Very few corporates have their legacy rooted in innovation the way Shemaroo has. Incepted way back in 1962, the year of the Indo-China war, the Shemaroo trump card of ‘engaging content’ has come a long way, locking horns with the evolving paradigms of the entertainment market across eras: from the relatively restrained avenues of the erstwhile ‘webless’ and ‘immobile’ world to the boundless opportunities of an ever-expanding digital universe.
Sudhir Raikar, Content Architect, IIFL | Mumbai | January 20, 2017 10:50 IST
Book library, video rentals, home video, broadcast syndication, film distribution, production and restoration, phenomenal progression is a way of life for the 55-year old warhorse, Shemaroo Entertainment. Given its seamless transition into greener pastures and smart assortment of diverse businesses across media - whether Satellite channels, Physical formats, Mobile, Internet, Broadband, IPTV or DTH – Shemaroo has raised the bar for the burgeoning content creation, aggregation and distribution market in India.
Shemaroo Think Tank: Thought leadership across generations
From the flagship book library to the current day YouTube repository, the Shemaroo management has carved a niche in territory after territory on the wings of its unflinching conviction and rock-solid resolve. That’s precisely why the Shemaroo narrative of exemplary evolution is incomplete without a tribute to founder Buddhichand Maroo’s flagship book library - its ethos and essence - that continues to guide the flagbearers of Shemaroo’s current day businesses.
The Shemaroo saga: Offbeat Off-screen blockbuster
The roots of the Shemaroo’s 200-crore enterprise employing over 500 people can be traced to Buddhichand Maroo’s eternal love for books. The invigorating company of thriller bestsellers during a part-time stint at an old paper mart enthused him to incept a circulating library of his own. The dream came true in 1962, albeit on borrowed money, in Warden Road of South Mumbai (then Bombay) The name Shemaroo was an acronym of the surnames of friends-turned-partners - Gangajibhai Shethia and Buddhichand Maroo. (Subsequently, Shetias exited the business but the Maroos retained the name, presumably for the emotional connect.)
The library stocked magazines and books across genres – from detective novels, literary gems and glossy paperbacks to inspirational and self-help literature, children’s books and women-centric publications. But Buddhichand was not content with the mere sourcing and stocking (from different old paper and book marts). He travelled the extra mile, in the true spirt of a knowledge catalyst, to establish a personal bond with members – whether commoners or celebrities - based on which he would tailor the library collection to suit the needs of an ever-growing clientele from all walks of life. No wonder, the readership was also a rich assortment of the most happening people of Mumbai including industrialists, writers, journalists and film and theatre personalities. The library opened three branches in quick time.
Innovation being an integral part of the Shemaroo DNA, the family was always looking for greener pastures even though their existing business was yet in its prime years. When Video Cassette Recorders (VCR) arrived on Indian shores, people raved about these incredible ‘fairy-tale machines’ that magically sucked in a cassette to play a film or recorded programme just like a tape recorder played audio. But the Maroos saw an irresistible business opportunity in the technology, beyond the wonderment. The Shemaroo Home Library, brainchild of younger brother Raman, who had seen an exhibition demo en route a business trip to Cologne, began life in 1976 with an inventory of 20 cassettes. With VCR technology in its formative stage in India and the then prevalent Licence Raj regime which made imports impossible, cassette production was itself a limiting factor. But the brothers worked around this supply-side constraint with yet another Shemaroo brainwave. They initially borrowed cassettes from different affluent business families, who had their own personal collections, and circulated the stock-in-trade, routing it from one family to another for a fee. This way, each family enjoyed a steady fare of new arrivals without having to own them. Subsequently, the Maroo family also acquired a few cassettes on their trips abroad. In due course, the library had over 3000 members relishing thousands of titles. The VCR market was by now at a tipping point, and with scores of nondescript libraries cropping up in every nook and corner of the country’s cities and towns, Shemaroo set its eyes on a new goal: creating an in-house video label.
