Ladies and gentlemen, welcome to the Q2 FY 2024 results conference call of Saregama India Limited, hosted by Emkay Global Financial Services. As a reminder, all the participant lines will be in the listen-only mode, and there will be an opportunity for you to ask questions at the end of today's presentation. Should you need assistance during this conference call, please signal an operator by pressing star, then zero on your touchtone phone. Please note that this conference is being recorded. I now hand the conference over to Mr. Pulkit Chawla from Emkay Global Financial Services. Thank you, and over to you, Mr. Chawla.
Very good afternoon, everyone. On behalf of Emkay Global Financial Services, I would like to welcome you to the Q2 FY 2024 results call of Saregama India Limited. From the management, we have with us Mr. Vikram Mehra, Managing Director, Mr. Pankaj Chaturvedi, CFO, Mr. Saket Shah, Group Head, Investor Relations and ESG Reporting, and Mr. Pankaj Kedia, Vice President, Investor Relations. Without any further delay, I'll hand over the conference call to Mr. Vikram Mehra for his opening remarks, post which we take the Q&A. Over to you, sir.
Good afternoon, everyone. The quarter two financial year 2024 saw operating revenues of INR 172 crore and PBT of INR 65.6 crore. If you look at or see these numbers on a year-on-year basis, you will see a degrowth in the revenue numbers, which only and only because of the events vertical. Remember, events vertical is seasonal in nature. Last year, quarter one, quarter two, we've seen two of our international tours happening, which do pretty well in the Q1, Q2. This year, the focus has been a little more on the domestic side, which starts peaking in Q3, Q4. As I always say, please look at our numbers only on an annual basis and not on a quarterly and quarter basis. This is actually very much true for events and the films business.
Before I get into the music segment, I want to once again reiterate what I shared last time. The company was in dialogue to settle a very old contingent liability, which was under litigation. We are very happy that this liability is now fully settled, and the entire contingent liability of INR 58 crore has been knocked off from our balance sheet. Let me jump on to music segment first. While our numbers are looking very decent, I think the bigger good news that I want to share with you is that now Saregama is actually working with the biggest production houses in the country. Whether it's Dharma Productions' Rocky Aur Rani Kii Prem Kahaani, which got released in quarter two, or their upcoming movies like Mere Mehboob Mere Sanam or Sarzameen.
From that to Sanjay Leela Bhansali's Gangubai and his upcoming movie Baiju Bawra or Vidhu Vinod Chopra's 12th Fail or Imtiaz Ali's Chamkila or Jio Studios' Stree 2, and many more movies. Such big production houses are actually partnering with Saregama, and the scene is no different in the Telugu or Malayalam space, where the biggest houses like Mythri, who were the producers of Pushpa, they all are now partnering with more and more movies and choosing Saregama as their marketing partner. It's more heartening, or it's most heartening because there was a little bit of skepticism that people had when Saregama decided to reenter the new music acquisition space. There was doubt whether Saregama has it in them to play this very competitive game.
I think through our innovative marketing strategy, use of technology, data analytics, and the professional way in which this entire work has been handled, has now convinced every major movie studio and a lot of independent artists to start choosing Saregama as their preferred partner. In this quarter, we saw the release of huge hits. In Hindi was Rocky Aur Rani Kii Prem Kahaani, then Kushi, all these songs in Telugu got released, which are the big musical hit. In Malayalam, we had the biggest hit of that market called RDX. Remember, this is coming immediately after the success of Zara Hatke Zara Bachke in quarter one and Romancham in Malayalam in quarter one. You're now having two quarters back-to-back of getting great albums coming out from Saregama.
Almost every single chart you have in this country, from AirCheck, which is a chart for what radio plays, to Spotify chart or a YouTube chart or an Airtel Ring chart, now it's becoming a routine to see Saregama songs featuring in the top 10 or top 20 lists of these platforms. We are not just into new content, but we are now becoming very, very successful player in the new content space. Now, commercially, if you look at the impact of these new successful releases, please keep in mind that the immediate impact will be seen only on YouTube, which is a purely variable model that all of us work on. If a song video does very, very well, more views are there, which results straightaway into higher revenue.
The impact on the other two verticals, which is OTT streaming and short format apps like Instagram or YouTube Shorts, is going to be coming with a lag because of the nature of the deals which are variable which are minimum guarantee driven or fixed fee in nature. You don't see the immediate impact of it, but the impact will start coming with a lag of anything between three to 12 months. More importantly, I think all of you who are invested in Saregama have a deep appreciation for the quality of catalog we people have. It was some very, very foresighted management people who were running this company in 1970s and 1980s, who decided to invest in the content at that time, and all of us who are running the company now are privileged enough to enjoy the fruits of those decisions.
Similarly, these big successes that are coming out now of the newer albums will ensure that 30 years down the line, when a different set of management and investors may be sitting in here, they will also be equally happy about the fact that we, we invested in some very high quality content today. Remember, music has got the longest shelf life of all the IP that's there in the market. Anything between 60-80 years, and you still have songs of 50, 1950s and 1960s and 1970s still being played out there in a very big fashion. And I don't see any difference in the newer content that's coming out.
I'm 100% convinced about this, that 30 years from now, when today's 18- and 20- and 22-year-olds, when they become 50-year-olds, they will still listen to Tum Kya Mile or watch What Jhumka? If we look at the coming quarters, there are many more big movies whose music is gonna come out. There's Kanguva, which is a Surya movie in Tamil. There's Kichcha 46 in Kannada, or it's Mere Mehboob Mere Sanam, which is Vicky Kaushal's movie, coming out. There's Diljit Dosanjh, A.R. Rahman's Chamkila. There's again, Ajay Devgn and A.R. Rahman's Maidaan. There is Mammootty's Bazooka. There's Gippy's Warning 2, which is coming out in Punjabi. So you have a very strong lineup of releases, which is there scheduled for quarter three and quarter four also.
And combine this with the individual artist releases that will keep on happening, as we people go forward. So you have a rocking year, hopefully in front of you. If I look at it from a monetization perspective, I've spoken about the new content creation and acquisition. Let's talk about monetization a little more. The biggest shift that we are seeing in the industry is the adoption of subscription-based revenue models by various streaming platforms. For the longest time in India, all these streaming platforms were relying only on advertising-driven models, whereby they are, they were putting all their content on a free basis, and there was very little focus on pushing the customer to the paid model. That's changing. Three platforms over the last few months have decided to put their entire content behind paywall.
Even the remaining three guys who are there, who are still at having their content on the free side, the biggest guy, who's a global biggest guy, is now started putting in serious effort to convince more and more customers to go behind paid walls by giving more privileges and bells and whistles to the paid customer and taking them away from the free customer. This movement, which is happening from free to paid, is something that all of us as music labels are also helping push. The problem with streaming platforms always has been that if they move from a free model to a paid model, on day one, they all start from a zero subscriber, so their revenues plummet.
