Manisha, lets start with your first brush with the music industry? Why the music industry and when did it happen?
I have trained in Indian classical music and I am a qualified vocalist. So I started off as an A&R person. I have also done my MA in marketing. I have a passion for music. In 1995 I started off with TIPS music as an A&R executive. TIPS was my first music label. Then I moved onto EMI Milestone. I was heading their Indian A&R division. From EMI I switched onto Music Today, the music division of the India Today Group. Again there I was looking after A&R. Then I moved onto Saregama HMV. HMV was my dream company after TIPS. I was heading their classical, devotional and New Age music.
After HMV I finally came to back TIPS as an A&R manager.
I am curious about that connection between the Sales and A&R. Can you explain a bit in detail?
Working at all these places I realised that A&R and the Sales departments share a very close bond. In fact one cannot survive without the other. I cannot sit and plan anything from a studio or from my office. Before signing on any artist or relesing an album I constantly needed to talk to the dealers and get their inputs on the my next project. Also I interacted a lot with the buyers and the trade too. I used to continuously check for retailer feedback of how youngsters responded to my particular albums. This made me realise that if I get actively involved in Sales it will help me to a great extent in my A&R planning.
When I came back to TIPS from HMV as an A&R manager Mr.Taurani suggested that I take up the sales portfolio as well. This enabled TIPS to not only structure our marketing and promotion systems in sync with the end consumer but it helped us a great deal in planning our A&R as well. Besides it was a challenge since at that time I was the only Female Sales head in the entire Indian Entertainment industry.
What are your current responsibilities?
My primary responsibilities are to see that our huge Bollywood as well as non - bollywood catalog has a good movement and work on more ways than one to monetize the catalog. Also you are aware how the industry functions. You require a new release to push your old catalog. So I plan new releases on the non Bollywood side to revive my old catalog. Besides the above I work around ways like events where we can ensure revenues other than just physical sales. So in short I look after Artist Management, A&R and Physical Sales. Digital Sales does not fall under my portfolio.
Can you elaborate a bit on the structure of your Sales Department?
Initially when I started out we had a sales team of around 20 people. But that number has been cut down because of various reasons. We now have a very traditional structure similar to that of T Series. T Series does not have a sales team. They just have a National Sales Manager who is heading the entire activity. But they have their own dedicated distributors. These distributors then appoint their own Sales Reps and Long Arm. Currently our structure is similar to T Series. Right now we have 5 sales reps who directly report to the distributors as well as to me. They are the bridge between the distributors and the company. They take orders from the trade and stock up the distributors and help them further liquidate this stock. So in a way they are employed by us but help our exclusive distributors liquidate stocks. At TIPS we do not have a separate team for large format stores or retailers as you call it and a separate team for trade stores. The retailers are touched through the Distributor Reps. They ensure our product visibility at these stores.
Tell us about your distribution network?
The distribution network of every music company in India is the same. Lets take for example my distributor in Delhi – Venus enterprises. Now he is also a distributor for HMV, SONY, BIG Music, etc. Barring 3 or 4 exclusive distributors of T Series the same distributors are used by all the music companies in India.
Who are your large distributors or the key distributors who generate maximum sales for you?
Maximum sales come in from North India. North India contributes to 50% of the sales. Then comes the South, West and East Indian in that order. Bollywood as well as non Bollywood music sells in North India, Metros and obviously Mumbai, Maharashtra. So all our large distributors are based out of the North. We have one in Delhi and one in Punjab.
What are the kind of revenues coming in from the new retail outlets like a Planet M?
Till last year the entire industry expected volume sales with the number of these retail stores opening up across India. But to be honest with you there has been no increase in volumes. Let me give you an example – Planet M which is the largest retailer in India having 250 outlets all across the country launched a mega block buster Bollywood film with only 3000 CD’s. This can tell you the state of sales coming in from these retail outlets. So bad is the state that most of these stores are planning to now go online. They would stock less of physical CD’s and more of books, mobile accessories, game toys, etc. So you would have only 20% of music selling out there.
We are all aware that the last hit movie produced by your company was RACE. What were the kind of volumes you launched with and how much did you sell?
I don’t think I can comment on that. All I can say is that we couldn’t sell the quantities with which we launched.
What do you think should have been the ideal launch quantity for RACE?
In these times the launch quantities should have been at least 1 Lakh CD’s.
How is the launch quantity of an album planned when it comes to Bollywood music?
