.

Right.

Post this also, do we see any ramp-up in our growth forecast which we were earlier expecting?

Yes. I would have addressed it in my closing statement, but let me address it here. Remember, we are -- you're right. But we are still going -- reduced our outlook at this juncture for the year, our guidance will be 15% to 20%. And primarily because I don't see public performance revenue coming back this financial year at all. Highly unlikely right now that you will be seeing public events happening, concerts happening and which was also a source of revenue for us. Second, all this revenue, which is dependent on brands, so often, brands come out there -- come out with their ads. In their ads, they end up using our music and they pay us a fee. We are seeing some amount of dip right happening on that side, too. Because of that -- so the streaming business is going to continue pretty well. It's these businesses which are dependent on advertising right now which may take a hit. Honestly, I wish I can give you a concrete answer, but the way these kind of variables that we are seeing these days have never been seen before.

Right, right. So what is the share of public concerts and events in our total music licensing revenue?

So all I can [ go on saying. ] So I'll leave it to...

I don't think so. So just is that substantial? I don't think that was a sustainable portion.

It may not be substantial, but that -- forget growth, that may become 0. So that knocks off from my overall number, remember this. It's not about that they will degrowth. They may become 0 this year because there's no event happening out here, there is no revenue coming in. I've seen in the last 2.5 months, there's nothing happening. That's why -- see, if even starts taking off after Diwali onwards, if for whatever reason we are able to go back and find a cure to -- or a vaccine out here, life will become okay. Also, the best part for events is anywhere between Diwali to New Year. So we have another 3, 4 months right now. Recovery happens, that's additional money coming in. Our current guidance is somewhere between -- we grew by 22% last year. Our current guidance is 15% to 20% [Foreign Language] somewhere it should fall.

[Foreign Language] Okay. Okay. And so on Carvaan, what is the levers do we have on the cost side? So I understand -- and if you can just highlight what kind of ad spend do we expect? But other than ad spend, our gross margins are around 22%, 23%. So what are the levers on the cost side which will reduce our cost or we -- should help us lower our losses?

No, no. Listen, let me put it this way right now. The losses on Carvaan was an account of only one feature was aggressive marketing. And the numbers did not take off the way we expected numbers to take off from the first quarter onwards as -- and all the data kept on telling us that we wanted to move to the smaller towns, smaller town people were -- the economic downturn from Q1 last year onwards right now, things did not pan out the way we expected it, right? There's no other way I can say this. And we people went out, they reduced some marketing spends. This year, we are very clear on Carvaan. We will -- we are going to be very, very cautious on any investment which is going in the Carvaan space as for marketing is concerned. We want -- because we have no idea, there may be another lockdown coming out that in the few weeks, months. We want to be very, very cautious. So we will rely completely on the natural pull from the market and put the stuff out. We are paring our cost on all sides. On the gross margins level right now, hopefully, we should be able to get it back to a 25% margin. The only other big variable is marketing. We are cutting it down. You will see a much lower level this year.

Okay, okay. And so is it that during the current quarter our net of INR 10 crores odd we assume that? Or it should be even lower?

Listen, all I can tell you right now is we have -- the March part has taught us right now that till that time we are 100% sure, retail networks being open 365 days, there is no point going out there and spending that much amount of money promoting Carvaan. We are fortunate enough...

Not even for our new version?

Even the new versions right now. We will allow it -- so you will -- apart from the product versions which are ready sitting with us, apart from that, we have no plans right now to go out there and do anything dramatic. We will wait and watch. We want to be very, very cautious on Carvaan. And because we are lucky enough to have a very strong B2B business in music licensing, TV and films, we can afford to go back and continue this way for few months till that time, things just clear out. We don't want to make the mistake second time that we blow a large amount of marketing one is to push the product because there is demand we know. But if the retail network again shuts down 2 months down the line because of a number of COVID-19 cases going up, then we'll have problems. You will see us very, very cautious quarter-by-quarter.

Right. And if you can just highlight a ballpark number for our EBITDA margins for music licensing division considering there is no major cost for that division because all the costs would have been incurred till now. So what would be the EBITDA margins in that? It would be significantly higher?

Significantly higher than what?

So a double-digit rate -- significantly higher than double digits or...

Remember, the majority of the margins that you're making is coming from music licensing business only. The other business are very small and Carvaan did not make money this year. So whatever you...

And all the EBITDA would be your music license?

It's upwards of 50%.

Upwards of 50%. Okay. Okay. Okay. And what is the outlook on films division considering there won't be films including TV, there will be lockdown which would have delayed shooting. So do we see any impact on number of films which we can monetize for FY '21?

Yes. So there may be an impact. The good part is that the shoots are starting right now, both in Tamil Nadu as well as the northern part of the country. And on shoots on films, our policy now is very, very clear. We are taking films, by and large, only if there's a preorder coming in so that we are not -- we started Yoodlee films, where we made films on our own and then sold it. Now we are in a position right now that where we can hopefully get preorders. Last year were all preorders. So the risk factor is going to be relatively low of we people going into losses. But can there be -- if there are another 4 months [Foreign Language] lockdown [Foreign Language] whatever reason, will the top line get affected, that risk is always there. But we will -- hopefully, we'll not be in a position right now where we're starting shoot and then not knowing how to sell the movie.