To support these people, all of us have taken a call that we'll stop charging them any minimum guarantees, which means in the short run, labels, especially the bigger labels, are going to face some amount of pressure. Our revenues are going to come down, but the moment we start looking right now in a 18 months, 12-18 months horizon, the 24 months horizon, you see a huge jump that may come out of the subscription revenues that we'll be able to get. I've been sharing this data multiple times. Our understanding is that the money that we make from streaming platforms should go up by anything between 150%-300% as the market moves from a free model to a paid model.
Are we asking for something very unexpected in India or expecting something very unexpected in India? No. You have close to 600,000,000 people globally, including a large number in China, which is now paying for music. Why should India be any different? When there is very cheap cable available, there are over 100,000,000 people odd right now, are now paying for either a digital cable or DTH, which tells that people have an inclination to pay, and people have the affordability power to go back and pay. Somebody just needs to push the customers to come behind the paid model. Even if I look at the video OTT services that are there in the country, even they are doing pretty well. Reasons may be... I'm not getting behind the reasons.
All I'm debating is, is there affordability in the market and is there willingness to pay? We don't see the first 100,000,000 people who have to be moved behind the paid model on music should be that big a challenge in our country. So short-term pressure, but on a medium-term basis right now, serious upside sitting for a company like Saregama. This quarter, if we see, it started, I think, from Q1 and Q2, we had three of our partners completely going behind the paid wall, namely Resso, which is a ByteDance company, Gaana and Hungama. So there were pressures. We were able to counter those pressures through a significant increase that we have seen on the YouTube revenue side. YouTube revenues are going up.
The primary reason for that is the newer content that we people are putting on, on the YouTube. In fact, I'll go back and share with you something which is very heartening for us, that the growth in quarter-on-quarter views that we are seeing on YouTube. This is only on Saregama-owned channels. I'm not talking about YouTube Shorts here. I'm not talking about user-generated content here. Only content that you can also validate on your own. Check the total all the Saregama-owned channels, how our views are growing vis-a-vis the top four competitors of ours in the market. We are seeing quarter-on-quarter, year-on-year, the fastest growth coming in the market.
This is two reasons: we are investing in new content, and our hit ratio seems to be far better than anybody else in the market, which is all coming out of the fundamental changes that we have brought into our company, which is data-driven approach and decentralized decision-taking model. I believe this competitive advantage that we have right now to be a sustainable one. Let me now jump into the biggest growth trigger that we people have gone out and adapted, which is acquisition of majority stake in Pocket Aces, a top digital entertainment company in India. Let me tell you what is the biggest trigger for us for taking this decision. We are seeing the evolving nature of advertising industry in India.
If I go by Dentsu, which is one of the biggest global media buying and planning companies, let me quote what these guys have gone out and predicted. They are saying that the advertising market in India is going to be growing at 15% year-on-year, which is very, very—when the GDP is looking at a 6% growth, advertising market growing at 15% right now is a very, very easily understandable and believable number. That's not the real point. The real point is something that Ernst & Young has also said in their report, Dentsu is also saying in the report, that the shift is now happening from the advertising earlier used to happen on the on television, radio, and print. That seems to be moving big time onto that digital world.
They are now saying that digital advertising is expected to grow at 31% CAGR. In 2022, just data. In 2022, digital advertising accounted for 35% of all advertising, which is expected to grow to 45% just within two years, that is 2024. Now, is it sounding that bizarre? No, it's not. If you talk to any 12-year-old, 15, or a 25-year-old also now, and ask them, when is the last time they saw an ad? Their immediate response is, "We are anywhere, not there on... We don't watch TV any longer." Most of them are shifted either to an AVOD service or an SVOD service, and in their free time, they prefer watching short format apps like Instagram and YouTube Shorts. So there is more and more eyeballs of the younger generation that is shifting onto that digital media landscape.
Advertising is just going to go back and follow them. So, we are saying 2024, maybe the digital advertising is going to be 45%. We won't be surprised that if this pattern continues, and every reason that this pattern will continue, because smartphone penetration is going up, broadband speeds are becoming far better. You will see more and more people now moving onto these platforms, and the share of digital advertising may become 60%, 70% also in the days to come. Now, what does that have got to do with us? We are very clear. If digital advertising is going to be coming in, where will it go? It will either go on AVOD platforms like YouTube, or it's going to go on short format apps like Instagrams and YouTube Shorts, and the likes from the domestic guys.
Whomsoever controls this landscape in terms of reach here, not so the money comes out there onto the platform. We have no interest to get into platform business. We don't want to open another YouTube or Instagram. What we want to be there, to be the preferred content consuming destination for the customer on these platforms. Saregama has been very, very strong on the YouTube space. We have got close to now 100,000,000 odd people followers of ours on our Saregama officially owned channels. Our weak point always has been right now, the social media, where the younger generation is going. What Pocket Aces brings to us is that demographic. You now have a Pocket Aces has got a massive play on to the Instagram world, whereby they Pocket Aces overall has got 95,000,000 followers on the digital media.
Majority of them are sitting on Instagram. That's what makes us very, very heartening, that if advertising is going to be coming onto the digital world, we need to control both the AVOD, which is YouTube, which is Saregama's strength, and manage the short format apps, which was going out there and becoming, you know, Pocket Aces' strength. They, in fact, let me share with you, they've got 64,000,000 people coming, followers of—on the digital platforms. This ensures that when the money flows, the large chunk of money is going to come out there to Saregama. That was the far—the biggest reason why we were looking at, you know, a digital entertainment company, and Pocket Aces came number one there....
Then the second reason, though Saregama has got very few weaknesses, but, if there is anything, if there's any area we always have been striving to work hard on, it is how to make the, the company talk to the younger age group. Saregama has always been a, pro-culture company. We are the people who make mainstream music, which is heard by families. So we are very, very strong in this zero to 12 year age group for children, whether it's rhymes or it's good moral songs or stories. We even have a Carvaan in that particular space do very, very well. All we do very, very well right now is with more mainstream stuff, which starts at, I think, the age group of 30-35.
Whether it's some of the greatest music from the yesteryear's films or even the latest Rocky Aur Rani Kii Prem Kahaani, Zara Hatke Zara Bachke, Khushi, RDX. They're all good examples of mainstream content. Where we people were weak is how to talk to this more rebellious 12-25, 12-28 year-old age group. Pocket Aces just fills that need gap of ours perfectly. The main strength of Pocket Aces is they have a large following in this age group of 12-28. They are what I call right - and the content that they create at times is what is called counterculture. No 18-year-old wants to watch the content that their mother and father are watching. That's in nature. We were also like that when we were younger. We never used to wear the clothes that our parents were wearing.
That time, music in the choice nahi hoti thi. But today, the children of our younger want to listen to what they consider as their music and not—it's not that they're against what their mom, dad are listening, but they want their own music also. And the kind of content they end up listening to, at times, can be bordering on something which I call a non-mainstream music. Pocket Aces, with its great positioning of being the most youth-oriented brand on the digital space, is able to going to help us in this area. From all these three perspective, they get me a younger audience to talk to. Their 65,000,000 follower base that is sitting on Instagram is all primarily on that. They make us very much attractive to the creators of content that wants to talk to the younger people.
