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Date:24 May 2009 |
Compiled by Mr. M. Sathya Kumar |
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Jai Maroo - Shemaro
Entertainment He is a second-generation
entrepreneur in a company that has been in the business of bringing Hindi
cinema to the Indian households for decades. Jai talks to DARE about his
entrepreneurial journey, and shares his knowledge about business in
entertainment industry. Can
you begin with telling us about Shemaroo in brief? I would
love to talk about it, because lot of people do not know everything about
Shemaroo as all of it is not visible.
The company
was started by my father Buddhichand H. Maroo way back in 1962 and was later
joined by his brothers (my uncles) Atul Maru and Raman Maroo. It was at first
a partnership with the Shethia’s. That is how
the name Shemaroo came into being. Subsequently, we bought out their interest in
the company, but we retained the name because it was already well- known. Shemaroo
was started as a book circulating library, and then moved on to become one of
India’s very first video libraries. That was the heyday of
VHS. Gradually, my uncle suggested that it is not only about video
distribution, but that the real play is in content. Hence, we evolved
ourselves as we saw other emerging platforms. For instance, we positioned
ourselves for cable when the boom happened, and grew in that. Similarly, we
positioned ourselves for satellite and we grew with that. As a result of
which we got into the still ongoing joint venture with Sony Entertainment
Television, India. We
basically positioned ourselves as the people who can make content available
on any platform. We are known mostly for videos as VHS/VCD/DVD have always
actually been available to consumers. However, we are also one of the largest
suppliers on other platforms – terrestrial television,
cable television, satellite television, and so on, which is not obvious or visible
to the consumer, but is still a huge business for us. Just for instance, not
many people realize that many movies being broadcast on Sony Entertainment
Television have actually come from or via Shemaroo. Besides this, we have created
our own technical capabilities such as our own post-production facility,
where we can manipulate, enhance, digitize, and convert content to master
DVDs and more. Now, of
course, we are moving forward to newer platforms such as mobile phones,
Internet, IPTV, etc. Also, we have ventured into creation of content in last
four years. We have got into films, including mainstream cinema, with movies
such as Omkara and Manorama: Six Feet Under, and animated movies such as Bal
Ganesh and Ghatotkach. So that is a
gist of where we are at this point in time –
creation, aggregation, and distribution of content on multiple platforms. Why
did you work at Citrix when Shemaroo was given? Well, one
strong value distilled by my elders was to not take Shemaroo as the given.
Every member of our family has to be educated, has to get their share of work
experience, and be capable of standing on their own feet. After achieving all
this, Shemaroo was an option that could be looked at. As I was
growing up, my love was in books, movies, and technology. I fell in love with
computers at a very young age. I went on to do computer engineering in India,
and then went to the United States get my master’s degree in computer science and engineering. It is only after this
that I joined Citrix to gain experience in technology. I knew I was in the
States only to gain experience, and I came back soon after, as I knew that to
start something of my own it has to be back in India. To get acclimatized, I
spent time in Shemaroo – from the ground up,
learning about our business as well as the Indian business scenario. While I
was at this, I realized that the new direction that Shemaroo needed to head,
which was highly technology-driven, was a perfect fit with my background.
Therefore, it was logical that rather than to create a completely different
venture, I should treat it as an extension of Shemaroo. So, that is how it
all happened for me. The
entertainment business is full of huge egos and black money. How does an
organization do business in such a mix? The fact
that we have been in this business for several decades helps a lot. We are
reaping the benefits of the very strong relationships in the industry that
our senior had established in their time. As far as handling egos is
concerned, it is like any other relationship – trust
helps a lot. In an industry that is not known for maintaining transparency, our
values have always been maintaining transparency and building trust. Because
of our decades of clean dealing, producers not only give us a chance for
business, but even come back to do more business. For instance, many
producers are skeptical about new platforms that are emerging fast. However,
our relationship with them has been strong all the way, and they trust us for
not misrepresenting them. As far as
the black money angle is concerned, I think that has changed a lot now in the
last decade. For instance, a lot of corporate organizations are entering this
business, an industry status has been accorded to it, and banks are also
getting involved, etc. We at Shemaroo have always been transparent about the
business we do. There was a point in time when we were one of the highest tax
payers in our segment. The fact that you are clear of all such activities,
such as the black money aspect, helps you a lot in partnering easily with
international companies and hence scale up. Video
library, film making, animation, post-production... how much time and effort
do you spend on each? Why? Shemaroo
has a strategic business unit kind of a structure, where each vertical has
couple of key people heading them. It is not an owner-only company; we have a
good team that we believe in. Therefore, we do not micromanage the business.