The next question is from the line of Bhupendra Tiwary from ICICI Securities.

So basically, just wanted to understand a few things. So there was an article a few months back, if I remember correctly, that we were also considering getting into this limited web series kind of part. Just -- and I understand the tale of that kind of a web series gives -- there's a consistent season and all those things putting in. And once that starts -- are we kind of thinking on those kind of terms to bring in your IP in the web series kind of a thing? That's my first question.

Yes. So let me answer this question. We started -- see, when we started Yoodlee, we had no reputation of making high-quality stuff for digital world. We were only TV serial maker. With the films, we have been able to establish our reputation very well right now. So now it becomes easier to have a conversation on the series part. Remember, series are always a much higher budget game. Films are not that -- the digital films are not that expensive. Series are more -- much more expensive. So yes, there is a lot of work which has happened during the lockdown period also to give final touches to multiple projects. Do we have a project in our hand right now? No. Is there a lot of effort going towards that side? Yes, there is.

All right. I think that's pretty useful. Second part, I just wanted to understand that in that TVs thing that because of lockdown, there must have been no shooting and so -- have you kind of seen that kind of thing pick up? And like you said, you had 15% to 20% kind of a view of guidance. I mean that's -- hoping that in terms of the streaming kind of a business, what is our outlook for the TV and this content card -- part of business for this year, if you could...

See, on the TV part right now, we people -- we have lost 2 months of revenues. Let me be very honest about it. April, May, there were only reruns happening all across. The only revenue we have made right now by putting those series, now we are putting all that content right now is already there on YouTube. We're also finding ways right now to put it on Facebook, and we are looking at giving the remake rights in various languages. So we are finding alternate ways. But the main part, which is the new episodes being put on Sun TV, yes, we have lost that. We hope right now that for the year, we should be -- maybe we may not be able to touch the top line number of -- because these 2 months have to be recovered from somewhere. But hopefully, on the bottom line number with all the other initiatives we are carrying out, we should be at least be able to hold this year's profitability.

The next question is from the line of Ravi Naredi from Naredi Investment.

Sir, these results we have seen, the financial asset side, investment was INR 75 crore versus INR 148 crore. So what this amount has been reduced?

So actually, this is the shares we have of the group companies and which we fair value on average reporting rate. So this is actually mark-to-market. So what amount you're seeing is all investment in CSC and their subsidiary companies.

Okay. And what is the cost of Karaoke, you are searching for launching this new product?

Sir, I'll announce it once it's closer to the retail launch. But obviously, like all other Carvaan variants right now, this one also has -- there's no subsidy, there's a clarity margin that's sitting in. But let's come closer to the launch, will tell you because I don't think we are launching it in a rush in this kind of a market.

Okay. So when are we going to plan this launching this year, 2021 financial year or may be delayed?

We do want to launch it in 2021, but I'll just want to wait and watch a bit. It's just too early. We don't want to make the mistake of putting the product in the market and then make no noise or put it in the market, make some noise and then realize the market is again going to lockdown. This year for us is a year of caution. We want to be -- we want to handle all our steps right now in a much more cautious in gingerly fashion while at the same time, ensuring that with more and more people sitting at home and consuming content, our IP sitting everywhere so that it monetizes better for us. All investments, we are going to be very, very cautious this year.

The next question is from the line of [ Sharan Sadarangani from Long Way Finance. ]

I just have a couple of questions. One is the Saregama product that you have, the device, now what Apple was able to do is once they had the iPod and then subsequently the iPhone, they built an ecosystem and a subscription on that. So I was just wondering like what is the long-term strategy with Carvaan going forward because it's a great product. It has many users. So can we leverage that in some way to create this ecosystem similarly like Apple there?

Yes. So as I stated earlier, right now, we start -- the thought process of Carvaan came from the fact right now that how do I make my catalog music easily accessible to the mid-age and the older people. That's what the genesis of Carvaan. So thought process of the Carvaan always was to monetize the music IP better. It took a shape of a product, stand-alone product, met with a very decent success. As we are moving ahead right now, we are now transforming Carvaan from a stand-alone product where you make margin only upfront to our platform where there's a potential to make margins right now from the consumer on an ongoing basis, either through advertising or subscription. So the newer Carvaans which are -- the latest version called Carvaan 2.0 supports our return path through which we can go back and customize what content we offer to each of the consumers. And this content gets updated by the hour, by the minute if you people want. Right now, we had -- earlier, we started only with music which is owned by us. That was what was uploaded. Now we have opened it to music owned by us, music which some other party wants to put up right now on a variable basis we are open to it. And not just music, there's a lot of content getting put out there which is in the lifestyle, entertainment, news segment too. We are seeing decent traction right now of the usage of this content because now we can track it on a daily basis. So our hope right now is Carvaan has been selling primarily to the 35-plus-age group on the convenience of usage. How do we ensure that the same thing gets transformed to Carvaan, the platform, continue talking to this 35-plus-age group, give them not just preloaded music but a constant spree of other content. Just FYI right now that the return path processor which is put out there in the Carvaan, by the way, is also capable of video processing. So there is a lot more that can be done in the days to come on this platform.