I'll tell you, it very often happens right now that our content team, when they're talking to the younger 22-year-old content creators, who make content for an 18-20 age group, those creators are very uncomfortable working with a more traditional company like Saregama. They want to... According to them, this, this company will, their their rebellious content will get lost or diluted in the overall sheen of a company like Saregama. We have been contemplating for some time of launching an indie music label, independent of Saregama, so that content creators can get comfortable. Now, that ambition of ours will get fulfilled through Pocket Aces.
If we have to create a hip-hop label, if we have to create rap label, where the lyrics can be something that many of us may not find very kosher, it's all that can be housed under a younger company like Pocket Aces, because creators are very comfortable dealing with that age group. And the third part are the brands. The advertising money that Saregama makes from his music, from brands is big, but we always end up getting more conventional brands that want to talk to the middle-aged people. The moment we go to brands that want to talk to an 18-year-old kid, they find us not as their best partners.
Pocket Aces got a massive strength in that particular age group because they create content for that age group only, and brands are far more comfortable talking to them rather than coming and approaching us to find a brand solution. In a single stroke, we have been able to go back and fulfill this need gap of having a youth-based positioning and, and hence, ability to target that segment. The third benefit is, this 95,000,000 additional follower base that Instagram brings along with it, is gonna become a big give us a big edge in new content acquisition. When we go and talk to any production house and say that we want to partner with you on the music side, the biggest thing that the guy is looking for, apart from money, right?
Money is given, but everybody is ready to go back and give money, is the marketing power. Up till now, our strength was 100,000,000 odd that we were able to go back and talk to them. We are literally doubling it. With this double strength right now, we will be in a far stronger position to get newer content from movie studios. We, let's look at the financials of Pocket Aces. Pocket Aces wrote a revenue of INR 104 crore with a loss of around INR 16 crore in financial year 2023. We are fairly confident that if I look at financial year 2025, because we are already fixed into 2024, so I cannot make any projection for 2024.
In 2025, you are looking at a annual growth of minimum 23% and a break even at the PBT level happening at Pocket Aces by 2025. But that's not the- that's no big story. Why am I just talking only about 23% at this juncture and break even? Because it will take us a few months to build and operationalize all the synergies that we have identified between the two teams. If we go on a medium-term basis, we are fairly confident that we will be able to grow the combined revenues of the two companies at anything between 27%-28%, which is a big jump from the 23% that we have been talking about Saregama in the past.
We will get this additional growth both on Pocket Aces and Saregama, the combined numbers. Also, this growth, which should not come at the expense of profitability margins. We have taken it as a challenge upon us that we will stick by the adjusted EBITDA guidance of 32%-33% that we have been making in the past for Saregama. The combined numbers of Saregama and Pocket Aces should hold on to that same 32%-33% adjusted EBITDA target. So you are talking about in the fairly strongly growing digital market, Saregama and Pocket Aces combination growing at a much faster pace. In a faster-growing industry, we combine growing at a faster pace while maintaining our profitability percentages.
We are very bullish, extremely bullish out there in this acquisition, and hopefully the numbers will start falling soon. Let me share the second development here within Saregama. We have been speaking about launching our artist management vertical. This was done in quarter two. What does this entail? We have presently signed three artists on a 360-degree monetization basis. We will invest in creating songs for them, their music videos, and marketing these artists on a wholesome 360-degree over the next few years. Not only will we make money from the music that they create, but once these guys get established, we will monetize them by promoting them on the live circuit. That means various corporate functions that keep on happening, live ticketed or non-ticketed events that happen, wedding. These are huge markets for artists today.
We will push them, advocate them at these places, and whatever money these people make from that, a big chunk of that will be retained by Saregama. So through this 360-degree artists, not only are we securing the next generation artist availability for Saregama's music business, but also creating, building an absolutely new vertical whereby we get a share of the artist's earnings. Since we are anyway doing it, and setting up this infrastructure to promote and push our artists in the live circuit, we have also decided to create one more vertical here, whereby we are now representing close to a dozen artists for their live business only. That means these are artists on whom we are not going to invest anything. They are small to medium-term established artists.
We are telling them that Saregama will represent them on the live side, and whatever money we are able to get for them from the live side, we'll keep our commission on this. Our commission percentages will be higher on 360-degree artists because we're investing them, lower on the live artists because we have zero investments in that particular space. It becomes even better. Now, with Pocket Aces deal happening, Pocket Aces has got a huge influencer management vertical that they have, which is nothing but again, a different form of artist management. Their strength is brand management and selling their artists right now to various leading brands of the country, especially youth-focused. Our strength is selling the artists on the live space.
So what we'll be doing is, all the artists who come and singers who sign with Saregama, we will continue managing their live part, but also try to convince these artists to give their brand sponsorship mandate to Pocket Aces. Similarly, all the influencers who are getting signed by Pocket Aces, their brand will continue to be managed by Pocket Aces, but we will try to convince those influencers to give their live mandate to Saregama. One more big area of synergy, and that makes both of us very attractive, Saregama and Pocket Aces, very attractive to any artist who's there in the market now. Because the artist becomes big through the various video content that Pocket Aces are making and the music content that Saregama is making.
We monetize them through brand strengths that Pocket Aces has and live event strength that Saregama has. So it's a win-win situation for everybody involved. Let me now jump into the space of technology. What are we doing in that space? In the times to come, the content business is not only just going to be about creativity. Creativity is a very important part here, right? But it's not going to be only about creativity. Technology will start playing a bigger and a bigger role in this particular space, the entire content creation space, whether it's audio or video. That's the reason we are in the, within the company right now, very serious about making investments in both predictive artificial intelligence as well as generative artificial intelligence. Our predictive AI investments are already bearing fruits.
That's why we have a success rate of our music albums doing far better than anybody else in the market today. We are also working on generative AI, whereby we can teach tools that we are developing in-house to learn from our own music. So there's no copyright infringement because these are our own 150,000 songs with billions of data points about which song does well where on which platform... use that data to go out and create, maybe generate newer content on an automatic basis. A big future, let's see how that rolls out. We are also upgrading all our hit songs to the latest technology, which is Dolby Atmos mix, for better listening experiences.
These songs may have been created in the 1970s and recorded using the technology that was available at that time, but today, if you're an Apple Music customer or any of the other platforms, you have far better quality speakers that you have access to or AirPods you have access to. So we are going out there and upgrading. If technology allows us today, right now, to take the music that was created 30 years back, break it into individual stems, that means individual parts, upgrade those parts, so that when you listen to this music now on Apple Music, you actually get the benefit of the latest technology that's available. Now, all these things just differentiate us with any other player in the market. We are preparing this company constantly for tomorrow and not just trying to make money for today.