The ideal situation is something like this. You release your music atleast 2 months prior to the theatrical. That gives you ample space and time to popularize the album. This is usually the time taken for the end consumer to react to the music. Now if the end consumer reacts favorably and the music is a super hit then most of your dealers are have 2 months to sell the CD’s and liquidate their stocks. Besides all of this in the case of a Bollywood film the music gives the movies a very good opening. You can expect the movie running into packed houses atleast for a week if the music is well accepted by the masses.
Can you tell us a bit about the launch stage of your last hit which was RACE?
We released RACE in March. Prior to this we had released the music on 31st December. We started with the title track ‘Allah Duhaai’ which was accepted well but things took a turn when Aatif Aslam’s song became a super hit. We used the timing and the popularity of Aatif to launch one of his non film album. This strategy worked really well for us.
Were you able to liquidate your entire launch stock?
Again I wont comment on this. But what I can share with you is this. After Aatif’s song clicked with the masses we expected to sell double the volumes of our launch quantity but this did not happen. Mainly because the song was being played everywhere. Be it on the radio or the mobile or online. This over exposure or overplay of the songs of RACE drastically reduced the volumes of physical sales. As is the case with every Bollywood film the movie was a HIT and we expected to sell big numbers of the music CD’s but this didn’t happen and hence I would largely blame the over exposure of the songs.
But obviously you have gained on revenues from the Radio or other forms where your music was played. So is there a reason to complain?
I agree we have gained on revenues from Radio and other digital mediums. But the larger question is whether that revenue is justified? My dealers are left with surplus stock despite the fact that I have a HIT music album which the masses are consuming. I think we need to really sit and think over monetizing issues of the digital sources which slow down our physical sales.
How much of a role did piracy play in ruining your physical sales of the movie RACE? What would be the volume of pirated CD’s of RACE available in the market?
I won’t be having that kind of numbers. But I can tell you in percentage terms. More than 60% of the CD’s of RACE sold were pirated.
Assuming that your launch quantity was 1 Lakh CD’s and 60% of it was affected due to piracy shall I assume that you have sold only 40,000 CD’s at the launch stage of RACE?
You may take it that way just for the benefit of understanding numbers but I don’t think those are the exact sales figures.
Can you elaborate a bit on the costs and margins of operation? Lets start with the tax structures.
We have a factory at Silvassa which is a tax free zone. We are a listed company and strictly follow Government rules and regulations when it comes to VAT and Sales Tax. There are a lot of music companies who do not abide by such tax structures.
What is your manufacturing cost?
See please understand that the manufacturing cost is never inclusive of the value of the content. Having said that let me give you a break up. My pricing for a RACE CD was Rs.150. My manufacturing cost is roughly around Rs.7 to Rs.8 for the CD. The jewel case is about Rs.8 again. My inlay cards are priced at Rs.5 to Rs.6. So in all the total cost of my CD is well within Rs.20/- This price goes up slightly in case there is a fancy packaging.
What is your operating margin?
Roughly we work on a 20% margin.
What is the margin you pass on to your dealer?
It depends. In case of a TIPS exclusive distributor there is a certain additional percentage we pass on in terms of a bonus. Otherwise the standard dealer margin offered by every music company in the Bollywood space is about 30% of the MRP.
So you are saying your dealers made good money by selling RACE?
Absolutely. Their margins were huge and most of them made good money.
In these times when most regional companies are slashing costs. You have not gone down on the price point of a Film Music CD. I am sure this is affecting your volumes given the fact that there is rampant piracy of Film Music CD’s. Is this is a conscious decision to maintain dealer margins. And if it is, are such prices and dealer margins justified?
You are absolutely right. We have maintained the price point largely to maintain our dealer margins. Besides we as well as our dealers do not think that slashing costs and getting that incremental volume will ever make up for our profits.
Let me give you an example – A very reputed company launched its content in the market at very low MRP’s for CD’s. The MRP of the DVD’s was Rs.36/-. The content was undoubtedly superb. They got an excellent response initially. But what happened after that? Today most of their stocks are lying down in the warehouses of dealers. The mistake that made was they reduced the prices but they didn’t pass on the adequate margins to the dealers. Also the biggest mistake they made was that of NO RETURN of unsold stocks.
The music industry in India and the markets cannot function without a RETURN policy.
Do you work on a minimum commitment from the dealers in terms of stock or hard cash?
