Old is gold, if well sold 

Long before digital streaming became the way of life it is today, there was another form of binge-watching known to Indians in the 1980s and 1990s. This version, which now seems primitive, entailed making a weekend run to the neighbourhood video library, spending ₹100 to rent out five video cassettes containing Hindi blockbusters,and feeding one cassette after another into a video cassette player—a marvel of technology at the time—hooked to a cathode-ray tube colour television set. Families would spend entire weekends huddled around the TV in their living rooms and bond over iconic Hindi films ranging all the way from Amitabh Bachchan’s Don to Anil Kapoor’s Beta. This was a time when choices were limited and life was simpler. Multiplexes hadn’t mushroomed yet and private cable television—with its multitude of general entertainment and movie channels—was at an embryonic stage.

Those who have lived through these times would remember a few brands whose logos used to occupy the top right corner of the television screen as these movies would play out. Brands like Ultra,Eagle, and Shemaroo can be recalled immediately. From anecdotal evidence, one could argue that most Hindi films worth their viewership were brought to Indians in home video format by one of these three brands.

With the passage of time and technology, video cassettes got replaced by VCDs, which were then edged out by DVDs, and later even DVDs became passé when viewership moved to digital platforms. The evolution of technology has made dinosaurs of many companies, and unsurprisingly, brands like Ultra and Eagle, once household names in the home video space, faded into oblivion.But Shemaroo Entertainment, which turns 57 this October, proved to be an exception. By continuously reinventing itself and evolving as a medium-agnostic content company, it has not only survived, but thrived.

Today, Shemaroo has an extensive digital presence, holds rights to some classic Hindi films (which it licenses to television channels and streaming apps), and provides content for in-flight entertainment. It has also recently jumped on to the streaming bandwagon with its own app.

And its market capitalisation has zoomed,because of which it is ranked 72 on Fortune India’s maiden Wealth Creators list. Since its listing on October 1, 2014, Shemaroo’s aver-age annual market value logged a five-year compound annual growth rate (CAGR) of 19%, and was at ₹1,226.1 crore on March 31,2019, according to data from Capitaline. The company had revenue of ₹478.7 crore in FY18, with a CAGR of 12.6%, according to data from Prowess and Capitaline. Net profit was ₹69.5 crore, with a five-year CAGR of 20.1%. The company reported earnings before interest,tax, depreciation and amortisation (Ebitda) of ₹144 crore, a CAGR of 19.63%That’s a long way for the company, founded as a book circulating library in 1962 by a 22-year-old from Kutch, Buddhichand Maroo, on South Mumbai’s Warden Road. The name was an acronym of his surname and that of Gangajibhai Shethias, with whom he collaborated to setup the library.

Around 1976, some of the library’s well-heeled patrons introduced Maroo to the concept of video cassette recorders and video cassettes of latest international blockbusters that were becoming popular in India. He sensed a business opportunity and in 1979 started a circulation library where he would take video cassettes from his well-travelled customers and rent them out to others. The video library business boomed and eventually Hindi movies started becoming available on home video as well.

In 1982, the market for video cassette recorders and colour televisions started growing in India as the government slashed import duties in the wake of the Asian Games, which the country hosted that year. “By 1983-84, the market for renting home videos had significantly multi-plied and renting videos to binge-watch over the weekend actually started back then,” says Hiren Gada, 48, Shemaroo’s chief executive officer and Maroo’s nephew.

Consequently, in 1987, Shemaroo decided that in addition to its video library business, it would also acquire rights to distribute films on video from film producers. Over the years, Shemaroo has acquired over 3,700 titles, including perpetual rights to some iconic Hindi films like Don, Amar Akbar Anthony, Kaalia, Namak Halaal, Mughal-E-Azam, Devdas (the 1955 version, directed by Bimal Roy and featuring Dilip Kumar), Anari, and others. Additionally, it has also built a robust library of devotional content,and entertainment and film content in other Indian languages such as Gujarati, Marathi, and Punjabi.After acquiring its initial cache of content that includes the likes of the classics mentioned earlier, Shemaroo has been mindful of not overspending on acquiring content in recent times. As a result, it doesn’t acquire rights to blockbusters that are fresh out of the theatres and focuses instead on buying rights to films in their second cycle of monetisation. This means that it buys these rights from an entity that has already purchased them from a film’s producer and aired them on another platform for a period of time.

“We figured out at a certain point that there are massive risks involved in acquiring rights to a film at a pre-release stage. There is no way of ascertaining the theatrical revenue that a film is likely to garner at this stage,” says Gada. “So we took a conscious call that though it may mean earning moderate returns, we will look to buy well-established films in the second cycle, since the journey of a film continues well past its theatrical release and enjoys a long shelf life in the minds of consumers.”