Let me share another very interesting development, which is going to roll out in the days to come. We are about to launch of our own music learning app, which will teach music fans how to sing songs or play instruments. All this is being done using artificial intelligence. It's not just a tutor who is going to manually go back and teach you. Yes, there are sessions available, where if you have a doubt, there will be a human element coming in who will take a session for you digitally. But the bigger part is that artificial intelligence is now going to help people on a regular app, which will be available both on the Android and the Apple store.
Now, to keep on honing their skills, either on vocals or while playing the instruments, to see how good, bad they are, improve their skills, and then get in a position to sing some of the greatest songs that Saregama has. Whether it is Lata Mangeshkar's Lag Jaa Gale or Arijit Singh's latest Tum Kya Mile or What Jhumka? Suddenly, there is a comfort that people sitting in their homes, whether it's a seven-year-old kid or a 35, 40-year-old lady or a 19-year-old boy who wants to impress his girlfriend, all of them can now learn scientifically how to sing songs or play instruments.
The cherry on the cake, because this app is launched by a music label, we are also offering the opportunity that the best performing people who are using this app and are evolving as singers or instrument players, will get a chance to release songs or music albums with Saregama. Now, most people give their right arm just to appear in a singing or a dance show on television. Just imagine if they come to know that it's not just about that, it's about India's most prestigious and oldest label now will give them a chance to release a song. I think there will be a decent amount of traction that will be coming in for this learning app.
Remember, the learning app needs to use the IP that belongs only to Saregama, so nobody else can go back and teach them, and no other company out there has got the quality of rich catalog that we people have. Just another example of how, like Carvaan, we are constantly looking ways of monetizing the IP that we already own. No other label was able to go back and match with us right now in the Carvaan space because they didn't have that kind of a rich catalog. Similarly, we believe we'll have a massive, advantage, competitive advantage on the music learning app also. Since I touched Carvaan, a quick update on that. The numbers of Carvaan continue to grow, primarily on the back of mobile phones, these are the feature of Carvaan-branded feature phones.
Good news is that the unit sales is going up, but it is matched by the average realization per unit sold going down. Remember, mobile phones are typically all under INR 2,000 bucks, units that we are selling in the market, so average realization is lower on these. But the comfort I can give you that the percentage margins that we people are maintaining on Carvaan, doesn't matter whether it's a mobile phone or the high-end Carvaan, they are well-maintained. On the films and series vertical, actually, there wasn't any action in this particular quarter. All our big releases are planned in quarter four. There will be very little action happening in quarter three also.
Difficult to believe, but I'm still holding our guidance, that by the time we end the financial year, the films and series vertical of ours will see a 25% growth this year on a like-to-like basis. So FY 2024 will grow by 25% over FY 2023. There are multiple movies and very big Malayalam and Punjabi movies all lined up in the January to March quarter. On the event side, quarter one and quarter two was relatively silent. Quarter three, we'll see a Diljit Dosanjh tour of Australia and New Zealand being done by us. Our overall approach on film, series, and events business continues to be that of being cautious in nature.
I shared it last time, again, reiterating that our total capital allocation to film, series, and events business at any particular time will not exceed more than 80-18% of the total capital allocated. Currently, this number stands close to 12%. So we will, we will find a way. We make smaller steps here, take baby steps, keep on growing this path, and hopefully, the, the, the vertical itself is going to throw enough cash to fulfill our growth ambitions. Overall, I want to reiterate that we have just touched the tip of the iceberg.
We have got our, our foundation in place in the company on all parts of IP, whether it's a one-minute short format content through Pocket Aces, or a three-minute music video through Saregama, or a 22-minute content through Saregama, or a 45-minute content through Pocket Aces, or a 120-minute content through Saregama. We are covering us all bases of ours. The world of digital is growing very, very rapidly. We are investing in technology in a very big fashion to keep us very, very steady as we go ahead. We are relying more and more on data analytics in our decision-taking power, and we are investing primarily in tomorrow. Investing in tomorrow doesn't mean that you will have- should have pain out there in, in today.
Today will be stable, but tomorrow with all these fundamentals in place, should look even rosier. And remember, the content that we create today, especially on the music side, the music is going to be heard, and create revenues, not today, just today, not just tomorrow, for next 10, 20, 30, 50, 60, 80 years or so. On that note, thanks a lot for your patient listening. Happy to take questions.
Thank you so much, so much. We will now begin the question-and-answer session. Anyone who wishes to ask a question may press star and one on their touchtone telephone. If you wish to remove yourself from the question queue, you may press star and two. Participants are requested to use handsets while asking a question. Ladies and gentlemen, we will wait for a moment while the question queue assembles. The first question is from the line of Aditya Nahar, from Alpana Enterprises. Please go ahead.
Yeah. Hi, Vikram. Hope you're doing well.
Thank you.
Vikram, just congratulations on your acquisition of Pocket Aces. Just for my understanding, we have bought 52% for the amount mentioned, and the remaining is on the basis of certain benchmark goals, correct?
That's correct, Nahar. Pankaj this side. Yeah.
Hi, Pankaj, sir. So, this is the funds for this has been from the QIP?
Let me just clarify.
Yeah.
You know, we will be closing the transaction shortly.
Okay.
The first one, we will be acquiring close to 52%.
Okay.
Within the next 15-18 months, our acquisition will be close to 92%, as we have already declared.
Okay.
Yeah. Yes, you're right. The QIP funds will be used for this inorganic acquisition.
Okay, great. Pankaj, since I have you, any timeline on the listing of the Digidrive?
Sorry, timeline for?
The listing of Digidrive.
The good part is, you know, the shares have been credited to the demat accounts. We've received the approvals from both the stock exchanges. We are in the process of getting the final clearances from SEBI, which we expect should be completed in about two to three weeks. Our endeavor is to get the listing as soon as possible.
Great. And sorry, Vikram, my last question to you is, this is an open-ended question. Any thoughts on the Taylor Swift controversy of rerecording her old songs again with, you know, with licenses being renegotiated with newer artists? If you could just talk about that briefly.
No, sir, I'll not touch that. What I can tell you is, the way rights in India are, they're very, very different from the way rights are, procured or secured in the international world.
Okay.
In our case, we have both what are called sound recording rights. That means the right to the song that's created- And... as well as publishing rights, which is the right to the composition and right to the lyrics. That's why we are in a complete 100% secure position at this juncture to do recreation of anything that we people want, and nobody else can do it.
Great, Vikram. Thank you so much. I'll get back in the queue. Thank you.
Thank you, Aditya.
Thank you. The next question is from the line of Saket Mehrotra from Tusk Investments. Please go ahead.
Yeah. Hi, Vikram. Am I audible?
Yes, please.
I had a question on this, Pocket Aces acquisition that you mentioned on the medium-term guidance. This is over what time frame are we looking at, this growth of 27%-28%?
Anything around three years out.