In the good old golden days of the music industry in India, yes we used to work on a minimum commitment. We used to insist on a security amount from the dealers before they picked up our stocks. This amount was double the value of the stocks. And trust me people used to pay that sort of amounts just because they wanted to be our distributors. There are people who used to approach us with security deposits of a crore rupees just so that they could be our distributors.
Nowadays the loyal dealers of TIPS and the dealers who are exclusively selling our catalog are the one who have given us a minimal deposit so that they have an exclusives access to our catalog.
None of the new dealers like Planet M or the large format retail or wholesalers do not work on a Minimum Guarantee or a deposit basis. This is also because we need them more than they need us. Today we are completely dependent on them for Physical Sales.
What is the agreed upon RETURN ratio of your stocks?
We start negotiating at 5% since that is acceptable to any Music company and it is factored in our business model. But with the present situation we have to be open for it. Sometimes it is quite high for new release and for catalog sales it is a 100% RETURN basis that we work on.
Is this the point where the phenomenon of ‘Stocks Dumping’ kicks in?
Sudhir, let me tell you that I have worked with most of the MNC’s in India. Such situations arise in these MNC’s who have a very high Corporate Standards and culture not in regional companies like us. Our company is a mix of traditional and corporate working style. In most of these MNC’s, you have to justify your sales and projections at the end of the month with presentations. Obviously this is for vested interests and individual benefits where one needs to justify budgets to a global headquarters. It can never happen in a family owned company from India which has a mix of traditional and corporate style of working.
In my case to be specific, I will supply my dealer with stocks only as per his requirement. If I try and force him to accept additional stocks and bill him obscene figures he will immediately complain to my MD, Mr.Kumar Taurani and I might end up losing my job. I just cant imagine having that fancy style of working where my books show the artificial profits for launch quantities of 10,000 units and 8,000 are returned back after six months.
I wont us e the word dumping in our case. Sometimes based on our gut feel when we launch an ambitious quantity then we convince the dealer to push himself and pick up slightly more stocks than his capacity and assure him of a RETURN policy to ease the pressure on him.
Give us an example?
Lets say for instance – If a dealer is in the ordering process of a 5000 units we convince him to pick up 7000 units since we believe in the product and have ambitiously launched it. When attempts of convincing him fail we give him the option of returning the entire additional stock of 2000 units is he fails to sell it. Volume sales in the Hindi Film Music market is all about decisions based on your gut feel of the product and then pushing your dealers to deliver their best. I wouldn’t call this as dumping a product.
What do you do with the RETURNED quantities?
Firstly as far as TIPS is concerned we have a very conservative approach towards volumes at the launch stage. So the returned quantities is never too huge. We usually bundle it off in Corporate sales or Bulk Sales at attractive prices to the dealers and FREEBIES to the end consumer. We are in a position to do all of this since we are ready with a Plan Of Action for the returned quantities at the launch stage itself.
This is all getting very curious. MNC’s say that they are not dumping in the market since they have a planned approach and besides they do not deal with a lot of film music. Similarly your justification of why an Indian Company wont do this also sounds satisfactory. Then why are the dealers complaining? And how did this term of ‘Dumping’ evolve?
I wont say that all the MNC’s are involved in this phenomenon. MNC’s who have to project sales to their licensing partner / collaboration partner are involved in this to an extent. They justify the need for their budgets and their licensing arrangements with these Sales figures.
Lets face it English / International Music in India is a niche genre. You cant expect to sell the same volumes of International Music in India as Film Music.
All said and done today there is no ‘dumping’ in either the International Music market or the Hindi Film Music market. Situations have changed for Physical Sales and no longer does anyone want to take a risk of huge stock returns.
How does a company like TIPS decide on the purchase price or the acquisition price of a Bollywood Film Music Right? How is that decision on purchasing a film music for a million dollars made? Is it just a gut feel of the content or is it a properly calculated decision based on the volumes you will sell?
As far as the decision for the acquisition of a Bollywood Film Music Right is concerned it is the sole decision of our chairman Mr.Kumar Taurani and I am not involved in that decision making process.
But I could share with you on perspective of the entire process. What must be happening is a detailed plan would be drawn out to confirm the revenue sources and the revenues that might come in from pushing the content in these various sources. These could be Physical, Digital, Mobile, etc. Besides these there are options such as boosting physical sales by clubbing the acquisition of home video with the music rights. Also the value a film brings to the entire catalog is also very important.
