The year 2020 was tumultuous for the entire world. The impact of COVID-19 pandemic andits aftermath are likely to be felt by most of us for many years. Yet upheavals bringtheir own set of positive and negative factors. The COVID-induced lockdown introduced newbehavioural patterns such as Work From Home (WFH) that have actually been beneficial forthe global music industry.
The current government headed by our Honourable Prime Minister Shri Narendra Modi hasboldly faced this unprecedented crisis and its management of the COVID crisis and theongoing vaccination programme for a population of this scale has been commendable. Thegovernment's stated intent to foster growth of the private sector will benefit allenterprises.
According to the International Federation of the Phonographic Industry (IFPI) whichrepresents the recording industry worldwide the global music industry grew 7.4 per centin 2020. It was driven by a 18.5 per cent growth in subscription revenue which nowaccounts for 46 per cent of revenue for music labels globally. Overall streamingcontributes 62 per cent of the total revenue pie for music labels globally.
We observed that short form content based new social media platforms like Tik Tokwhich offer a mix of music lip sync videos and micro-video content - have built businessmodels centred around music. New use cases are being created for music in social media.
According to EY's Media and Entertainment Report 2021 the Indian music industry whichis advertising-driven remained unchanged in 2020. The hard lockdowns required to controlthe spread of COVID-19 caused equally sharp cutbacks in advertising expenditure of allmajor advertisers but the growth in digital advertising supported the Music Industry.
Your Company registered a 7.55 per cent decline in music revenues due to a mix ofreasons including cancellation and ban on events post lock down timing of contractrenewal and some contract-specific clauses which delayed booking of revenues.
The external environment was challenging but we continued to focus on aspects ofbusiness within our control viz; new recordings and releases signing up artistsrecreation of old songs improving marketing efficiencies evaluating new opportunitiespresented by short format content and usage of music on social media platforms.
Tips Industries Limited is at a watershed moment in its evolution. This year yourBoard of Directors decided to separate the film and music businesses into independentcompanies so that each business can independently chart and execute its strategy andattract like-minded investors. At this juncture as we look into a future of expandingopportunities I would like to reflect on our journey so far.
My father Shri Sadhuram Taurani belonged to a middle-class joint family consisting ofhis parents his wife two brothers and five sisters all residing in Karachi in unifiedIndia. In 1946 at the time of India's Partition they left all their belongings and cameto Mumbai where they rented a house in Dadar. Luckily the Government soon announced someaid for people compelled to relocate from those provinces and my father received Rs. 6000as aid. He used Rs. 3000 to buy a shop in Colaba and started a grocery store with hisyounger brother. There wasn't enough money to stock goods or create an inventory. Neitherconnections nor business track record was available to help access credit. Fearing thatcustomers would not come to a sparsely stocked store he relied on his wits and stockedthe shop with goods that he could buy and filled up the rest of the store with emptycontainers and boxes to create an impression of a well-stocked store. The store was asuccess and soon turned very profitable as my father focused on selling food itemsconsumed by the Sindhi community which were not easily available with other grocers.
A few years later my father bought another shop Jai Hind Electronics in NavjivanSociety on Lamington Road and started to sell electronics watches clocks etc. It was amiddling enterprise. My father's youngest brother managed this business.
When I was around 18-19 years old my younger brother Ramesh and I were asked to learnthe business under him. We visited the shop but looked forward to weekends when both of uswould spend the entire weekend watching movies. Our goal was to watch every movie that wasreleased that weekend. Our elders didn't approve of this but we persisted.
We got an opportunity to become dealers of HMV. Since the electronics business was notvery profitable we started selling music records. In a few years we also got dealershipsof Polydor - Music India CBS and other leading music labels of that time. Soon we werethe largest distributors of music records in the western region.
2. Music Label
In the 1980s we were still a joint family. In a division of assets our grocery storeat Colaba was given to one of my uncles in 1982. My father and his youngest brother nowdepended on the records business. All the leading labels had launched music cassettesduring this time and we got dealerships to start selling cassettes in the Indian market.
In 1985 we bought another shop on the busiest part of Lamington Road PanchamElectronics. Between Jai Hind Electronics and Pancham Electronics we got dealerships fromall major music labels of that time to sell cassettes too.
As we gained an understanding of the records business we realised that recording musicwas more profitable than selling music records and cassettes. So we started recordingbhajans and songs by small artistes in Hindi Sindhi and Marathi languages under the labelTIPS which was owned by our Company R.K. Electronics. Our music label was TIPS whichstands for 'To Introduce Promising Singers'.
In 1986 in yet another division of assets our shop Pancham Electronics along withthe music dealerships was handed over to our uncle. My father had retired and my brotherand I retained Jai Hind Electronics and our Company R. K. Electronics along with the musiclabel and the music rights that we had created. Ramesh and I worked very hard in thisbusiness.