Okay. And secondly, are there any specific synergies with respect to being on the cost side? Like, I understand that even Pocket Aces is into production. So will we be running two cost centers, or is it gonna create some sort of saving? Do we have any actionable numbers for that to, like, bring our costs down?
See, multiple things here is on the video side, you're right, both of us are into the production side, and that's a great part. We are doing more films from Saregama, and we are doing more series work for digital platforms targeted at youth from the Pocket Aces side. There are already projects that have been kickstarted to start doing benchmarking on both the sides and see that, if the people are procuring, simple things like lights or camera work that's happening out here, can we do start now doing combined deals, which takes care of both, the requirement of both sides of the spectrum and get cost savings done. So yes, there will be cost benefits coming out that side.
The moment I'm talking about our music promotions, a large chunk of our music marketing budgets actually end up going and getting spent right now on various influencers that are active on social media. Now, we have access to a large number of those influencers through Pocket Aces, because Pocket Aces are representing them. So we will be in a position to go out there and negotiate a far better deal or a lower deal, or for the same amount of money, get bigger bang for the buck. So there are advantages, both on the revenue side, that will accrue to Pocket Aces and to Saregama, also on the cost side.
Okay, thank you.
Thank you. The next question is from the line of Lokesh Manik from Vallum Capital. Please go ahead.
Yeah, good afternoon, Vikram and team. Couple of questions from my end. One was a clarification. In your presentation on the music licensing monetization, it was mentioned that strong revenues growth in medium to long term, despite short-term pressure due to minimum guarantees going away. A clarification, was this is solely attributed to the music apps that are going behind the wall, they're going paid?
Monetization. Yeah, it's only attributed to that.
Okay, great. Second was on the live artist management. In the event, let's say, it does not work out and the artist is not successful, how is the exit plan then? Do we have any liability to carry forward for the next five, 10 years or the contract period that we get into? How does that work?
See, so, there are two kinds of artists, as I mentioned. The one which are our 360-degree artists-
Mm-hmm.
We are in a very short-term commitment on those artists. There is a short-term commitment. I'm not going to run away from it, but the numbers are not that huge. 360-degree play of ours is going to be limited. At this juncture, there's only three artists, at best, it may become four or five artists. On the... The real numbers are going to be coming right now, where we take the live events monetization management of artists, there is zero commitment there.
Okay, understood. Just the last one. So, the growth rate that you have upped from 23% to 27%, 28%. So 27%, 28% will be from 2025 onwards, just to clarify?
Yeah.
Great. That's it from my side, Vikram. Thank you so much.
Thank you so much. The next question is from the line of Pulkit Chawla from Emkay Global Financial Services. Please go ahead, sir.
Yeah, thank you for the opportunity. So Vikram, given that now the largest OTT platform has also restricted several features, do you see that short-term pain that you're talking about, you know, becoming slightly more worse in the near term, at least? And let's say that all these platforms then do be move behind a paid wall. I mean, do you see it an impact on piracy also going up because of this issue? And second, do you also foresee the payback period also going after the current target?
Payback period for music?
Yeah, so, yeah.
Okay. So let me answer the second part. No, we are, we are holding on to our guidance of five-year payback period for music. We are not going to differ from that. So for whatever reasons, if there is serious amount of pain which is going out in the market, that means the acquisition cost will have to come down. So we are not changing our five-year payback guidance. That's one part here. Let me try to answer your first question. Will there be a pain right there? Yes, there will be a pain. The good part is, out of the six guys who are all giving free, it's the moment to pay is happening in a phased fashion. Three have moved to pay, other three have not moved to pay yet. It's good news or bad news.
I would have loved had everybody move to pay in a single go so that we were done with this. But, to me, from a commercial perspective, we still have three of the guys who have a large amount of a free business that's going on. If one or two of these guys start deciding to move towards pay, yes, there will be a serious pain in a quarter or two when it happens. But the jump that you are going to be seeing, from free to pay in terms of our revenue is massive. You were asking, there was a part two to your first question.
Yeah. So do you see an impact of piracy?
Piracy is a pretty good question. See, I also, I'm chairing the apex body of the music industry in India called IMI, and we are working a lot with the Commerce Ministry in that space because we come under DPIIT, which is part of Commerce Ministry. And we keep on picking up, working with government a lot on various characteristic measures that are carried out to take care of piracy. Piracy is declining, and in the larger towns, if you talk about the Bombay, Delhi's and Bangalore's of the world, literally, there's zero piracy. You will always have those kids who have a way right now to download some of the content on an illegal basis.
But those days, where music used to be available on CD, at every corner of the streets, whether it's Bombay or a Delhi, 20 years ago, right now, on Fort, there used to be some 20 shops selling illegal music or illegal pen drive. All that is gone. So what will the customer do? In the same part, music, cricket is sitting behind a paid wall, but people are going out there and paying. The amount of piracy that used to happen earlier, not happening in our country any longer. And this will be the same journey that China has gone through. There was a serious amount of piracy problem there. As technology is evolving and people got used to the flavor of great experience on a streaming app, people are refusing to go back to the old days. I don't see personally, at least in all the tier one, tier two, three and three towns, it's happening. In the smaller towns, there may still be some challenges. But the good part is, those guys are anyway not on the OTT platforms today.
Correct. Yeah, thanks, that helps, that's helpful. Just one more thing: is there, has there been an increase in the competitive intensity for the new content acquisition?
See, there are limited number of players which are sitting on the content. So if your question is saying, has the pricing gone up substantially? Pricing is completely disconnected to the dynamics of how, what music is doing well. If you have in a language, some trending hit coming in here, and all of it is doing pretty well, that language offering starts going up, or some other language takes a beating in that case. So, it is a competitive market, it's not. No new guy can ever play this game because they don't have the catalog to play this game. They don't have the number of songs that big labels should release. Among the existing guys, I think we're in a fairly strong position today, which is reflected by the amount of content we people are acquiring.
Yeah, thanks, Vikram, that's very helpful. That's it for me.
Thank you so much. The next question is from the line of Swapnil Potdukhe from JMFL. Please go ahead.
Hi, thanks for the opportunity. I have three questions. One is that, given that we are going through this transition of free subscriptions to paid subscriptions, how should we see the music licensing revenues trending in the next couple of quarters or so? I would presume there could be some pressures out there. When we are guiding for 27%-28% consolidated growth, are we expecting the music licensing business to grow at a similar rate, or like, how much of that will be coming from music licensing?
So, uh [crosstalk]
Question number-
Let me answer the second part first. Music licensing is the largest form source of revenue that we people have. If we people are striving for a 27% or 28% growth three years from now onwards, I cannot achieve that growth right now, unless music licensing also fires at the same pace. So yes, with this synergy that is gonna get created between the two businesses, especially artist management is a large contributor there, on the music side. We are expecting, on this three-year horizon basis, our music revenues also to start touching 27%-28%. And I'm reiterating, this does not include the positive kicker we will get the day everybody goes behind a paid wall. Because the streaming business alone can grow between 150% to 300% for us. That will be over and above this. But even without that, just the synergy of the two companies will ensure that three years from now, you are looking at 27%-28% growth in both businesses combined, including the music business. That's part one. Your other question was?