Can you elaborate on the link between Catalog Sales and signing up a new film for such high prices?
When an album is released and if the music is good the whole catalog is revived. When a dealer places the order for the new film title he also places orders for the past 10 films or catalog as you call it.
And is this what the industry terms as – “Take the SHIT with the HIT”. Aren’t you putting excessive pressure on your dealers to sell your flop catalog?
I think you are taking it wrongly. Let me give you an example – The television is promoting RACE. As an end consumer I see the song and decide that let me just buy the CD. With hectic lives in the metros people usually go out only on weekends for entertainment or to purchase their sources of entertainment, one of which is visiting a Music Retail Outlet like a Planet M. Obviously today’s end consumer who is hard pressed for time purchases everything in a single visit to any supermarket or store. This holds true for the Music Retail Outlets as well. So this end consumer who has just liked the title track of RACE and has gone out to purachase the CD for RACE ends up buying an Aatif Aslam, a devotional album, a regional album, a movie DVD, etc. The excitement and experience of a retail outlet propels the end consumer to buy more than the recent film music or as we call it he ends up buying our catalog.
Hence it is a known fact that If any film music is a hit it helps the entire music industry. I don’t think there is any logic of a Hit & Shit here. I think catalog sales is just another avenue to recover your money invested into a new release.
What according to you is the recoverable price that one should invest in purchasing a Bollywood Film Music right?
Let me share with you this situation. Recently we were having this meeting with a leading Bollywood Film Producer who was wanting to sell the music rights of his film to us. You wont believe the deal he struck with us. He said “I’ll give the film’s music to you for free on condition that you invest a substantial amount into promotions and distribute the music well so that it reaches the masses”
The current situation is that nobody is willing to invest crores of rupees into just buying the music rights. Nowadays everyone strikes deals where it is a combination of Home Video or Theatricals or some other form of content which enables us to recover our money.
TIPS has transformed itself from a music company to a production house. We are no longer buying the rights of Film Music from any other external production house since now we have our own in house production. So I wont be able to comment on your question since we are no longer in the business of buying music rights from external sources.
If I have to compare 2 of your last in house productions, NAQAAB and RACE. NAQAAB was clearly a flop and RACE was a hit. What happens when you invest that kind of money (almost the same amounts were invested in both the movies) into a movie, expect the movie to do well and it flops miserably?
After TIPS actively got involved with in house film production we started treating film music differently. Today it is more of a by product for us and the film is our main product. Music along with the trailers enhances the excitement of viewers during the film’s launch period. Similarly the music of NAQAAB helped us during the promos of the film. The cost of production of audio as well as the cost of the content, both were accounted for in the production cost of the movie. Now to recover all our costs we had sold it to Nimbus for Home Video and theatricals. Nimbus further sold it Moser Baer. So NAQAAB although it was a flop was never a losing proposition for us. We recovered and made a decent profit out of the movie. Besides we did sell numbers of the audio CD.
But to answer you question on losses after a flop, there is no strategy to recover that. It just becomes a catalog and we look at it as catalog sales.
If the quality of the music was exceptional but it didn’t sell just because the film was a flop then we look at it a little differently. It might happen that some advertising guy might buy the music rights of the catalog at an attractive price. Or we may work on some overseas rights. We might also be able to bundle it off in some innovative digital format.
The BIG Question – T Series your strongest competitor having the maximum share of the Indian market and with profits better than most MNC’s has its in house film production as well as they acquire music rights from the market for crores of rupees.
Does T Series sell better volumes than you do? Does it have a better distribution network than yours? What is their strategy to recover those crores of rupees and continue delivering hits after hits while the other music companies are struggling to keep up?
Firstly let me tell you that they have the biggest catalog in the industry. Its biger than even a 100 year old HMV Saregama because of the Version Recordings they are into. They have the entire TIPS catalog and so with the others. So its like they own the songs of the entire music industry in India because of this Version Recordings business strategy of theirs.
Secondly they are the biggest players of the regional market. The moment they discover a popular artist regionally they sign him up the very next day. This again gives them a huge regional catalog.
Thirdly they have their own manufacturing units which gives them a cost advantage over us.
Fourthly they have their own dedicated distributors. These distributors do not work for any other labels since they get the industry’s biggest hits and the largest catalogs from TSeries.
Because of these distributors their penetration into the interiors is the best.