In 1988 we launched another Company Tips Cassettes and Records Company to acquirefilm music rights and sell film music cassettes under the TIPS label.
Gunahon Ka Devta released in 1990 was the first film whose music rights were acquiredby TIPS. We subsequently acquired the music rights of four more films; Elaan-E-Jung(1989) Chor Pe Mor Kahan Hai Kanoon (1989) Bungalow No. 666 which were all musicalflops.
We remained undeterred and we tried to gather insights from our distribution businesson consumer taste and preferences for music. We also used this experience to fine-tune ourunderstanding of pricing music rights.
In 1992-93 we merged R. K. Electronics and Tips Cassettes and Records Company.
3. Growth Phase
Salman Khan starrer Pathar Ke Phool was our first superhit and we sold 3 millioncassettes. In the very same year music of Phool Aur Kaante became a blockbuster hit. Itsmusic remained popular until the era of cassettes and CDs ended. Cumulatively we wouldhave sold over 20 million cassettes and CDs of this film's music.
As the music distribution business grew the cost of acquiring rights also went up.Ramesh and I focused on acquiring music rights and poured every spare penny into IPR. Weopted not to purchase larger houses or more cars or redecorate our homes. We simply keptinvesting every rupee into music rights.
The music business was booming and we were recovering anywhere between 30 per cent and300 per cent of the cost of producing a film simply by selling its music. So in 1993 wedecided to produce films in a bid to gather more music rights cheaply. Given theeconomics of that time we felt it was a risk worth taking.
We had no experience in the craft of filmmaking. So we partnered with other filmproducers. Our first film Coolie No.1 was coproduced with Mr. Vashu Bhagnani's PoojaFilms. We probably sold over four million cassettes and CDs of Coolie No.1's music. Ournext film Raja Hindustani was also a co-production with Ali and Karim Morani and BuntySoorma. The film and its music were both blockbusters and we would have sold over tenmillion cassettes within twelve months of the film's release. Similarly we co-producedHaqeeqat with N R Pachisia Jeet with Sajid Nadiadwala and Beqabu with N Chandra.
Having gained some experience in film production we decided to produce filmsindependently. our first independent production was Auzaar.
By this time TIPS had become the leading music company in India. We started raisingprices. Cassette prices went up from Rs 20 to Rs 55 over a period of time. The rest of theindustry followed TIPS on pricing.
By virtue of independent recordings acquiring film rights and producing films on ourown we had become the largest acquirer of music rights in India. The period from 1988 to1997 was one of uninterrupted growth. We had announced simultaneous production of tenfilms. Soon six movies were on the floor and we had signed up actors for the other fourmovies.
Life never moves in a straight line
In 1997 my brother Ramesh was falsely implicated in the Gulshan Kumar case.Thankfully the sessions court acquitted him in 2002 and the Bombay High Court upheld thatdecision and acquitted him in July 2021 closing this chapter finally. After a very longtime our family can be at peace.
In retrospect however when the news broke out in 1997 we found ourselves in adilemma. On one hand we had six movies on the floor requiring capital influsion every dayand on the other hand all our financiers were insisting on return of their capital. Thosewere extremely trying times for the business and the family as well.
I met all our financiers and explained the situation to them. I assured them about thereturn of their capital and convinced them to give us six months time to start therepayments.
We took stock of the various productions and ranked them on the basis of completion.The movie which was nearest to completion was prioritised for providing additionalcapital. On completion we sold the film and used the proceeds to partly repay financiersand partly for completion of the next film. We completed all six films in this manner andreleased them.
In about eight to nine months most of the external capital was repaid and within ayear all of it was paid back with full interest as per our original agreement. We did notseek any interest waivers or even lower interest rates. We repaid every single penny.
Following closely on the heels of this crisis was another; Technological Change in themusic industry. This disrupted our physical distribution business and rampant piracybrought the business to a standstill. In this era piracy technological change and achange in music preferences led to a change in the industry's business model.
I had written about these changes last year and will not repeat them here. Suffice tosay that the mobile telephony revolution revived our industry and we could see light atthe end of the tunnel.
We have always been first to embrace change and were the first music company to do alicencing deal with a Singapore-based streaming company Sound Buzz for streaming anddownloading singles and albums in 2010.
In a decade since then streaming has become the largest contributor of revenues to theindustry.
In films too the business cycle has turned with the emergence of OTT players and largecompanies like Disney+Hotstar Amazon Netflix Zee5 SonyLiv ViacomVoot and othersmaking India their focused markets.
Ups and downs are a part of life and business. We are grooming our children to followus on the same lines with the same values.
At a time when both businesses are growing strongly and will henceforth carve out ownpaths it's only natural to ask; What next? Ramesh and I cannot foretell the future butto all our stakeholders we want to say that there's lots more to come.
I thank you all for your trust and faith in TIPS. A special note of gratitude to allour stakeholders: our employees investors partners bankers and vendors.
Kumar S. Taurani
Chairman & Managing Director.