RPG Enterprises president and CEO (entertainment sector) and Saregama India managing director Subroto Chattopadhyay has over 26 years’ experience with companies like Unilever, PepsiCo and ITC.

Chattopadhyay, who joined RPG Enterprises in November 2005, has aggressive plans for the company going forward. The mandate is to completely reinvent themselves thus keeping pace with rapid changes in technology, market and delivery systems.

In a tête-à-tête with Businessofcinema.com, Chattopadhyay, along with Saregama India chief film production and distribution officer Madhu Mantena hold forth on the company’s plans in the music, film, digital and television space.

Excerpts:

Saregama India is a 100+ years old company. Where does the company stand in the present scenario with all the developments taking place in the Indian filmed entertainment space?
Chattopadhyay: The first thing that was staring us in our face was that we needed to completely reinvent ourselves with the change in technology, market and delivery systems.

Ours is not just a 105 year old company, but a 105 year old content rich company. We have four business verticals namely – Music, Films, Home Video and New Media. In our first business vertical – music – we used the technology to figure the inventory we had and discovered that we had 300,000 music tracks in 27 languages in every single genre. If you layer this in four developments – internet, radio, telecom companies and equipment manufacturers; we found that the opportunities were humongous.

To put things in perspective, the data which stared up in our face was that even if our share of acquisition of soundtracks was barely 10 per cent, our market share was close to 38 per cent, which goes on to show the strength of our catalogue and the consumer’s pull towards it. We found that not only Hindi film soundtracks, but in every language there was great demand when we packaged the compilation properly.

So we needed to reinvent ourselves completely. As a music company, we set up our processes internally to catalogue together and market it both in the physical and digital domain.

The second thing that we tried to figure out was why should people prefer us over others? We found three reasons – (i) our business practices have to be absolutely top gear and we have shared great relationships with Lata Mangeshkar, Subhalakshmi, Mohammad Rafi etc. These artists only worked with HMV because our conduct with them was very good. We clear royalties on the 15th of every month. It is difficult as earlier there were only cassettes and CDs and now it went on to a host of various digital formats. We are one of the few companies across the world to introduce SAP to capture the market and remain transparent.

The second was that we needed to demonstrate that we were able to market the content better. So the mandate that we gave ourselves was to move from trading in content to marketers of content and do what it takes to create preferences for the content.

Another peg of our strategy was to decentralize our operations and we are creating capabilities of not only marketing our catalogue better but also attracting artists. The move towards local relevance became critical.

The next feature of our business is that it is very important those people running the business, who know more than you. There are specialists who understand certain businesses so you need to position those and empower them and get out of their way. We are in four businesses that are all interconnected. What we did strategically is that we moved Atul Churamani, who knows artists and repertoire, to head the division.

The second part of our business is television, which is headquartered in Chennai. We have about 14 hours of television programming and we are in talks on how to take that national.

Over the last two years we went on a very intensive search for people. We were very fortunate that Madhu Mantena and BR Sharan joined us. They know the space well and are building the cinema business. Earlier, our model was to finance a project but we didn’t understand the process. The truth is that making cinema is an extremely complex business. Moreover, it’s a difficult business to be in because people make big announcements everyday but only few of them materialize.

The fourth is our digital initiative that is technology led. We are putting people in place. I do believe that we have a better chance than most to convert HMV into a destination company.

A whole lot of new players have entered the business and have aggressive plans. So how aggressive is Saregama?
Chattopadhyay: Even though there are many players in this field, we do not want to be aggressive because that is not the criteria.

Every company has its own personality. Over the last two and a half years there have been a lot of changes in the industry and there have been times when we have deliberately slowed down, not because there were problems but because we had to understand the changes.

As of now we have got three films in the pipeline. Over the two to three months we have a reasonably strong plan.

What is the mandate going forward for the different segments that the company operates in?
Chattopadhyay: For music there are three interlocking mandates. The first mandate is market your catalogue well, keep your franchise young and market it in every single format. The second is to create new content in every language and the third is trading in soundtrack.

Earlier, we were blinded by the thought that we had to do soundtrack if we needed to be in the market. But that’s hogwash. Everybody is in the business to make profits and you do a certain thing only if it makes business sense.