The other thing, near-term, revenue trends in music.
Yeah, let's go. But see, near term, it will, things keep on fluctuating. I will hold on, on a stable basis, numbers of something around 23% growth on 2022, 2023, let me say, on the music licensing side. A quarter here and a quarter there misses, but YouTube comes back and supports this. We are growing our publishing business, which is all about brand in a significant fashion. We are trying to grow our public performance business. So hopefully, we will be able to counter this pressure, if I look at this 12-24 months horizon, where all the transition from free to pay is gonna be happening.
Got it. The second question is, with respect to one of the major platforms, missing from your PPT, with respect to the partners, which are working with you.
Yeah.
Can you elaborate on that? Yeah.
All I can say is that this is a natural part of doing business here. If you look at any music label and platform partnership, half of the... Well, I think 90% of the labels will have some issue going on with some platform. Yeah, we are in commercial dialogue with them. The commercials are not matching at that particular time. Hopefully, we'll sort it out. It's usual way of doing business. Somebody will not be there on platform A, somebody will not be on a platform B. Just need to go out there on any platform and look at the content, you'll come to know. What I want to give you a comfort is because majority of our deals in these cases are all variable in nature.
If a customer does not find Tum Kya Mile or What Jhumka on a platform A, that person does not start listening to some other song. The person moves from platform A to platform B. So I don't end up having a 100% loss of the revenue. The revenue, to a great extent, gets made up by some other platform. Revenue starts going up significantly. That notwithstanding, it's our intent to get the commercial deal in place with the said platform too.
Right. And the third question is on the cost side. So we have seen a significant sequential dip in some of the major cost items like royalty fee and the right any other expenses, too. So how should we see them playing out in the near term given that I presume this is this has a direct correlation with the fact that music licensing is going through some certain pressures. But how should we see it you know cost side moving in the near term as well?
So, Swapnil, Pankaj this time. On the royalty, the absolute numbers are pretty much stable, you know, although as a percentage, they have been declining, and we've explained the reasons why.
Mm-hmm.
On the other expenses, as you have mentioned, we spoke last time when we said that we were addressing one contingent liability, and, you know, there were some estimated provisions that we were taking and then you see, you know, a small jump last time. But costs have now, in fact, come down way, if compared to the last quarter. They're pretty much in the normal state now. So as we move forward, these fixed costs as a percentage to revenue will always keep declining. Hope that helps.
Right. Just one clarification. The A&P spend that we have right now, of around INR 13 crore for this particular quarter, that was completely attributable to the music licensing, or like, does it also includes Carvaan and Yoodlee, and the films business?
Carvaan, as mentioned, we don't spend on the marketing side.
Mm.
The entire A&P that you see in the P&L consists of all other segments. There were some A&P spends on events and films last quarter, which are not there, you know, this time. Also depends on music, what song gets released when, and we, you know, promote those songs at the appropriate time. So other than that, there is nothing specific as such to highlight on the A&P. So as we said, on the A&P side, the music linked A&P, there was no change.
Mm.
There were similar amount of numbers, but since there were no events that were done, so all the A&P connected to events, and to that extent, films also, were not happening in quarter two. There's no top line, so there's no reason for us to spend money on advertising. Does that answer your question? So the numbers will look different in Q4, when there will be large amount of films of ours getting released. From the Yoodlee side, there will be corresponding, marketing money that will... cost will also come in.
Got it. Very clear, Vikram. Just one last thing. Carvaan continues to be breakeven or like or it is also contributing to some profits right now?
Carvaan was breakeven. Carvaan is now looking at a, but it's a very thin margin, but it's a thin margin.
Okay, got it. Thanks a lot for your taking the questions, and all the best.
Thank you.
Thank you. The next question is from the line of Vikas Tulsyan from Vision Ahead . Please go ahead.
Sir, from the last eight quarters, your results are flat, basically. And, in the same time, the listed peer, like Tips Industries, has performed so well. So sir, why you have not performed the last eight quarters, and what you will do to rectify it?
So listen, let me not go on the competition part here. We people, are you, the, the revenue that you are firstly seeing right now on the moment we finish our entire, year. The events business is the only business right now where you're seeing this kind of fluctuation happening. When we got into events, we are given this hedge up, this hedge up, because those are blocky and chunky in nature. They come in a quarter in a big fashion, and then they don't come out in the other quarter. If I look at the more steady part of our business, which is music, there's been a steady growth that we people are seeing on the licensing side. We, at the end of the year, always end up sharing the licensing revenue from you.
So licensing revenue is growing at 25% year, and it's not flat in nature. It's the other parts of the business which are chunky. There was Carvaan business that used to be big, which has come down because we did not want to have any losses going on out there. And that business at this juncture is going at a steady to little degrowth or something, little growth path. Films and events business builds, and I'm maintaining that guidance right now, is going to grow at 25%.
So why don't you demerge the music division also? There are so many loss-making division or flat divisions, and the result is-
We don't believe they are loss-making divisions. We believe there are serious amount of synergies between the various verticals that we are carrying out. That's point number one. Remember, there's a big diff- In our company, when we are looking at content IP and Saregama as a company, we are not only looking at improving numbers in this quarter, but how to keep company in a very solid position, three years, 10 years, and 50 years. So we are taking all the steps to build the foundation for the next massive story. We don't want to just be a profitable company. We want to be India's biggest entertainment company that is also generating large amount of profits. Our approach is little more long-term in nature.
What I can give you and give you the comfort is, films business is going to be riding a 15% margin this year. It's not going to go below that. Events business, we have just started, and we have asked, requested for time for 18 months. We'll take a call if that number is going up or not. It's critical to the artist management business, it's critical to the music business, if you're also on the live side. You talk to the same singer, and if you can manage their live business also, chances are they will also give songs to you, which, if you're not in that business, may become a little difficult for some of the other competitors.
Oh, thank you, sir.
Thank you so much. The next question is from the line of Sukriti from Laburnum Capital. Please go ahead.
Yeah, thanks, very much. Just a couple of questions. One on the minimum guarantees. So it's great that they are sort of fading away, and, you know, we're gonna see largely clean, variable pricing-based numbers. Any sense of dimensioning, how big the fall will be due to that? Second question is, you know, as we see a consolidation play out in distribution platforms, are we concerned that our own revenue share may come under pressure? Because for the last few years, you've had multiple platforms trying to build viewership, trying to build growth, and they may have been a little more generous, with payouts. But going forward, would that change?
And specifically folks like YouTube or maybe Spotify that become more dominant, could you see them squeezing harder? Finally, on Pocket Aces, you articulated your rationale for doing this very clearly. I'm just curious, if we did a build versus buy analysis, how do we feel in terms of time and cost that it would have taken to build this out organically versus what we paid for it?