Right. So the idea is not just to make that -- now you guys are just selling at a loss, but the idea is not just to make a margin on the device itself but also to ensure -- get some kind of revenue stream from all the existing devices that are out there, either through advertising or...

Yes and no right now. So broadly, you're right. But the devices which are sitting out there in the market today don't have the return path capability.

Correct. But the ones, the 2.0, the ones...

All them. So yes, we will not follow that DTH model which subsidizes the set-top box that comes into your home and then makes money in the long run. We intend to make a gross margin right now when you buy the product and also find a way to make money from you through advertising or subscription by being right now your preferred partner for accessing content in the most convenient fashion. Will we ever try to compete with the television right now? No, we have no such intentions. This is a more personal device. You see lots of people right now, just -- it's just a sheer convenience of listening to something right now through Carvaan which makes it so appealing. We will keep on harnessing that ability of the product while we move to our platform.

Sure. Sure. Okay. And my just last question was on the films that you produce and that you supply to digital OTTs like Hotstar, Amazon, like what is the margin typically? And do you get some sort of an upside? Let's say, the film does really well on their platform in terms of eyeballs or is it just a cost plus fixed margin that when you get a preorder, it's fixed at that price and then the transaction is done? Hello? [Technical Difficulty]

Sir, the line for the speaker dropped. I would request you to please stay connected while we join him back.

The management got disconnected?

Yes. We have sir connected.

Yes. Just for a minute, I want transfer this line. Just hold for a minute.

Sure.

Sorry, I'm back on the line.

Yes, sir, you can go ahead, please.

Okay. Sure. Yes. So my other question was that...

Let me answer this question of yours, right? I'm so sorry, the line got disconnected. We people, the way our deals happen right now with the Netflix for Hotstar is that we license our movie to them for any period right now from 3 to 5 years. And if it's -- if the movie bought right now as an original, then we license it for a slightly longer duration. It can be for only digital. It can be all rights. It can be broken based on which country are we giving this movie across rights to. So every deal is different right now. There is a flat fee which gets agreed right now for the license value. No, we don't get any upside if the movie is doing all that well. The way all the deals today on the video OTT platforms are functioning, unlike the audio OTT which are done on a variable with MG, the video OTT deals are practically all fixed fee deals.

The next question is from the line of Jaideep Merchant from Janak Merchant Securities.

I have two questions. One, you've already given indication that your marketing spend will be coming down substantially.

Sir, sorry to interrupt. Jaideep, sir, we are unable to hear you clearly. If you can come to the speaker...

Yes, is that clear?

Yes, much better.

Yes, yes.

Yes. So Vikram, you have indicated that the marketing spend will be substantially lower this year. Now given that and also because you've been spending on average INR 9,500 crores in the last 2 years, okay? So -- and given that there is unlikely to be any movie write-offs this year in the marketing spend as well, is that -- is my understanding correct?

No, I am expecting right now, there are 3, 4 movies of ours who rights are sitting there with us. If the movies do get released this year, then there will be marketing spends of those movies that will happen. And I wish right now they happen right now because we need more and more new content. But yes, that factor is there right now. So I'm not ruling out some of the bigger budget movies getting released in this year, maybe starting Diwali.

Okay. Now if we have a substantially lower -- I mean, I'm just throwing any number. Say, the marketing spend is down by 50%, okay, this year. Now -- so does that mean that the impact on the bottom line will be significantly higher? So given that the Carvaan sale was not contributing at a net level too much, at least in the last 6 months. So will we see the margin operating -- the EBIT margin of the music business moving closer to that 50%, 55% that you've been talking about?

So the intent is that. The problem is how do we define this significantly higher term right now. Yes, directionally, we are clear. Last year, same time, I was clear when I was talking to you guys that we wanted to go back and invest heavily in the Carvaan business. This year, very clear, we see still a lot of uncertainty in front of us on the retail business. We have no intention to go back and start spending. We'll rely only on natural pull. We also understand right now, like 2 months, the revenue is completely wiped out both for Carvaan and for television business of ours. So there are some amount of push and pulls, which are going in here. All I can say right now that as for the year is concerned, at the overall PBT level, we people have an optimistic view. We don't have a pessimistic view right now. We expect it to improve.

Okay. And last question. So if -- what was the learning on the marketing side while doing Carvaan which we may do differently once things become normal now?