The mandate in television is to explore possibilities in Hindi and Bengali – in that sequence.

Saregama India’s chief creative officer BR Sharan’s primary area is cinema, though television comes naturally to him. He will be coming up with new ideas and strategies in the near future.

On the cinema front, our aim is to have a studio model. There are a lot of changes taking place, which are good for the industry. A lot of smart, educated and good people are coming into the business.

In my view, the industry will be very happy if HMV succeeds because everybody has had a long and happy relationship with us.

What according to you is lacking in the way the industry works? And how different is Saregama’s way of working?
Mantena: As an industry, we lack two things – first is that independent filmmakers have never given any importance and resources to the pre-production and development of films or the marketing and distribution. As independent producers, we have always fallen in love with an idea and converted it into a film.

As a company we want to become a destination where filmmakers can come and experience creative joy, while bringing their ideas and dreams to life. Our main idea is to support filmmakers to develop their films and ideas with adequate resources and infrastructure behind them and help them produce, market and distribute the films so that they can showcase it in the best possible way.

We are working with talented actors, directors and producers and our aim is to help and support them in the most efficient manner and bring things to life… at the same time do business too.

Could you throw some light on the budgets that you’ll have chalked out?
Mantena: The question is not about budgets; it is about the idea. We plan to do three – five films in the next one year.

There are no pre-sets regarding budgets but if we get a good concept that every Indian would like and if it is successful, then our objective is achieved because we are making films for the Indian public.

We are making small budget films like one with Rituparna Ghosh and Apurva Lakhia, and a medium budget film with Aparna Sen.

At the end of the day, it’s the filmmaker’s decision on what he wants to make. We can help to take that film to the maximum number of audiences and monetize it.

One of our strengths is that we have content in various Indian languages. Cross-cultural collaborations are something that we are looking at. We will be making films mainly in Bengali and Hindi.

Chattopadhyay: We have made some serious progress over the last few months. What we have agreed upon fundamentally for which we have got the board approval is that first determine the idea, figure out if it can be converted into a film which will connect, then decide if it can be monetized. If there is an 80-85 per cent chance of it getting monetized, then we green light the project.

We don’t mind spending Rs 60 crores for a film, which has a strong story, good star cast and director. We can breakeven by earning Rs 70 – 75 crores on that film. That’s a dramatic shift in our strategy because now we have people who can make such films.

Has this shift come because of peer pressure as most companies are making big-budget film?
Chattopadhyay: It is not like that at all. The brief I received from the chairman was to get the right people into the team. There are directors who are very good at making a Rs 40 crore film, but not a Rs 2-3 crore film and vice versa and that applies for managers also. Our team has both kinds of people. That is the difference. So between two large films, we will build a capability to do a small film.

Mantena: The market is growing so naturally the cost will go up and hence the revenues will also grow. What I am trying to say is that you may spend 40 crore on a production, spent 10% on talent and image or 80% on talent or vice versa. It really depends and differs from idea to idea. So it is the idea that makes the difference and then of course the finance depends on the concept and idea.

Are you looking at raising funds for the expansion plans that you have charted out?
Chattopadhyay: If I was to see the way we are running our business, I think we are increasingly running it in an efficient manner. The word we can use here is “professional.” They maximize revenues through more touch points, more pricing, better collection and better marketing. I think that has started happening and I am very optimistic that they will get into their stride. Three – four years down the line, the little exercise that we did with British Council might seem modest. Maybe then we will have a writer’s workshop wherein international talent will come and help us.

To answer your question, the core business will get more efficient and will therefore start generating better results. One mandate that we have given ourselves is that we won’t do something which is not sustainable… no flash in the pan, no smoozing the press and saying we are stars. It has to be a nice long haul.

Secondly, funding is not an issue here because investors are always looking for good projects and good people to execute them. Thus, money is not and has never been the constraint here. Money would be a constraint if the operating team has not been able to give a strong reason for their decisions.

Have you identified any other segments to foray in the entertainment portfolio?
Chattopadhyay: Apart from the four segments that we operate in, the other area that we are exploring is publications / magazines. One of the challenges that we are facing is how to market and monetize a large scale of tracks and organize big budget films that could be a landmark films.