Let me answer Pocket Aces first. It's in the case of the Pocket Aces, the rationale or outline, yes, we debated between build and buy. The issue is culturally, and organizations have to go back and understand this, culturally, we are a traditional, family culture-driven organization. We create content which appeals to the more mainstream audience that wants to watch content along with their families. For me to go back and say that within the fold of Saregama, can we go out and create content, which is more rebellious, in your face kind of content, maybe parents may be a little itchy about, is a difficult task. We would have had to go back and start it completely outside Saregama, not taking... Leveraging any of the benefits of Saregama and create it.
We realized that's going to be a Herculean task. Most likely, it's not going to go back and happen, and it's going to take a very, very long time. It's better that if we get—if we are able to get the number one player in this particular space, which is professionally run, has got a very, very formidable reputation in the market, it may be, maybe from the cost perspective also right now may make much more financial sense. More importantly, we are able to capture that digital audience today when the transition is happening, rather than later.
Immediately, and we are already seeing the impact of that, every major movie studio head has already called us up, and they have taken notice of this fact and congratulated us about how we people are thinking of future. So we know immediately it's going to give us the benefit in our content acquisition space. That's the second part of your question. The first part, on the consolidation that may happen, on the OTT side. First, how big the kitty can be? I've stated it, I'll again repeat: we believe when the transition happens from a free economy to a paid economy, we are looking at the kitty that we all generate from streaming platforms to go up anything between 1.5-3x in the short run. The dynamic is very simple.
I'll, like, explain it to you. On average, when a free customer listens to a Saregama song, we get on average eight to 10 paise. Every time, if you are a free customer, you listen to my music. But if you are a paid customer who listens to my music, then our deal primarily is that whatever you have paid to the streaming platforms, around 50% of that is going to be earmarked as content pool, and that content pool will get divided equally among all the songs that you heard during the month. So now let's speak through a number, that suppose you are paying INR 100 to your streaming platform on a monthly basis, which means that content pool is equivalent to INR 50. An average Indian customer is listening to on streaming platform, 64 songs.
If I look at that number, then so everybody gets paid close to INR 0.80-INR 0.90. Let's not look at that. Let's say you are now a hardcore customer, and you listen to 100 songs in a month, that means I get paid INR 0.50 per stream. Even if you are not come at INR 100 per month, you come at INR 50 per month, then also we get paid INR 0.25 per stream. So there is a large amount of upside which is fitting in with... or for all of us, all music labels, once the movement happens from the free to the paid side. Your other question was, if consolidation happens, I think, remember, India is a very competitive market, but if I look at America today, there are only three big platforms playing out there. There's Spotify, Apple and Amazon.
There's nothing else. It's not gone out there and diluted the position of the three of the big music labels that are sitting in there, Universal, Sony or Warner. I see a similar situation happening in India, because what we are selling or licensing is not commodity. If you are a fan of a song that you have grown up with, or your favorite Shah Rukh movie or Amitabh movie or Ranveer movie, then you are going to listen to that song. That song cannot be replaced by some other song on the platform just because my song was not available. You may go out there and change platforms. So in this IP versus platform game, we strongly believe that the people who are owning the IP, especially on the music side, that you want to consume on a very frequent basis, I think we people are on equal footing with them. I don't think there's a big edge the platform has over us.
Got it. Really helpful. Could you just any dimensioning around the extent to which things should fall as the MGs fall away?
So, see, again, it all depends on phasing. You have three of the guys out, so their MGs are completely gone, and we are now building the subscription business there. There are three big guys, the number one, two, three are still there in the market, all on the free side. It all depends whether a single guy goes out and the other two remain, then it will be all phased on fashion. If all three goes out, it does make an impact, but that means also that the growth in the subscription is going to be that much steeper. So there may be a big dip for a quarter, but a massive increase coming from maybe the third quarter onwards.
If they go in a phased fashion, there may be small dips happening over one to three quarters and an equally gradual improvement that's happening on the subscription side. But all that is, is a matter of 12-18 months, and the endeavor of the, our company is that we counter or, or neutralize the impact of this to whatever extent possible to increase on our YouTube revenue and our publishing revenue.
And could you give us a sense of what percentage of the revenue today comes from minimum guarantees?
I can't get into that specifics.
Okay. But- But there are only three platforms left. If I-
I don't know.
There's only, everybody else is behind a paid wall, and all paid wall guys are on a variable basis. Got it. And, and of those three, all of them are at the minimum guarantee level, or could some of them be paying you more than the MG?
You're getting into very, very specifically out there again, but what I can tell you is in majority of the cases, earlier days when everybody was there on a free side, on major... Our MG numbers typically for us used to fare anything between 90-110, and then 20%. And these deals were renegotiated every year, to ensure that there is some amount of parity which is sitting in.
Got it. Got it. All right. Thank you very much.
Thanks.
Thank you. The next question is from the line of Yash Bajaj from Lucky Investment Managers. Please go ahead.
Yeah, hi. Thanks for the opportunity and good afternoon, team. I had a couple of questions on Pocket Aces. So first is that I wanted to understand how different is the business model if I compare it to the traditional Saregama model? It would be really helpful if you could answer that in context with the P&L and balance sheet. That's my first question.
Okay, so see, our primary business model right now on the music side or the film side was create IP and license it out to platforms.
Mm.
That's our primary model.
Mm.
We don't take our content to the customer directly, we license it to people. The model, the primary business of Pocket Aces is to create content and get brands along with that content to get integrated into the content. That content is going to be hosted on their own Instagram pages or influencers' Instagram pages. That's why these guys have got a massive strength going on, on the brand relationships. Saregama wants to evolve in that space, so that I'm also not only dependent on platform, but I can make some money directly from the brands. So when these two strengths come together, the net result is more than the sum of the individual parts.
Hello?
Have I answered your question?
Yeah. Also, just to understand, so Saregama is more of a catalog model where the catalog is in the inventory from a balance-
Catalog model.
Sorry.
Catalog-
Sorry. Yeah.
Old content. We are an equally strong player in the newer content. Our business is to create IP, retain the IP, license it. Pocket Aces, on the video side, does exactly the same thing. They also create content. We create more content on the film side, they create on the web series side, but that's a video part of the business, which is smaller thing. The bigger part again, is they create content and rather than licensing it to anybody, they get a brand to come right up front, and that becomes a business model.
Okay. So is there anything on, anything significant on the balance sheet of Pocket Aces then?
No. So, when you say significant [crosstalk]
I'm asking from how we create... How Saregama creates the IP, and it-
Okay.
It forms part of a balance sheet.
No, our [crosstalk]
Now, and-
Our IP does not form part of the balance sheet. If you look at the older songs, we are not keeping them on the goodwill basis right now on our balance sheet. These guys follow the similar model. They charge off the entire cost of the content in the year in which they are creating the content, and book the revenues, whatever the corresponding revenues that are coming.