Honestly speaking, right now, if you ask me, sitting in last -- if I was in the same position, I think I would have done the same thing once again because we were -- the numbers were shaping up. We didn't realize right now the kind of downturn the first quarter last year saw. We were not expecting that. Our entire focus was that we should start moving to smaller towns because larger towns is -- the only thing we people have focused and got our number from. The other part right now, you can go back and see us doing is that there may be a little bigger push on the lower-priced Carvaan Minis in the days to come. Whenever we people start pushing it out there, that's maybe the only thing I can say right now maybe will do different. We are relying only on the bigger product. And second, maybe this entire return path capability should have been pushed a little stronger rather than being a niche concept during the first 2 quarters of the last year. We believe in the product. I'm very clear right now. As a management team, we believe in this as a product and this transitioning into a very strong platform. We don't want to subsidize this part of the business. That's not our intent, to build for future. We want it to be -- to stand on its own feet. So the fact right now that what happened in the last quarter of Carvaan is a disappointment to us also. And we are not happy about it, but just beyond our control. And we will take all the efforts right now that, that does not get repeated this year.

Okay. So we can go to INR 90, INR 100 crores again in FY '22 if these things are normal of ad spend?

I'll just leave it right now. We are -- see, for the 2021 right now, with so much uncertainty, I'm still telling you, we people are bullish.

Sir, FY '22, I was asking. FY '22, we may go back if things are normal.

Yes, if things go to normal, then lots will change by that time, the music licensing business was looking stronger and stronger. And if other parts, remember this, which I wanted to cover in my closing part, but the one big variable that all of us don't know is, all the guidelines which are coming from government in India and abroad are saying that people above the age of 60, 65 should continue staying at home, which means right now a largish opportunity getting created where more and more people who are just the plum segment for Carvaan will be sitting at home. And if this position -- product gets -- as it gets -- starts permeating much and more out there in the market, there may be a large amount of takeoff happening. So we are trying a new distribution strategy, no expenses. Just looking at a different kind of a network which can get an entry inside the homes of people. Let it get launched. Hopefully, I'll talk about it during my next call with you people with some experience of that. If that works, it just ensures right now that we are entering homes to demonstrate the product in the homes where you have somebody above the age of 60. So there may be upside also sitting in, but we are not going to blow marketing money hoping for an upside to come this year.

The next question is from the line of Ayaz Motiwala from Nivalis Partners.

Some of the comments were very helpful in further appreciating your changing business model. I have 2 questions. One is on your music business closing March '20, you had a revenue of INR 444 crores, as you reported. Could you share the breakup between the music licensing within that and the other businesses?

Just give me a second. So you want the difference between right now, the Carvaan retail business of ours right now and the music licensing business?

Yes, basically, what you call it, sort of the B2B and the other licensing business and the kind of B2C business of devices and otherwise.

It is part of corporate presentation, the longer presentation we updated.

Actually, I'm on the presentation on the BSE website.

It is 239 for licensing and 201 for Carvaan.

Okay. 239 and 201. Okay. That is great. And as a build-up on what you shared -- from what you all had shared, is the B2B licensing business is also looking up a lot interesting, as you said, right? We will try to place that in the OTT serials apart from advertisements, which in the short term might be affected, but they look interesting in the medium to long term.

So you see anything right now -- if you follow Netflix and Hotstar, you -- it will be difficult for you to find a series where something or other of ours is not getting used. From Jamtara right now to Mirzapur to latest movie right now, Extraction, which has come out right now which has Bangladesh faced to Four More Shots, you name it and our music is sitting in out there. And if you see Delhi Crimes, there's some 38 instances of our songs were in use. So more and more video consumption, more and more video content getting made right now means greater opportunity for people who own a majority of India's music catalog out there. We have better opportunities to monetize.

Right. Sir, my question on that was, how do you look at pricing on the B2B side of it? Your relationships with Hotstar or the newer ones, Hotstar, Netflix, et cetera and then the past users of your content which could be the consumer companies or media companies, otherwise, how do you look at pricing because yours is a unique content which is not replicable, in these kind of times which is just here and now, but on a strategic basis, do you -- can you sort of share on how pricing has behaved in the last 3, 5, 7 years?

I think there's a structure how does the deals happen. There are 2 ways in which music is getting monetized, 2 very broad ways, as I must say. One where, as a user, you listen to my song which is what a Spotify or a Jio or a Gaana is all about. You go to the app, you listen to the song. All our audio OTT deals where the full songs are based out there and people listen to it are based on every time my song is heard I get a variable fee of around INR 0.10. And the overall deal is protected through a minimum guarantee. But the -- when you -- the other use of music is where music is synced, means something else was going on right now on the video and our song is also making an entry, it may be a protagonist is singing my song, [Foreign Language] the moment you're going to say that, there's a license that needs to be taken. Maybe somebody moving in a car right now and a song is playing in the background right now which belongs to us, maybe that's a title track right now which is used out there. Maybe there is a party sequence going on right now and somebody does a cover version mine. All these things are what we call is a publishing revenue internally. These are by and large fixed fee deals where rights are given across basis the number of years they want and number of platforms they want. So we break the rights. Not everybody gets digital and television. Digital and television are treated 2 differently. Within digital also, India territory and outside India treated separately. Within that also, do you have the rights only for 1 platform, say, Amazon, or do you get rights right now for all digital platforms in India? So rights are broken in various ways. And you are right, if you want a particular song, there is no replacement of that song. So if you're depicting a situation right now where the song fits the best, that's it. If you're a hair brand right now and you want a song and [Foreign Language] better [Foreign Language] is difficult for you to go back and get and then the negotiation happens in that way.