If we could get 2 – 3 good projects, which can keep the business growing then take a step forward and create a movie which will be a landmark movie. Our focus for the next two quarters will be on content.

Are there any plans to list on any international exchange?
Chattopadhyay: Let me put it this way, the sources of funding are multiple. We were the first corporate in the Indian entertainment space to list in 1964. It’s not just a valuation game for us.

In the music business wherein you have a huge catalogue, how aggressive are you in acquiring music rights for new movies?
Chattopadhyay: Everyone knew that we were desperate for content and in that desperation, one tends to buy high and you can’t sell. Moreover, we write off our acquisitions in the same fiscal and hence it becomes very difficult. We would like to partner with companies in order to understand things better and figure out how much money we make out of it and then collaborate.

On the digital front, the Saregama website has been in the development stage for a long time now. What’s the status on that and when is the formal launch likely to happen?
Chattopadhyay: The website is ready. What we didn’t realize that there is something called meta data, wherein there are 22 fields for each song comprising the name of the lyricist, music director, etc. We have a total of 300,000 tracks. When we loaded the songs, the people feeding in the meta tags spelt artists’ names in 30 different ways! So for each song, the names of the artists have to be changed to the correct spelling. It’s a laborious, painstaking job and hence it’s taking a lot of time.

Hence we have been Beta testing it for so long.

What is the revenue model that you have outlined for digital downloads?
Chattopadhyay: There will be subscription plus advertising model.

What kind of sales do old catalogues get today?
Chattopadhyay: I would peg the revenue figure at about 78 per cent that old catalogues get even today. To give you an example, Sachin Dev Burman is the better than the best that we have today. Today, a new film’s music hardly has any shelf life. The last musical hit we had in Bollywood from a sales perspective was Kajrare from Bunty Aur Babli, which was three – four years back.

Mobile digital ring tone revenues have also being increasing, so what kind of growth are you expecting?
Chattopadhyay: We have seen a significant growth except that the percentage of revenue that we get is very low. That is something, which are in negotiations for because we believe that our content is generating more downloads and more subscribers we feel we deserve a higher share. But we are in a gentlemanly conversation with mobile operators. And if that happens, it can really help us because with that the nature of the business can change. Between digital and physical piracy, it becomes very difficult to sustain from legal content.

What are the company’s plans on the home video front?
Chattopadhyay: We have a strong association with various international studios and have good young team led by a very experienced person. The business has done rather well this fiscal. We have a good physical distribution set up.

What do you think is the future for home video market in India considering the fact that online models and legal movie downloads are coming into play? How do you see the home video sector panning out?
Chattopadhyay: Physical sales are under pressure. The truth is that if content cannot be monetized, then how do you make a half a billion dollar film? If everybody says give it to me free, then either the likes of P&G and Unilever are paying for it through advertising, which is not happening in this field as yet. I can’t see FMCGs, banks and liquor companies pumping in that kind of money into cinema.

What about the Indian entertainment industry as a whole?
Chattopadhyay: I am of the view that what is going to happen over the next few years in the Indian entertainment industry, is very similar to where the financial sector was in the 80s. It is getting professionalized. Suddenly you find many men and women want to be a part of the industry and if that happens you will find the whole thing changing because across the table you’re talking to someone who understands. If that happens, a lot would change.

Today, my peers at radio stations tell me that they won’t pay for the content. I tell them ok don’t pay me but tomorrow when they will start making movies, the others won’t pay them for their content. This something that people need to understand. This is the crux and they need to understand that in order to create content, we need to pay for it, otherwise we won’t have content.

In the last two years typically the industry has seen a sea change in the way things function. And it is a welcome change.

What is your vision for the company couple of years down the line?
Chattopadhyay: I would like it to be the Infosys of the entertainment industry.

We have the stories and you cannot make a Mahabharat for Rs 5 crores. The moment you make it in that budget, you’re ruining it. We have so many characters in India like Panchatantra, which are universally appealing stories.

My other dream is to create 30 – 40 outstanding world class managers who are great in the entertainment industry whether it is in the radio, music, cinema or production field.