Saregama India Ltd.: Striking a Digital Chord
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Case Code: BSTR237 Case Length: 21 Pages Period: 1986-2006 Pub Date: 2006 Teaching Note: Not Available |
Price: Rs.300 Organization: Saregama India Ltd. Industry: Media and Entertainment Countries: India Themes: - |
Abstract Case Intro 1 Case Intro 2 Excerpts
Excerpts
The Cassette Revolution
Audio cassettes became popular in India in the early 1980s. Their increasing popularity came as a rude jolt to GCIL because the company had invested heavily in record manufacturing facilities and could not build capacity in the new technology as swiftly as it might have wanted to. By the mid-1980s, the audio cassette revolution had swept through India and close to 95% of music sales were in the cassette format. These developments resulted in a worsening of GCIL's financial position. A drastic drop in record sales, discounts given to dealers, and low realizations because of lowering of prices pushed the company to losses. This period also saw the emergence of intense competition in the industry. Several big and small cassette manufacturers/recording studios mushroomed in every corner of the country. Most of the small players, numbering 500 by some estimates, sold cassettes made with smuggled components. They successfully sold folk, devotional, and film songs in the local languages, genres almost completely ignored by GCIL...
RPG Acquires GCIL
In The RPG Group acquired a major part of EMI's stake in GCIL in 1985 (Refer Exhibit V for the companies in the RPG group). It also took control over the management of GCIL. GCIL was a cash-starved company when it came into the fold of the RPG Group. In 1988, the RPG Group acquired the brand rights of HMV in India for a period of 10 years. By 1994-95, the RPG group was able to steer the company back to profitability. During this period, the RPG Group also set up Music World retail outlets across major cities in the country...
The Early 2000s
Compact Discs or CDs began to gain popularity in India in the early 1990s. In the early years, a single CD (of Hindi film songs) sold for around Rs. 350 ¾ a price which put it out of the reach of the majority of Indians. However, with time, some of the players, especially SCI, expanded their CD production capacities. SIL seemed to have missed the bus again, concentrating on the manufacture of cassettes instead of CDs. Yet, the management seemed to be quite happy with the state of affairs...
The Turnaround
In April 2001, SIL engaged the services of McKinsey & Co to undertake a 'growth study' to devise a growth strategy so that SIL not only maintained its eminence in the Indian music industry but also improved its profitability and prepared itself for future opportunities. The study began in June 2001 and the report was submitted in October 2001. What was later referred to as the 'turnaround strategy' consisted of several components.
The turnaround strategy involved:
Improving the distribution aspects of the business: SIL tied up with a Singapore-based logistics firm, which advised it on the reorganization of its distribution network. This involved the creation of eight regional distribution centers (RDC) to take care of the stocking and supply of cassettes and CDs...
Digitally Yours
Digital music in the form of MP3 files became available in India through music sharing websites in the late 1990s and 2000s. With the popularity of such websites, music piracy became commonplace. It was observed that, more than any other group, youngsters in the age group of 15-24 were active in downloading songs illegally. And because more than others, it was people in this age group that listened to and purchased music, the music companies experienced a remarkable downtrend in physical music sales...
Outlook
SIL was a dominant player in the Indian music industry, where the sheer size and popularity of its repertoire of songs gave the company a clear advantage over its competitors. "HMV (SIL) is a unique company. We are actually a trustee of Indian musical heritage. We have musical tracks in as many as 23 languages and in every genre of music. They have regional and national relevance," said, Subroto Chattopadhyay, managing director, SIL. Apart from the core business of music, the other businesses too showed promise...
Exhibits
Exhibit I: The Gramophone
Exhibit II: EMI Records Ltd.
Exhibit III: The Indian Music Industry
Exhibit IV: Categories in Indian Music
Exhibit V: Companies in the RPG Group
Exhibit VI: Cassette and CD Sales in India
Exhibit VII: Saregama India Ltd.'s Financials
Exhibit VIII: Subsidiaries of SIL
Exhibit IX: Some Popular Music Albums from SIL in the 2000s
Exhibit X: MP3 and Digital Music
Exhibit XI: Hamaracd.com: A List of Categories
Exhibit XII: The Value Chain in the Music Industry
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