A heart-to-heart conversation at a film gathering, with the nephew of noted filmmaker Raj Khosla, proved the turning point. Convinced of the value prop of Raman Maroo’s proposition, the Khoslas sold the rights of many a blockbuster film from their stable. Memorable hits like Mera Gaon Mera Desh and Do Raaste entered the video market under the Shemaroo banner. The film library swelled with time and effort and today Shemaroo’s content library has over 3400 titles across different genres.
In the nineties, spurred by Dr. Manmohan Singh’s liberalization drive, the private TV channel industry took off and the Shemaroo family was keen to mark its presence in this space too. While exploring a deal to buy films of Sony’s Columbia Tristar, the Maroo brothers ended up taking an equity stake in Sony’s Indian TV channel. Raman’s experience as the channel’s director came handy for a ringside view of India’s entertainment dynamic and later paved the way for Shemaroo’s debut into filmmaking.
Even a cursory glance at the Shemaroo graph makes it evident that innovation is at the core of their business. Working around problems, going beyond constraints and looking at the larger picture is ingrained into the management vision, mission and values. Today, the firm’s digital initiatives are being spearheaded by Buddhichand’s son Jai Maroo and maternal nephew Hiren Gada. Although they are locking horns with a new set of challenges and opportunities, the rock-solid Shemaroo business sense is intact. So is the zest and zeal to conquer new frontiers.
The Road Ahead
Shemaroo’s new media initiatives, at this juncture, constitute less than 20 per cent of total revenues. Bulk of the contribution comes from content aggregation and distribution while the home entertainment segment fetches a small slice. But given the company’s track record of making smart inroads into sunrise segments as also its rich insights into the digital space, Shemaroo’s new media business is set to scale new highs in the immediate future. The momentum should come about from one, the growing viewership on digital platforms led by high-speed internet, increased smart phone penetration and better infrastructure and two, more realizations from better view monetization and RPM rates, notwithstanding the glaring gap between India and the West in RPM rates.
On the conventional business front, India’s prominent film-centric entertainment preferences continue to spell great news for Shemaroo. Here, any meteoric rise in business opportunities seems unlikely going forward but Shemaroo should be able to maintain its competitive edge based on its impressive catalog and first-mover advantage. The future revenue mix, that would tilt in favour of new media in due course, should also improve margins and enhance asset utilization due to the inherent rewards of the digital turf.
Going forward in the digital-led era, Shemaroo would have to constantly strike a judicious balance between the tranquillity of balance sheet stability and the traction of library ramp up. Given the dynamic nature of opportunities on both sides – on one end, the graph of new media topline revenues and on the other, acquisition of compelling content to enhance the content bank - deciding the cut off for tapering the ongoing investment spree would obviously be a tight rope walk. But given the management’s overall prudence as also the practice of cautiously weighing each proposition for the cost and benefit, we strongly believe they will achieve the golden mean with resounding conviction, if not immediately strike gold. After all, it’s the management’s far-sightedness that has placed it in a comfortable position on the debt front with enough leeway for making more investments, if an opportunity should arise, and more importantly devoid of any undue FCF worries unlike what many analysts would like to believe.
Already the Shemaroo digital strides are quite impressive, especially the traction on their YouTube channels (although the revenue contribution is currently way less than what the Telco traction contributes). The Shemaroo creative value-add in this space is superlative. A case in point is their channel Retro Diaries which recalls Hindi film classics like Taxi Driver, Pakeezah and Do Bigha Zameen for a contemporary audience - a voiceover-led neat summary, rich in style and substance, highlights the timelessness of handpicked films of the bygone era for the benefit of today’s youth. This initiative makes Shemaroo a high-minded cultural ambassador on behalf of the entire film fraternity, an edge that goes beyond the triumph of mere numbers linked with views and clicks. Going forward, this value-add should motivate yester year film producers to grant perpetual rights to Shemaroo for their creations, especially when they face the looming threat of shelf-life expiry and given Shemaroo’s command over second and subsequent revenue cycles of content distribution.
Having said that, one feels the Shemaroo team needs to articulate its value prop more effectively, especially for the benefit of a global audience. The YouTube channels demand a better preface introducing the Shemaroo universe at a glance, where the conviction behind each channel needs to be elaborated, more than a mere mention of number of hits. Ditto for the Shemaroo website which hardly conveys the distinctive features of the Shemaroo DNA. This is one area where the staple Shemaroo obsession with caution could prove counterproductive.
