As humans, we’re constantly adapting to new trends and technologies, but one thing remains timeless: our love for music. Do you have a playlist full of classic hits like ‘Hosh waalo ko khabar kya’ or ‘Rehna Hai Terre Dil Mein’ even today? Well, good music never fades, no matter the era we live in, right? For decades, two major music labels—Tips Music and Saregama— have been weaving a sonic tapestry, that resonates with the hearts of millions. From timeless classics to contemporary chart-toppers, they have cemented their place in the annals of Indian music history.
India’s music and entertainment industry, a ‘sleeping giant’ of global music markets, has profoundly transformed. Until the first decade of this century, music lovers had to carry devices such as Walkman, iPods, or USB drives to listen to music on the go. Now they have converged into a single device: the smartphone. The plethora of applications has made music available 24×7 with a tap and a swipe.
Amidst the growth of the Indian music industry, behemoths like TIPS Music and Saregama have not only successfully adapted to these new formats but have struck the right chord with investors, sending their stock prices soaring.
TIPS Music stock has surged more than 200% in the last 3 years. The companies’ revenue has grown at 131% (Tips Music) and 29.8% (Saregama) compound annual growth rate (CAGR) in 5 years. According to Prashanth Tapse, Vice President at Mehta Equities Private Ltd, “The average annual earnings growth rate of both Tips Music and Saregama have surged to 35-40%, surpassing the average entertainment industry’s growth of 20-23%”.
Vaibhav Muley, Lead Analyst of Entertainment and Media, Institutional Equities Research, YES SECURITIES, states that the large music catalogs have acted as a key moat for the two music label companies with a steady revenue stream. Additionally, the long copyright (IPR) duration of 60 years has allowed them to exploit multiple monetization strategies over time, Muley added.
According to Tapse, both Saregama and Tips Music are minting benefits by “monetizing their audio-video libraries and generating revenue and profitability by licensing music to digital platforms like YouTube, Gaana, Apple Music, Spotify and JioSaavn”. Furthermore, the rise of OTT platforms have added advantages for them.
As of March 2024 on YouTube, Tips Music has more than 97 million subscribers across its channels, with 194 billion views. In contrast, Saregama’s subscriber base across the YouTube channels is 107 million, with its Music IPs used 373 billion times across its owned channels and user-generated content on YouTube.
‘Understanding the business’
TIPS Music and Saregama have built their business model by focusing primarily on licensing, audio streaming, and digital monetization. The former, with a music library comprising over 30,000 songs, is also generating significant revenue from its existing catalog. During a recent earning call, Tips Industries Chairman Kumar Taurani stated that repertoire from 1988 to 2022 contributes 85 percent of the company’s revenue.
Additionally, TIPS Music sees YouTube Shorts as an opportunity, as the platform has started allowing advertisements in short-format videos up to 180 seconds. “It can be a huge business, like an additional direct stream, which currently contributes up to 5% but may increase to 25% of the business”.
Tips Music receives a 55% share from YouTube, while the platform retains 33-35% percent, and 10-12% goes to publishing rights.
The company anticipates a significant surge in content usage across Meta platforms, including Instagram and Facebook. Last year, TIPS Music partnered with TikTok, providing users worldwide access to its content library. According to Taurani, if TikTok re-enters the Indian market, “TikTok, Facebook, reels and YouTube Shorts can generate Rs 100 crore business for Tips over the next 3 to 5 years”.
Furthermore, the company is monetizing its music vertical through new song launches and recreation of old hits. Tips Music believes that its music vertical, comprising licensing and artist management, will grow at a 22-23% CAGR over the medium term. Notably, Tips Music licensing fee jumped to Rs 241.5 crore in FY24, compared to Rs 186.7 crore in FY23.
In contrast, Saregama reported that its publishing business, which grants rights for its songs to be used in various videos, has continued to grow handsomely. Licenses are granted for its music, including lyrics and tunes, to social media platforms, video-sharing apps, TV channels, new films, hotels, and event
managers. Saregama’s music licensing revenue grew 23% year-on-year, driven by strong new content performance and steady growth in the catalog. The company’s licensing revenue comprised 52% from 21st-century songs, 68% from licensing and artist management, 16% from music retail, and 14% from video films, TV, and digital content.
In contrast to TIPS Music, Saregama has seen the most aggressive content release in the past nine months, with a total value of approximately Rs 235 crore, encompassing content costs and relevant marketing expenses.
“The next three years, spanning 2025-2027, will be crucial for future-proofing our company by investing aggressively in newer content,” Vikram Mehra said. Saregama is also monetizing its artists by booking them for live events, weddings, and brand endorsements, and earning a share of the revenue. On the other hand, Taurani mentioned that Tips Music will allocate 25-30% of its budget to new content in the upcoming quarters.
“The music industry is competitive, but it is dominated by a few key players,” said Avinnash Gorakshakar, Director of Research Profitmart Sec. According to him, “Establishing a new company will take years, as it will have to build a robust library of chart-topping hits like those of Tips Music and Saregama. Therefore, there’s immense scope of growth among established players, provided they continue to curate and entertain the audience with great music”.