Okay, got it. Got it. And, my second and final question is,
Look, here I want to clarify. Listen, we have – if we have invested in Pocket Aces, it's not because of the IP that they have created, but for the digital follower base that they have, which believes in them and their capability to create content which is relevant to the young people. The content that has been created and sitting with them, and an IP owned by them, is the least of the things right reason because of which we have invested. I hope we have clarified that part.
Yes. Yes. Thanks for that. And second question is a follow-up to Pocket Aces only that, are there any exclusive agreements with these influencers or how are the agreements like with the influencers?
Artist Management contracts for whatever mandate artist is giving you are exclusive in nature.
Okay. Okay. That's all from my side. Thank you.
Remember, I want to clarify this in continuation with the question that he asked: What is the artist looking for? Why does an artist want to go out there and sign up with any company, and share his revenues with that company? There's a reason artist wants to do it. Every artist wants to become even bigger. How do you become bigger? By becoming more visible. Saregama's ability to make its own artist big, the only access we had till now were our music videos. Pocket Aces, the only access they had right now was to create content for those influencers, for the Instagram and the YouTube world.
Now, what we are going to be doing, our artist is going to create the content for our artist is going to be done by Pocket Aces, and for Pocket Aces guys now can start appearing in the music videos of Saregama. So for an artist, this becomes the ultimate destination where he or she can become big, using our IP creation power of both the companies combined. Which means, Pocket Aces, which is already the number one player in the digital influencer space, should be able to grow that part of the business at a significant pace.
Thank you so much, sir. The next question is from the line of CA Garvit Goyal from Nvest Analytics. Please go ahead.
Hi. So am I audible?
Yes, please.
Good afternoon, sir. So you have earlier guided for 22%-25% growth if you take the overall across the segment. Then going by that, we should have reached somewhere around INR 900 crore by FY 2024, but actually we did only INR 340 crore. So although we, this was supposed to be entirely organic growth, but even if I add Pocket Aces, that will contribute, I think, in Q4, maybe around INR 30 crore. So are you confident enough that we will be able to make the revenue to INR 530 crore in second half?
20%-23% is the growth that we people have been seeing for this financial year. You have to give me time till the fourth quarter. Fourth quarter, I'll reiterate, we'll see bulk, maybe about 75% of the revenue for the music or films vertical coming in that particular quarter. So at this reason, though there are serious pressures of Spotify, the streaming application going behind the paid wall, we are still hopeful that with these acquisition that we people have right now and our own growth rate on a combined basis, though we will get Pocket Aces numbers only for a few months and not more than that, we should be somewhere close in that space only. We are not changing our guidance for 2022-2023 as of now.
Understood. Sir, secondly, on the acquisition of Pocket Aces only, I agree it is, it is beneficial for the company in the longer term. Definitely it is going to be, as you explained, but it doesn't fall under the intended utilization of QIP, as it is not a music label, it is more of a web series creator. So with this acquisition, don't you think we are going against the strategy of strengthening our music IP with the songs that that were released during 2005-2020, that you mentioned at the time of QIP release?
At the time of QIP, since I only was addressing at that time, I had said anything that helps our music business. Now, music business has got three arms, three areas which are helping music business today. One is just pure IP buying, either new content or older content is somebody else's catalog, that's one. Anything that helps me make my position better in terms of acquiring newer content, which is the marketing power that you end up getting it, this is where Pocket Aces fits in beautifully. When I now go to a movie studio and say that we want to acquire the content that you guys will be releasing in terms of songs, and we put combined power of 100,000,000 on Saregama on digital side and another 95,000,000 , we become that much more attractive vis-a-vis any of our direct competitors.
So on this acquisition is helping us a lot on the new content acquisition space. I'm also telling you, there's a third space also out here, which is the AI or technology space. The old world of saying music is all about go out there and pick up a song. It is valid, but there are other areas today, it's not about just getting music, it's about making the music become very big, where marketing is very important, or our technology partners start playing a very important role here. That tomorrow there's a great AI-based firm which is built specialization in that area, we may even look at that. Anything that helps our music business. What we are not going to be going out there and start using these funds right now, as I stated earlier, and I'm reiterating, is for a films business or an events business or a Carvaan kind of a business. That will all be managed right now through our internal growth.
Understood, sir. Understood. Thank you, sir, for all this.
Thank you. The next question is from the line of Govindarajan C from CSIM. Please go ahead.
Yeah, hi. Thank you. Thanks for taking my question. Couple of housekeeping questions to start with. In your notes to account, there is a mention of INR 15.32 crores of provision written back. Could you tell us where this is directly to the balance sheet, or it's been taken through the P&L? And if in the P&L, where is it being accounted for? That's question number one. Secondly, we see a significant increase in inventory in the first half. What is that due to? And the third question is something that which you may have answered many times, but just wanted some clarity. What is the total amount that's spent by the industry on music acquisition, film music acquisition every year?
I think you've mentioned the number of INR 700-800 crores, and you want to be 30% of that. Is this the cash outflow or is this, does this include commitments based on minimum guarantees, et cetera? Or is INR 800 crores the outflow each year that is made by the label? Yeah, these are my three questions.
So let me answer the third one, and let Pankaj take the first and second. This is the total size of the industry this year should be, of total content sold, should be more closer to INR 1,000 crore odd. INR 800 crore was the number two years back. When we are saying INR 1,000 crore, it doesn't mean thousand crore cash flow will happen. Typically, when we acquire content, especially in the on the film side, the music is the first right that any of the production house ends up selling. At that time, we just pay just a token percentage is paid to block and sign the agreement. Real cash outflows start happening out here closer to the release of the film.
But that also means that a movie that we acquired maybe in financial year 2022 or 2023, payout may have happened, actual payout may happen in financial year 2024. Though we had acquired the movie in 2023, but the movie never got released, and hence the songs were not released. So that's answer to your part, question number three.
Yeah.
I'll just take the first two questions. So on the note that you are referring to, just to highlight that this is completely in the normal course of business, wherein, you know, we take certain provision based on estimates, then we actualize that in the subsequent months or quarters. That's a good practice. We've been disclosing this now, you know, for some quarters in the past. So there is nothing as such abnormal about it. And yet it, you know, does impact P&L, as you were asking whether it is in P&L or balance sheet. That's question number one. Question number two was on the increase in inventory. So we've had, you know, a lot of films that have got released, which were actually sitting in the work in progress side. Once they get released, we account them for as inventory. That's the reason you see the inventory levels going up. No other reason.
It's fair to assume this INR 15.32 crores of write back of provision is a one-time positive impact on the profitability?
Listen, this is just a normal course of business. Something similar happened in last quarter also. We, as a company, we people are very conservative here. We take provisions here, and as the actual data keeps on coming out here, that gets reversed. I think just as good housekeeping, we have now started saying that we will start disclosing it to the market.
Okay. Okay. Thank you.
Thank you.
Thank you so much. Ladies and gentlemen, we would take that as our last question. On behalf of Emkay Global Financial Services, that concludes this conference. Thank you for joining us, and you may now disconnect your lines.
Thank you, everyone.