Many PEs/VCs still regard Shemaroo as only a catalog library even though it has travelled many a mile to become a wholesome content creator and provider across media with credible presence even in tech-centric areas like animation and restoration. In the quality time and attention to the repackaging of Bollywood content, the Shemaroo team seems to have inadvertently kept the packaging of their core value content on the backburner. After all, founder Buddhichand’s Midas touch is their most crucial intangible asset of undeniably tangible gains. The founding story deserves better packaging, rather than leaving it solely to the media to rehash the Shemaroo lineage saga from time to time.
The Shemaroo conviction, as expressed in impromptu management conversations, is way more powerful and reassuring than what the web content conveys. And articulation doesn’t mean telling the whole story unlike what most managements believe. A smart gist of the past, present and future should suffice. Shemaroo, given its wealth of content, has the potential to become the most definitive encyclopaedia on India-stamped entertainment – film as well as non-film. For overseas communication & entertainment players keen to make quick inroads into India, Shemaroo can offer an India-advisory service ahead of collaborating with them.
Shemaroo’s most distinctive value prop is undoubtedly the management’s vision and values, which in IT terminology is much like the Microservices Approach to Solution Architecture, of not replacing the monolith by a new structure overnight, rather testing out new waters in smaller, parallel silos and launching new initiatives in incremental fashion, and once convinced of the overall cost-benefit at a portfolio level, focusing on the new pursuit, mitigating risks to the extent possible and working around challenges and constraints aided by lateral thinking. Hiren Gada, whole-time director and CFO, Shemaroo Entertainment in conversation with IIFL’s Sudhir Raikar.
How has the entertainment industry evolved over the years?
The vehicles of delivery have changed, not the need for quality content. Content is timeless across eras, more so in the entertainment space. In the bygone era, film watching was a rare privilege for most households. Our home video service served the demand of the time admirably well, enabling one to watch one’s favourite movies from the comforts of the living room. In stark contrast, today one has the luxury of the proverbial remote to sift through scores of serials, films and entertainment programs being aired on different channels at any point of time.
The entertainment market in India is very different from that of the developed countries. Notwithstanding the fact that India has a thriving film and music industry, RPUs in India are very low as compared to US. So, despite the plethora of conventional and new media platforms on the supply side, India is still largely an underserved market. At the same time, demographics and a predominantly young population are India’s biggest strengths. So the scope for market expansion is huge.
Thanks to our creative team’s acumen and alacrity, we have repackaged our vintage content to suit the demands of the digital generation. A case in point is our 15-minute movie segment, an astutely condensed version of a regular three-hour movie, in line with the tastes and preferences of the YouTube fraternity. It offers them a delightful peak into the film’s plot which more than keeping them glued, motivates them to watch the whole film. So, in more ways than one, we are reviving the charm of a vintage movie for the youth of today.
Has the new media changed the demand-supply equation of entertainment?
The enabling role of technology is undeniable. With technology, access to various forms of entertainment is now easier, faster and better, be it broadcast via satellite, cable or terrestrial mode. In the personal consumption space, video cassettes made way for physical media which in turn is migrating to the digital regime. The prevalent trend is in favour of internet-based and mobile-based platforms. But content is still the king. After all, our YouTube are not because of the ease of access, it’s primarily due to the quality of our content, the value-adds we etch it with. Technology enriches the recall value by facilitating any time access and repeat viewing at will. For us, content and tech always go hand in hand.
Having said that, certain realities of today can’t be overlooked. Today’s households, middle class in particular, have a default ‘second-best’ alternative screen in their form of their cell phones. Invariably, the living room TV screen is switched on and off depending on the preferences of a select, mostly elderly, group – either by housewives for their regular Saas-Bahu fare or by the male members for their daily dose of news, sports and action spectacles. So, the younger folks of the family invariably look up to the ever-obliging cell phone as their most reliable source of entertainment – which is more user-friendly, delightfully mobile and ripe with downloadable variety entertainment. This household factor has changed the very dynamic of the entertainment industry and almost all the providers and via media players are vying for a share of this pie.