We leave the team to do what they know best, and we only focus on the
results. Over a period of time, we have managed to get some really great
people, who are pretty much entrepreneurs in their own right, for running
their respective businesses with a feeling of ownership. There are a couple
of verticals where people have been with us for more than 20 to 25 years now. From a
macro perspective, I focus on new initiatives. Early on, even when I started
to take on more responsibilities, it was made very clear to me by my uncles
that there were the existing verticals that were well-established. The need
of the hour was to have someone look at the plethora of emerging platforms
and dig for opportunities in them. It also gets me involved in finding the
right people and work with them till they developed a free hand to run the
unit, and then I moved on to the next initiative. New
initiatives are not just in platforms, but also in expanding our range. For
years we were known for our Hindi content (movies and serials). Over time we
have expanded our portfolio by bringing in a lot of regional content. We have
one of the largest collections of Gujarati plays, Punjabi telefilms, etc. We
have also expanded our category into health and wellness. Our bestselling recent
products include Shilpa’s Yoga, Talks of Osho, Deepak
Chopra, etc. We have got into edutainment, world cinema, and more. We have,
in fact, even expanded from plain content into value-added services for the
mobile platform. The way I see it, within content we have expanded our range
into many types of content. We have also expanded our range of platforms on
which the content goes. What was the strategy of
transition taking it from VHS to VCD to DVD to post-production to movie
making to mobile and IPTV platforms? One of the
challenges in general was dealing with the life-cycle of these mediums. For
example, in the mid-90s when VHS died completely, it took several years
before VCD could take off. One thing that has always worked for us is that we
realize it is not about being in a single medium of distribution or a single
platform. The days when VHS went down were actually the days when satellite
and cable was doing really well. This has helped us ride through the rough
patches. Because if one platform is not doing well, there is always another
that is doing great. This strategy has really worked well for us.
In terms of
the format itself, like with any new format there is always a chicken and egg
situation. You want to invest, bring the content out there, and make it
available to the consumers. At the same time, you have to deal with the
volumes not being there. Therefore, it boiled down to challenges such as how
many movies should we release, what quantities do we come out in, how to
bring the price point down at the same time, etc. For example, when we
introduced VCD in the mid-90s and actually worked with Sony to do that
initially, the price point was Rs 799 and Rs 999 for a VCD. The challenge was
to make it viable, sustain it, and then bring down the prices as the volumes
increased. Today, we are providing the same at Rs 69 and Rs 99 for regular
movies, and Rs 149 for premium movies. A similar
thing is happening with DVDs. It is only now that DVDs are getting the
volumes, with prices coming down to the level that they are at today. Again,
it took time, as people started buying DVD players but preferred buying VCDs
to play in it, mainly because of the pricing. We worked on that, and also
looked at how we can offer additional value additions in a DVD that will get
the consumer’s attention. As for
dealing with the technology changes throughout these mediums, we realized
early on that we are not in the business of selling physical tapes or
physical discs; we are in the business of selling movies. As long as that
remains the focus, the technology change impact is not that much if the
underlying medium is a VHS, VCD, DVD, or maybe Blu-ray tomorrow. But, of course,
these technology changes did call for managing and understanding the
technology as far as the manufacturing aspect was concerned. We worked
closely with many manufacturers to understand the changes better and to make
a viable business. Also, the fact that we had established our own technical
post-production facility gave us a lot of control over the quality of the
content. Just to put it clearly, from digitization up to the mastering of the
product, the process is controlled in-house. So the only step that was not
internal was the actual physical manufacturing or replication. We had to
go back to do our homework for certain aspects like packaging. But even in
that, since an audio CD was already out there in the market, we could learn
from the music industry. But more importantly, the mediums with underlying
technology changed, though fundamentally the logistics, sales network,
distribution, etc. remained the same. The team that we had in place was able
to adapt to the changing mediums. How
do you identify when it is the right time to move on from one medium to
another? It is part
instinct, part luck, and part analysis. We believe in going into any new
medium or platform early and experimenting with it. So one thing that helps
in being prepared for the right time is diversification in verticals of our
business. By understanding the emerging platforms early on gives us an edge
when the market starts to take off. The fact that we are not reliant on one