Also they give a better dealer margin on certain catalog sales and certain products. Where we offer the dealer a margin of Rs.15 on a product with MRP Rs.36/-
T Series offers its dealers a margin of Rs.22 for a product with the same MRP.
I am nobody to comment on the production costs of T Series but it is a matter of investigation on whether T-Series is following government rules and regulations and paying proper taxes since these components logically to me wont allow such low pricing strategies.
Yes all of this does give them an advantage when it comes to selling volumes.
Also look at the version recording market. Saregama sells products like ‘Lata Mangeshkar Hits’ at Rs.75 and the same product in the version recording product is sold by TSeries at Rs.36/- obviously TSeries will sell a better volume than Saregama. Does the end consumer bother about who is selling Lata Mageshkar Hits? Does he even think whether it is a Tseries product or a HMV product. They might not even notice for a while that it is Anuradha Paudhwal singing and not Lataji. Section 52(1)(J) has been leveraged by TSeries to create the empire that they are today. The section itself is in question and the matter is sub judice hence I wouldn’t like to comment more on this.
But does TIPS as company want to follow the same strategies or rather compete with TSeries?
I don’t think so. Our CMD, Mr.Kumar Taurani believes that if we also start version recordings then why would our consumera buy original recordings. We would be discouraging talent in this country if we too start working on the same lines as TSeries just to gain volumes.
Is their strategy in context to new releases or new films any better than yours?
Firstly I believe that they have a mind blowing strategy when it comes to exploiting the digital medium to promote their content. They are the pioneers in promoting the digital side of their business. From the early days of Digital Music in India they have dedicated digital teams pushing content into the digital space and monetizing it in various ways than one. No other Indian music label other than Sony Music has that aggressive an approach.
So this Digital Strategy helps TSeries a lot when it comes to new releases. Also when your digital promotions are so strong your physical sales also has a good movement. So the digital strategy is clearly working for them in context to new releases.
What do you think should be done to combat this rampant piracy?
I wont give you suggestions but an example. Recently a regional company launched a regional title in the format of a VCD. The content was spiritual music enacted by children. It was as you can call it a musical which takes the movie ahead. The language was Haryanvi. The VCD was priced at Rs.25/- The Dealer Price (DP) was Rs.12/- which means the dealer earned Rs.12 of every CD he sold.
Sudhir, Just take a wild guess of the volumes sold?
Maybe a few thousands.
They sold over a crore CD’s. I couldn’t believe this when I heard it that in times like these there is still a possibility to achieve that kind of volumes. But all our dealers reverted back saying that the reports of those kind of volume sales were true. I was curious and started figuring out how the company managed to achieve this remarkabke feat.
Soon I found out that this CD sold well within Haryana because obviously it appealed to every Haryanvi. The dealer margins were good hence the dealers were happy selling it especially in the interiors. The return policy of this company was unlimited time and unlimited return of stocks. This again appealed to the dealers who never get such terms from any music label in India when it’s a HIT product as in this case.
Now to answer your question on piracy - This CD was unavailable in the pirated CD’s market. Obviously because the pirate cannot match up the dealer price of Rs.12/-
From this I learnt that to beat the pirate and see those kind of sales we need to have a tight control on Pricing, Content and Dealer Margins.
At this recent conference in Hong Kong which I attended, the Sr.VP of Universal Music made a shocking statement. He said and I quote “In the future Music will be available for FREE. Music wont be sold as a product but it will be available as a service. Music companies should stop looking at end consumers and instead should focus on device manufacturers” Let me explain that. What he meant was Music will reach the end consumer for FREE in a bundled form with devices that he / she purchased. So lets assume that 500 songs would be bundled with a handset, another 100 would be bundled with your car deck, another 5000 with the personal stereo system and so on. Do you think we are fast approaching that day in India?
I think Yes. We will soon see that day in India. With declining Physical Sales and digital not responding the way we expect we will all have to turn towards alternate sources of revenue other than the end consumer just like the gentleman above has suggested. But it won’t happen that fast. We are still a good 10 years away from all this. As Indians we do not adapt that fast to any technology. It takes us a lot of time but when we do it we whole heartedly embrace it.
Last Question and I must ask you this - What was TIPS Industries last years’ turnover?
It was a little over a few crore rupees the last year.
That’s very diplomatic. Anyways it was a pleasure talking to you. Thank you so much for all your precious time.
Thank You Sudhir.