So, digital is the way to go for you?
Absolutely. Our acknowledgement in favour of this vibrant platform came way back in 2007. Given the nature of business, of owning and aggregating content, digital was a natural evolution for us. So, we tied up with a few regional players of the music and audio space for supply of ringtones, mobile radio and song downloads in as many as 20 languages. We also digitised our film library and made it compatible and accessible across different formats.
Our digital strategy is broad-based. We are not just thinking of films here but even special interest productions. The whole idea is to build sustainable revenue streams. That explains our premium DTH offerings – based on themes like fitness, health and self-help - running on channels like Tata Sky, Airtel and Dish TV. Besides, we have the refurbished library content of films and TV serials that become our additional monetization mechanisms.
Having said that, our digital focus in no way implies the end of the home video segment. The demand for home video is still alive, what’s changed is only the format of delivery. Given the higher price tag and susceptibility to piracy, the physical format is no longer feasible. Digital makes the whole process efficient and secure. Hence the thrust on moving to digital as fast as possible.
What’s your take on the competitive landscape of today?
We have minimised the risk window through our focus on re-issue segment, steering clear of new film arena. Besides, we put in a lot of thought in the choice of films. The enduring nature of the product – say a film like Amar Akbar Anthony – itself creates sustainable demand. Talking of competition, we see one strong contender in the producer fraternity but having said that, it’s difficult to make quick inroads into this sector especially when you have no experience of the space. The production houses are focused on theatrical distribution where we have no presence. Content distribution is our forte.
What about your home productions?
We are distributors first and then producers. Of course, we’ll selectively look at opportunities for film production but we are focused on the special interest non-film segments given the healthy demand for such products.
Has the ongoing data volume slowdown in the telecom space affected your new media prospects?
Notwithstanding a minor slowdown in data volume in the telecom space in the recent few months, the video content consumption has been steadily increasing. In the developed countries, video based consumption is substantially higher as compared to India. The important aspect in India is that the overall trend of data consumption is still on an upward path and most drivers for this continued momentum are strongly intact. The current trends like wider acceptance of 3G & 4G, introduction of competitive data plans by telecom operators in the wake of Jio launch, improving broadband connectivity, surge in affordable smartphones sales, etc. are bound to increase the demand for video consumption.
In the new media, bandwidth issues are the biggest challenge. With time the cost of bandwidth is reducing and so even a normal consumer enjoys higher bandwidth. This is also one of the reasons why consumption of entertainment on the online platform is gaining popularity. Also, with better streaming solutions and increasing Internet penetration in India, bandwidth is no longer a constraint.
Managing a good creative product at a reasonable cost is a challenge these days. As we see it, video consumption gets a boost with bandwidth growth. Hence a delay in the rollout of 4G in India could be a challenge.
Which platform(s) among mobile, DTH and TV have proved more productive, both in terms of revenue and brand visibility?
Shemaroo is technology and platform agnostic. Our business model is based on content monetization across multiple platforms. In this context, our business growth would be linked to the scale of the respective platforms. We have presence/relationships across the ecosystem. We are partners to most of the services/platforms due to our content strength and industry experience. At this point, television is one platform with maximum scale and reach in the M&E space; Consequently, even for us, TV remains one of the biggest contributors of revenue.
Could you brief us on the status of your initiative to create a self-regulatory code of conduct which is critical to your industry.
This initiative is currently work-in-progress and with respect to time span, it is medium to long term in nature. I acknowledge piracy is an issue for entire Bollywood.
What’s the thought behind your Bollywood-theme merchandise initiative Yedaz?
Globally, Licensing & Merchandising (L & M) is a huge space and a major source of revenue for content owners. However, in India, the L&M business is currently at a very nascent stage and only serves as an auxiliary source of revenue. Bollywood has a strong consumer and emotional connect in India. Shemaroo has a large library of content (including movie dialogues, songs and characters) which appeals to various age categories. So, we are trying to leverage on an existing content asset under the umbrella of ‘Yedaz’. This is our experiment in the L&M space with minimal capital investments.