Tuesday, 5 July 2011

What’s behind the weaving of a film song in the storyboard of an advertisement? – Part 3

FICCI Frames held every year in Mumbai, India during the last week of March, is the biggest convention of Media and Entertainment in South Asia, attracting speakers and delegates from across the globe in the domain of M&E. Apart from the opportunity to listen and network with some of the brightest and biggest minds in the Media and Entertainment space (not to mention sumptuous lunches and cocktails), my biggest takeaway from the event is the FICCI-KPMG Indian Media and Entertainment Industry Report. Structured into different segments of Print, Radio, Television etc. it’s a must read for anyone related to the Media and Entertainment Industry in India.
Off late, I’ve tried to squeeze time to go through the latest report of 2011 (182 pages) and was naturally interested in the segment devoted to the music industry. It validates that the music industry is moving towards digital distribution of content and digital distribution overtaking physical (CD / Tapes) distribution of music. Split of revenues from different sources such as Physical, Digital, Radio &Television and Public Performance.
However what I expected to see from a detailed treatment of an Industry was how much the synchronization licenses contribute towards the kitty of a music label. Lack of detail on this aspect in the report could have been because of the accounting treatment of such revenues by the music label and how it is clubbed with other sources of revenues in the books of account.
For the readers of this post, I’ll try to provide some numbers that’ll help you to make some guestimates.
Typically a music label can charge anything from INR 50,000/- to INR 10,00,000/- for a synchronization license, depending upon the elements required by the advertising agency, such as media vehicles, campaign duration etc.
Depending upon the catalogue of the music label (catalogue equivalent to the album / titles / singles owned by the music label), the music label can strive to cut a bare minimum of four such deals in a year. Assuming that the average deal size is INR 2, 50,000/-, annual revenues on account of synchronization license can be INR 1 million. Assuming there are more than 200 music labels in India with  around 50 music labels having a good catalogue of over 100 titles, the cumulative revenues for each of the 50 music labels will be INR 1 million * 50 labels = 50 million = INR 0.05 billion. This is 10% of the public performance revenues earned by the music companies. As per FICCI KPMG Indian Media and Entertainment Industry Report 2011, Public Performance contributed 0.5 billion to the kitty of the music companies in the year 2010.
However these two sources of revenue flow are not correlated, but yes in terms of profitability and overhead costs, synchronization license as a revenue source is a winner to me. Now if the question is, how the music companies increase revenues from the grant of synchronization license? Well this will be covered in one of my next post.
As always, I will request the readers of this post if you have time, please drop a line.

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