Tips Industries — Music to the Ears After a Long Dry Lullaby

  1. Share of Ad-revenue on streams
  2. Payout on paid subscriptions
  • Low Base on Paid Consumers: Out of the ~200 million streamers of music in India, less than 1% are paid subscribers. This number is around 8–10% in the global markets and poised to grow. We have all witnessed how people around us are paying for subscription services like Netflix, Sony Liv, Hotstar etc. This is a positive trend as it indicates that users are willing to pay for great content.
  • Demographic Advantage: India has a favourable demographic advantage since more than 65% of the population is less than 35 years old. This is the age group that is most exposed to streaming services. As India grows economically with more connected users, the music industry is poised to benefit as new users are added to the streaming universe.
  1. Tips has a catalogue of 29,000 songs and will be 100% licensing.
  2. Tips is pure play music streaming after demerger. Tips management has confirmed that the Company is demerging the films business from the main business. This means that going forward, all of Tips’ revenues will come from the Music business only which has reported incredible numbers in the recent past
  3. For TIPS, the return on capital employed (ROCE) in the music business has been in excess of 100% for the past few years. It is the ROCE from the films business that has been pulling the numbers down for the company.
  4. Saregama is still dependent on producing films and selling Caravan which has been a flat source of revenue for the past couple of years with demand being erratic due to Covid. The management is rigid that they can maintain and grow revenues from the two divisions. Hence, TIPS with its pure-play focus on music offers a more lucrative risk to reward ratio as compared to Saregama in the near term post its merger.
  1. In the entertainment industry, distribution plays a huge role. Music in our country is still popularised by Films and they prefer to sign with record labels as opposed to individual artists.
  2. New artists are eager to get on the bandwagon of record labels since these labels handle the marketing, distribution and appearances of the artist as well.

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