Right. So the reason, Vikram, I'm asking this question is that before the Carvaan launch in a few years back, also, your revenues were pretty steady at INR 125 crores, INR 150-odd crores, which I'm assuming would be the core licensing business revenues, the B2B, as you called it and you explained in detail. So my desire to understand this pricing is in that, that the world has changed a lot in the last 5, 8 years and the way people like us access content. So if that is becoming so material, do you -- have you earned more pricing power in the market? And are you sort of going to exert that to make your own monies out of what you have, which is a very solid rich IPR of content?

I think the numbers itself are talking right now. The numbers that you spoke about are closer to the number -- and this is -- if I go by your numbers right now, you're right in terms of numbers, INR 120-odd crore right now becoming a INR 240 crore in spite of INR 120 crore [Foreign Language] 60%, 70% used to come out of caller ring back tone business, which has become 0. We literally are taking noncaller ring back tone business has grown from numbers roughly around INR 40 crore to INR 240 crore in what period of 4 years. So you -- I think the answer is there in front of you.

Sure. And sorry, quickly, because the way the time is going, I'm sorry. On your cost side, sir, can you share your immediate exercise that you've undertaken on cost control which is this quarter of the reported quarter or the ongoing quarter on the COVID crisis? And in the medium to long term, your employee and other costs are the key costs which have been there, and they seem to be very sticky and fixed. So can you throw some light on that? What aspects of employee costs are you working on considering you have such an electronic linked business?

Majority of the employee cost is the Carvaan cost because you need a distribution network across the country right now to go back and deliver it. So the biggest cost part right now, let me put it this way, we are bullish on the -- we are not saying that we are going to go back and manage our profitability by going out there and cutting costs in a dramatic fashion. We are saying we believe right now we are in a very good position to exploit this data explosion and people spending more time at their homes. We will make our money through that. It's only on Carvaan we are being cautious because we are as bullish on Carvaan as we were 1 year back. It's just that in this current year, with market lockdowns may be becoming a reality, we don't want to take any punch there. We much rather prefer that we defer everything by a few months or quarter rather than take marketing bets here. So you will see us significantly reducing our marketing budget side.

Sure. If I can ask one last final question, which is, you talked about to a question asked earlier that we could potentially look at on a reverse flow and opening it up as a platform where others want to offer their content on Carvaan as well.

Yes.

Now if that were to get a little bit of success, would you be competing with JioSaavn or the others, including Spotify where you kind of become also an aggregating platform, while it sounds very good to us as prospect because they are ultimately your customers right now. So will they feel that you are competing for the same set of customers and that affects your business on the B2B content?

Please understand at the end of the day, presentation year after year, we always say we are a content IP company. Everything else is secondary to that. So for us, we start with IP and actually end with IP. Carvaan was launched to ensure that the older songs also get a fair value because we were realizing that the digital platforms in 2014-'15 were only interested in pushing newer content to these 18-year-old kids, right? Anybody who was above the age of 30, 35 were not getting access to the content. So that shows you where the prioritization is sitting in. Second part, we will never become a -- compete with these aggregators because we have no intentions of ever going out there and saying that please give me your content, Mr. Label, and I'll pay you a flat fee for it. We have no such intent. There may be specific kinds of content owners who may go back -- come to us and say, "Can we also put up a content?" No money is going to be guaranteed from our side. If at all there is advertising, it will come in. If you ask me personally, I see more and more of nonmusic content getting added by us in the days to come on the podcasting platform. But are we open to the idea that a very niche label somewhere goes back and says, can I offer my content? A good example is now Art of Living content. There's a Carvaan which has been made right now only for Art of Living content. Now that's not a music business at all. It's an altogether different business that we are talking about. But there may be a play out there for this kind of content, too.

Ayaz, we would request you to please come back in the queue as we have several participants waiting for their turn. [Operator Instructions] The next question is from the line of [ Manoj Shah from Lax Curve Investments. ]

My question is with respect to the Carvaan sale. I was looking at the presentation. If you see from second quarter of FY '19 onwards, sale has been in a broad range between 200 to 250 kind of thing, spanning around 6, 7 quarters -- or 8 quarters, you can say that. So I'm saying, why it is stagnating in that band? Why are not able to push it beyond that range? And second question is with respect to the movie business. Normally, the budget you spend on movies for the OTT and what kind of risk you see if movie business doesn't grow? Then how you're risking that the other businesses from the OTT movies?