single platform for our source of revenue helps us have the luxury of making
mistakes. How
do you decide on the time to phase out a dying medium or platform? Look at
today’s scenario for instance. The VCD is still the
bulk of the business, even as the DVD is emerging as the platform that will
take its place. We foresee VCDs being here for at least the next couple of
years. The DVD has grown a lot faster in the last one year. As the DVD grows
to slowly challenge the market share of the VCD, one has to scale down the
volumes that are released for the latter, striking a balance according to the
market. That said, we have also always monitored the numbers of VHS players
being sold, and so on for VCD players, DVD players, Blu-ray players, etc. It is not
all that difficult to let go of the medium we are delivering in, because we
know that we are not exiting that business. See, we provided Mahaan – the only movie with Amitabh Bachchan in a triple role on
a VHS tape. We did that on VCD, and we are still doing that on DVD. We know
that we are just shifting from the medium while still being in the same
business of providing content. Online
DVD rental business is doing well. What is stopping you from being in that
space? It is
simply a case of priorities. Several years ago, we went back to the basics
and thought about where we wanted to take our business if we defined
ourselves loosely as an entertainment company. We actually came out with 27
business ideas. Then we decided which the mature ones were and which the
growth ones; which are the ones accessible immediately with our core
strengths and which are not, etc. We prioritized these in three phases. The
first phase was expanding the content range and the distribution verticals.
The second was businesses that were immediately related and were also key
areas. Owning content (Shemaroo owns one of the largest library of negatives)
and creating new ones was what got us into film production and animation
movies. The third priority was which platforms to be on and within those we
wanted to look beyond just being a mere content supplier. For example, in the
IPTV space we provide full content management solutions. As a part
of this prioritizing, we focused more on the immediate distribution of the
content business rather than on the end consumer touching business in some
cases. So when it comes to the DVD rental business, our idea was to partner
with the people running these businesses and facilitate that whole model.
Hence, we have a commercial video model for them. In fact, we actually work
with players such as Seventymm.com. Page 3 of 4 From
among all the verticals that you are in, where is the big money? About the
money splitting for these, it is not much of a financial decision. Obviously,
if the film production and broadcast businesses require heavy working
capitals, the largest allocation is for those businesses. The way that we ensure
that upcoming businesses do not lose focus is by having them as separate
divisions, with a separate team and resources, which are fairly
semi-independent. This helps us prioritize. How
do you deal with piracy? The way we
handle the issue of piracy is sort of a multi-prong approach. One is to
strengthen the product to make it worthwhile for the consumer to go for
original — by increasing the quality of the product, by
increasing the value-additions (behind the scenes, making of, interviews,
etc). The second is generating awareness of the benefits of original versus
pirated products, how to distinguish between them, etc. Third, we work with
the government to strengthen laws. Fourth, we have our anti-piracy team that
does market surveys and reports them to the law enforcement agencies. This is
not only at a company level, but we do this at an industry level as well. For
example, we cooperate with other labels where we inform them if we find
pirated versions of their products, and vice versa.
Last but
not the least, we work at it from a business angle, which is to say, we are
in this constant endeavor of bringing down the prices. We also work with the
movie producers to shorten the hold-back window because a lot of piracy
happens between the time the movie releases in the theaters and the time the
official VCD/DVD product comes into the market. For example, if this window
is four weeks, one needs to deal with piracy from the day of movie release in
the theater till this time. We constantly work with the producers to shorten
that window – it used to be six months, which was
brought down to three months, to eight weeks, and now there are movies that
we release one or two weeks from the theatrical release. Give
us an estimate of revenue loss due to piracy? How
do you go on about choosing the titles to distribute? What is the success
rate like? As for the
success rate in the titles we pick, we have a portfolio approach. The film
business is lot like venture capital, so to speak. For example, if you are in
the film production business, out of the six movies you make, one could be a
super hit, two will break even, and three will be loss making. When you
average this out as a portfolio, we roughly make around 20 to 25 percent of
returns. Bollywood in general has a success rate of 7 to 12 percent, which
includes Hindi mainstream, B and C grade movies, dubbed movies, and so on.
For well-known banners this rate is between 20 to 25 percent. For the
home video, satellite, and other businesses, the failure rate is much lower.