Okay. So let me answer the first one. I'm with you completely on. We started -- this was the third year of Carvaan. We started Carvaan with some 350,000, 370,000-odd units that we sold in the year 1. And we touched the second year around 900,000, right? And that's where the intent was right now in the year 3 to take the numbers higher. All the data was indicating there's a larger -- and the first 2 years were primarily coming out of the larger top 10 towns. The intent in the year 3 was to take it to the smaller towns. We started upfronting our marketing budgets right now. The -- we were not getting traction out there because very clearly, we were getting the messages there are not enough footfalls coming out there to the electronic stores. If you check, not just ours, checkout anybody who's been there in the electronic business last financial year, they will have a similar story will go back and say. The economy started seeing a downturn. So we invested for the first 2 quarters and then we started taking our foot off the pedal thinking that maybe it's a wrong timing which is going in and we should not invest. Our intent clearly and we know there is a potential market sitting beyond the top 10 towns. There is smaller towns, large enough market which is sitting in. The movement market opens up, and we believe that the market is back into a steady state, you will see us going back and pushing Carvaan. The good part is the Carvaan that will go out at that time hopefully will be the Carvaan the platform which will give us a sustainable recurring source of revenue also. In respect to your second question that you asked on OTT part, the risk was higher in our year 1 because we were making movies and then hoping that we will go back and sell it. From year 2 onwards right now, as we started building a reputation and year 3 became very significant right now that we are getting preorders. So the 3 movies that have gone to Hotstar during the year, all were preordered by them right now. So there were 0 risks that we were working on. And we will see us, going forward, doing more and more movies based on a precommitment by a platform and that is possible because we have a reputation now.

So you're saying you will create movies for them based on the order guarantee, but do you get any content upside in terms of the movie does well or how does it go? So just as a cost basis plus margin, which is you make movies from them whatever upside is taken by the OTT player?

That's firstly video OTT and television business. In India, whenever anybody sells a movie from the top producer to anyone to television or digital OTT, there is no upside. It's a flat fee. The model that works out and not just in India globally. For video, the model at this juncture is working out there right now, by and large, on a flat fee basis. You license your content to a channel or a platform for a fixed number of years, for a fixed territory and you get a flat fee upfront right now. So that's the part you -- that's what you asked, right?

Yes. See, because somebody has gave you an order, you produced it and you gave it to him and he gave you the fixed amount. Is that correct? And whether the movie does well or it bounces out on the OTT platform, it doesn't affect you. Is that correct?

It's actually correct. Remember, this that the IP is retained by us. So the movement a movie starts tracking better right now, if we have not sold all the rights right now to the platform, which is majority of the cases, we can go back and monetize those rights in other territories far better. If we have sold digital rights, we can monetize the TV rights far better. If we have sold rights for 3 years, then the renewal will come in the year 4, we can monetize it far better.

So if I have understood correctly, you have created a movie and you have given OTT player will run on the next 3 years or 5 years from the right he will display it. And after that, you have got the IP rights or the content right for that movie. And then you can encash it based on -- by selling the video content on that business. Is that correct?

Yes and no, right now, I'm saying. When I'm giving the digital rights, I'm not giving away the TV rights. So I still maintain the TV rights and I can give it to anyone. I'm not giving away the airline rights. Even on digital rights, many of the deals we do is only India exclusive, outside India is nonexclusive. So I can go back and give those rights to other competing platforms in specific countries. The music rights are never given across. They're always maintained by us. We keep on monetizing it. So it's...

So you're saying rights are based on a platform, region-wise, country-wise, so you can divide it, customize it depending on how you want and the deal can be customized?

Yes. And directionally, when year 1, we were doing our deals right now with people, the buyer was far stronger. We had no reputation. So there are times right now we may have gone out there and incurred a little bit of losses also in our movies. Now as the reputation starts building up right now, you are able to go back and charge a premium. It's never a cost-plus model right now. Philosophically, everything is cost plus, but it depends right now [Foreign Language] on the reputation with which you are going and the quality of content you're creating. We are in a position, if we have written profits this year, it just courtesy of that.

My question was coming does the movie business is putting the other businesses that suppose you make movies for some OTT players and you incurred loss, whatever could be the reason. So my question is, how that can be minimized? Or is that really that way that if the movie doesn't work out, then you incur a loss kind of it. So you may have volatility in the...

That happens only if I make a movie and then hope right now whether I can sell it or not. As I mentioned to you right in the beginning, you are seeing from the financial year '19-'20 and we'll continue forward right now. Our more and more focus is about we people pitching an idea to a platform is a platform and agreeing to that idea ready to buy it, then we go ahead and make the movie. So that keeps on coming down significantly.

The next question is from the line of [ Govind Jalipa ] from [indiscernible].

I have a couple of questions. One on licensing, there are 2 subparts. One, could you update us on the status of the case on Section 31D of copyright? What is the status and what is your personal view on how things pan out there? The second subpart is, if you remember right, the FM Radio royalty is up for renegotiation sometime this year for the 20-year period for which the court said [ 6%, 2%, 10%, ] if the rates are not wrong. So what is the status on that? That's the first question. The second question is on Open Magazine. I mean we are always hoping that you do something about it, and you haven't mentioned anything about it. So I would like to hear your thoughts on that, especially in this environment where I spent aggregation revenues would be extremely challenging.

Okay. The third question is, let me attack your first 2 questions that you said right now. The first question was...

Licensing on 31D...

So 31D right now, see, the current status of 31D is the High Court -- Bombay High Court had ruled in favor of -- there's a case that happened between Tips and Airtel Wynk, whereby Airtel Wynk was trying to impose this 31D condition and High Court [Foreign Language] ruling has been right now the 31D is not applicable on digital platforms. It's a ruling which is applicable only for broadcast platforms. That's the current status. So at this juncture, I personally see no major issue happening out there. Beyond that, since it's something which is legally fought, I'll not like to comment. But principally, we don't see any issue right now. We have great relationships going on. There has never been a 31D issue right now coming across to us. But the law of the land today, the high court -- the last high court ruling says, OTT should -- cannot get covered under 31D. Your second question was...

FM royalties.

FM royalties right now -- so FM, you're right. FM was covered and the 2% of the top line only has to be paid by the radio stations. This was a ruling which is getting over in September. We all are going and trying to petition to government and see right now how can we work on and improve that rate because there was a time FM needed a lot of handholding. We believe today FM industry is bigger than the music industry. So music industry should get its fair value. All my projections that I'm making right now are independent on what happens on the FM side. We don't know -- we will know from October onwards. Right now, there's a Copyright Board. If the Copyright Board comes in place, both Radio will try to put up their case and we will try to put up a case. And as they say, let the best man win.

So what is the global benchmark? I mean...

It varies from country to country. There is no standard part which happens in many of the countries. Also, remember, nowhere else there's so much dependence only on music for a FM station to go back and work on. The amount of talk shows and all the other things that happen right now are very, very high. In India, there's much larger dependence on music. And different countries have different presidencies here.

My other question also on Open Magazine.

Actually, it's status quo on Open Magazine, let me just put it this way.

The next question is from the line of [ Sunny Shah ], Individual Investor.

Just congratulations on your deal with one is Spotify and Facebook. I just wondered [Audio Gap] on this as to, this is a very different model from what I understand. One is that what kind of deal do we have with both of them in terms of revenue picture? And I believe that your -- most of these agreements are in line with the MG plus some variable impact. So how does the -- how does it work out? And what about the cash flow? The cash flow, is it a bullet payment or a one-time payment now that has been [indiscernible] in both the deals?

You're asking me specific details about the deal which you know I cannot disclose. It's on your part also to expect us to [indiscernible] details. But I can tell you right now, broadly, as I mentioned earlier, all the deals where we are putting up the entire song on a platform for a consumer to go back and listen to the song, which is the likes of Spotify, Gaana, Saavn, they're all in the nature of, every time somebody listens to my song, I get paid INR 0.10. If there's any advertising coming on that song right now, I get a share of that. If platform makes subscription revenue, I get a share of that. And all this is protected by a minimum guarantee. All our audio OTT streaming deals, and there are multiple from Spotify, JioSaavn, Gaana, Apple, Amazon, Google, Airtel Wynk, Hungama, Resso, these are in India. And then you're talking about global deals. All are working in this structure. The other kind of deals right now is where the platform does not put the entire song for people to listen. The platform is allowing people to create their own videos and put a third-party audio content in it right now, which is a kind of deal which is YouTube, Facebook, TikTok. That's a second kind of a deal. And some of those deals are fixed fee in nature, some of those deals are variable with the minimum guarantee in nature. What it also does right now is it works right now in a nice feeding cycle that people -- as more and more people listen to music, and I'm already seeing a big impact of that on TikTok. As people listen to, make -- see videos which are song and is getting used right now, they end up going to another platform and start listening to that song. So that's another big advantage apart from the financial deals we have out here. We will see this content getting out more and more often. And hence, they both will feed on to each other, publishing business will be feed on to OTT and OTT will keep on feeding to publishing.

All right. All right. Okay. Coming on to the next question. As you just said before that all your audio OTT deals are having variable impact and there is an upside to it. Vis-à-vis if we compare with the video OTTs, Netflix or Hotstar, where you're saying that you have a complete out and out deal, although the IP remains with us, but there is no variable upside to it. So is this the situation with every content player in the industry and every -- and is there any change maybe happening, looking if there is a repeat view and maybe if we establish our goodwill with these OTT platforms and we have a good book, would this -- is there is a possibility that this variable impact could be inserted in these deals or there is no scope?

Right now, you're asking me to [ crystalize ] and tell you right now how it's going to move. Obviously, we will be very, very keen right now that these kind of deals also start having a variable part. Today, the way industry is structured, unfortunately, for all content players and for all platforms, the nature of the deals are fixed fee. The only place where we have a lot of flexibility is on the medium and territories. And we people play there much more significantly than we are able to go back and do on this variable side. Let's see which way things are going to move. The good part is if one content company ends up enjoying it, all content companies will.

All right. All right. Fair enough. Okay. And one more question is, right now, what I have been seeing over the years, from a music company to physical sales, which is Carvaan we're having side-by-side, although we are not really dependent on that particular segment too much, I also see that we are also moving to a video base, as you said, they are creating movies which can be used on these platforms. So what I could see from the presentation is that we are targeting 50 movies in the next say, 3 to 4 years. And right now, if I'm not wrong, we are somewhere close to 10 to 15. So how do we look at it because we have just started in the last 2 years or so. In next 3 years, do you feel that the 50 movie releases is really workable or is it too stretchy target?