A lot of this has to do with the fact that many of the sales of these rights
happen very close to release or post release. Therefore, further knowledge of
the film, of how it performed is there, and this helps us in making a
slightly more educated guess on the potential of the movie. How
is the business of animation, and alternate content like world movies, and
health and wellness videos doing? The
animation business has been around for us since 2007. It has done very well
for us. Although a lot of people are working on animation projects and given
the hype about it, there are only a handful of released projects in the
market. We have the learning of the two animation movies (Bal Ganesh and
Ghatotkach) that we have released and were very successful. We have also
worked for the distribution of products like Dasavtar and Return of Hanuman.
We have established ourselves as early leaders in this space, with a clear
pipeline going forward as well. We have had
very good results, especially with regards to The Secret, Shilpa’s Yoga, and Deepak Chopra. They clearly exceeded our
original expectations. So we definitely foresee alternate content being a
significant segment in taking us forward. It is a lesser tapped segment and
there is so much there to explore. Also Gujarati plays, for
example, are a category that we helped in bringing in. The Gujarati film
industry is not as prolific in its output but the play industry is. And we
were one of the first people to take this excellent theatrical industry of
Gujarati plays and take it on to other platforms. We got into the model of
taking plays, shooting it in a controlled environment, and releasing them on
VCDs and satellite in good telefilm quality. World
cinema as a segment has been doing well. But, of course, that is a relative
term. If we were to judge the volumes by comparing it to mainstream English
films, then world cinema is far behind. We anticipate that there is an
audience in India that is willing to go beyond mainstream Hindi and Hollywood
films. We are looking to see how we can bring that in. Bollywood
apparels and merchandizing – a
business that did not take off ? Internationally,
merchandizing, both in terms of theme-based toys, stationery, etc. to
celebrity apparel auctions, are very well-established revenue streams. Even
if the revenue stream in India today is not that significant, we were quite
heartened when we successfully sold out apparel from our very first film
project Kuchh Meetha Ho Jaye. Although it might seem unlikely that people would
buy used clothes, there is actually a response and people do bid for clothes
worn by celebrities in a movie. Eventually, when it does emerge, we will have
the advantage of early learning. Similarly,
we have made extensive efforts to release promotional key chains, T-shirts,
notebooks, etc. of both Bal Ganesh and Ghatotkach. Initially there wasn’t even a market and manufacturers said that they can’t really invest in it. But we took the risk and worked
jointly with the manufacturers to commission a minimum amount of quantity on
a sharing basis. We strongly felt that if only someone helps to catalyze this
business, it will be a matter of time that merchandizing could be a huge
revenue stream for animation films, just like it is internationally. Another key
concept that we were able to pull off, and is a great achievement for us, was
being able to make Bal Ganesh the first animated film to be associated with
McDonalds Happy Meal – like they did with Shrek
and Finding Nemo. We got Bal Ganesh to become the first Indian merchandize to
come free with McDonald’s Happy Meal. It was for a limited run
for about three weeks in 12 cities and 50 outlets. Given the success of Bal
Ganesh, we were able to do the same with Ghatotkach and expand on our relationship
with McDonalds. These are the stepping stones in establishing this kind of
merchandize. The big
challenge, however, is piracy and counterfeiting. Many people, for example,
can find Ghatotkach apparel in the market, even though we haven’t officially licensed it to any garment manufacturer. We are
talking to retail chains and garment manufacturers to make it official, even
if it is in a limited quantity. Because we do believe that in the coming
years, it will take off. Is
seeking funds a part of your expansion plans? So far we
have managed quite well with our internal accruals. But with the kind of
expansion plans that we have had in the last few years, we did realize that
bringing in a certain amount of growth capital would help us expand beyond
what our internal accruals and organic growths would allow. So we are on the
lookout to have some PE funding. But it’s a very challenging market right now. The valuations are
in pressure and we are not financially in such stretched circumstances that
we absolutely need it. It will only happen if we can get it at a reasonable
valuation with regards to our strategic interests and brand value. Since it
is a matter of quickly expanding the projects that we are already doing, it
is not something that needs to be concluded in the next few months. What
is the challenge that you face as a second-generation entrepreneur? The biggest
issue with the new generation has been to really expand out to the new areas
that we can explore, or breaking the barriers that we drew for ourselves in
terms of the business we are in. Article
earlier appeared in Dare - The Entrepreneurship magazine |
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