So remember right now, we already have released 12 films so far. And if one gets a series -- every episode of a series is equivalent literally to a film in terms of budget. So a single series may take care of this a lot. So directionally, we are very, very clear right now. We want to have a decent play on the video IP business. We always have been maintaining out here that as devices become more powerful, people end up -- and data cost being low, if things like COVID-19 has ensured that more and more people have got started consuming content through digital apps, all this is going to make huge potential viewing opportunities sitting in front of us in the days to come. And we don't want to restrict ourselves only to audio IP or the short format TV content kind of IP, but also work on the longer format. But by and large, content, which has to be consumed on the digital side, we are not having a big play at this juncture right now thinking of doing theatrical stuff.

The last question is from the line of Ayaz Motiwala from Nivalis Partners.

Just a couple of questions. One was on the cost control side of it, you said we are not looking at anything and we're looking at life on a more positive basis, not looking at cutting employees or costs as such. My focus was more on the business model itself is transforming, sir, like you pointed out and more towards video content creation, et cetera. So what your costs are currently? Can you elaborate on what can be the cost outlook over the next 2, 3 years, if you start making other type of content versus the cost-saving part of it that we have there? And the second one was on the FM side, which I wanted to know. You said there's -- it's coming up for renewal in September 2020, if I heard it correctly. So if you can clarify that, I didn't catch that.

So let me address FM first. There was a ruling -- court ruling in India which all of us governed by, under which for the last 10 years FM stations were supposed to pay 2% of their top line from radio business across to the content music labels, all the music labels combined. That ruling gets over in September. From October onwards, new tariff is going to get applicable. There is obviously a lot of work happening right now to get a fair value for our content. Beyond that, there's nothing I can add out there right now. Coming to your first part, I'm still not very clear on the cost part. See, remember, there is -- while we people are focusing on video IP also, we are not taking our attention away from audio IP. Audio IP is the long-term value. The repeat usage is highest for audio content. This has been proven globally multiple times. Video content right now does not have that long a shelf life movies. But movies have a much longer shelf life than a TV series which has got a much longer shelf life than this kind of content which gets uploaded on YouTube or Facebook. So we are playing in the top 2 status right now, music, which is right at the top with the repeat value going in. It's said that the music that you hear from the age of 16 to 22 is the music that stays with you till the time you are kicking the bucket. So we understand right now that the life is very, very, very long on music. We'll constantly keep on investing in music. We will invest on the video -- music side, we are much more aggressive. Video side, we are taking cautious steps out there. We took our baby step by launching films right now and doing less number of films. We're expanding it. We will take films. Right now, only there are preorders coming. Like on the films business, we don't get people on our payrolls. We get people on contract. Only if there's a film, there's an individual who gets hired right now. Apart from a very small core team, everybody else is on a variable basis. They come in when the film is there. Film is not there, they're not on our rolls. So that work will keep on happening. We people -- so on the overall right on the cost-cutting side, it's the Carvaan part this year we want to be conservative in a perspective rather than aggressive. So wherever we believe right now that we can push the cost or trim the cost right now which is primarily on marketing and some amount on manpower, we will do it.

I now hand the conference over to Mr. Vikram Mehra for closing comments.

Hi once again. I end up repeating most of the stuff. We maintain -- we are -- as a management team, we are bullish on this financial year in spite of the fact that the first 2 months have just gone by for 2 of our businesses. We are still overall maintaining an optimistic perspective here. We believe music licensing business will continue to grow. As more and more people start sitting at home, they will end up consuming more and more content, both in terms of audio and video. We will continue with our investment right now on the music content side, whether it's Hindi or Tamil or Bhojpuri or Punjabi. There will be maybe less Bollywood movies getting released this year. But hopefully, with the investments we people are making in other languages, which is non-film content right now, we should be able to hold our position. Our approach on Carvaan this year is going to be extremely cautious. It's a wait and watch. We want to be reasonably confident that the retail markets are opening for sure and will continue to remain open before we start making any major move. We'll rely more on inherent market demand right now for the product and play around with the distribution network strategy right now to create maybe alternate channels out here through which we can reach the consumer home. On films side, this year, our focus will continue being on taking more and more films on a presold basis. If somebody preapproves the film and then only we spend money on it. We are focusing a lot on series this year, and we are hoping right now that we should be able to grab hopefully a series we'll watch. On that world of -- on the television, we have lost 2 months of revenues for April and May because there are no new series has been put -- episodes have been put up. But overall, we hope that we should be able to maintain, by and large, the bottom line that we wrote on the television last year, this year too. Thank you, ladies and gentlemen, right now. Hopefully, we all will have even better 2021. Thank you.

Thank you. On behalf of ICICI Securities, that concludes this conference. Thank you for joining us, and you may now disconnect your lines.