This has led to the company earning decent returns on capital employed (RoCE) and Ebitda margins. In FY18, Shemaroo reported an RoCE of 20.36% and Ebitda margin of 29.3%. The company hadn’t reported its FY19 numbers at the time of writing this report.

Also, Shemaroo is well-aware that, given its limited size, it cannot compete with the top dollar being shelled out by international giants like Netflix, Amazon Prime, and Hotstar (controlled by Disney, following its acquisition of 21st Century Fox that owns Star India) for acquiring the latest Hindi blockbusters for their over-the-top (OTT or streaming) platforms.

Rather than making a splash with big-ticket film acquisitions, Shemaroo’s focus has been on finding new ways to monetise a slightly aged library of quality content. The company,which began as a B2C (business-to-consumer) venture with video cassettes, switched gears to become a B2B (business-to-business) venture to align itself with the direction in which its clientele was moving.

As the private cable television space in India opened up in 1992, top broadcasters including Star India, Zee Entertainment, and Sony Pictures Networks seeded the market with a wide bouquet of entertainment channels, including those exclusively airing Hindi films. Shemaroo became a natural partner of choice for these broadcasters with its library of Hindi films. It also powers the owned platforms of direct-to-home (DTH) television service providers like Tata Sky and Videocon D2H that air everything from classic Hindi cinema to devotional content.Other channels of monetisation include in-flight video services and overseas distribution.

In 2008, Shemaroo anticipated the Indian consumers’ gradual shift to the digital medium for content consumption and started distributing its content across digital platforms including video-on-demand services like those offered by mobile service providers and online video streaming services like YouTube.

The early foray into digital distribution of content has helped Shemaroo build a sizeable digital presence. In FY18, as much as 27% of Shemaroo’s revenue came from digital media, mostly by way of distribution income and advertising revenue. It has around 50 channels on YouTube catering to different genres and its content on the platform gets over 750 million views a month, according to the company’s investor presentation dated January. It also offers the movies in its library to other video streaming services such as Netflix, Amazon Prime, and Hotstar.

“Shemaroo has an advantage in terms of having a big library...which is distributed across various OTT offerings in India,” writes analyst Karan Taurani of Elara Capital in a January research report. “Shemaroo’s role remains critical in the ecosystem as it offers depth in the movie catalogue of these OTT platforms.”Following the company’s initial public offering in 2014, Shemaroo invested around ₹350 crore in acquiring new content, which promised attractive returns on investment as digital consumption started going up.

That happened in 2016 after Reliance Jio Info-comm launched its low-cost broadband wireless services, which have catapulted India to the top position in the world in terms of broadband connectivity. India’s monthly mobile data usage of 8 GB per user is the highest in the world and the average price per GB of data fell to as low as $0.17 in 2017 from $4.40 in 2014, according to a 2018 report by Google, Bain, and Omidyar Network. According to a report by Kotak Institutional Equities,around 250 million monthly average users spent an average of 70 minutes per day watching their favourite web series and films across OTT platforms.

“Old films never go out of fashion and entities like Shemaroo that own the content and have adapted to changing consumer behaviour have survived and done well,” says N. Chandramouli,chief executive officer of TRA Research, a brand intelligence and data insights company. “Also, there are several ways of dissecting such content and packaging it as short video clips, which help monetise them better through frugal innovation.”

This redefinition of the way in which entertainment gets consumed in the country has now led Shemaroo to return to directly interfacing with customers by launching its OTT platform ShemarooMe, which went live in February. The launch of the news ervice was accompanied by a refreshed brand image and a new tag line, India Khush Hua, which was conceptualised by advertising major Ogilvy.

But given that Shemaroo has been sitting on this library of content for so long and the market has no dearth of streaming services, isn’t Shemaroo late to the party? Kranti Gada, chief operating officer of Shemaroo Entertainment and Hiren Gada’s sister, doesn’t think so. She contends that the first phase of digital content that resonated with consumers was the so-called new-age and edgy content that the likes of stand-up comedians offered.This kind of content catered to affluent millennials in urban centres who could afford smartphones and expensive data.

“But with the current democratisation of smartphone and internet usage, the audience for our kind of content, which could be of a different age profile and in non-urban, tier 2 and tier 3 cities is also on the Internet and the time is right for us to go out and get them,” says 38-year-old Kranti, who joined the company in 2006 after a stint with PepsiCo India.

ShemarooMe will also cater to non-resident Indians around the world; the streaming service was launched in the U.S. in April and will soon roll out in other regions, including countries in West Asia and Southeast Asia.

However, ShemarooMe is only one part of Shemaroo’s new B2C strategy, which will also see the launch of content-led devices and the retailing of Bollywood-themed merchandise.

The company appears to have taken a leafout of the book of another company, Saregama India, which successfully tapped into the nostalgia economy with the launch of Carvaan—a range of Bluetooth speakers pre-loaded with Saregama’s vast Indian music library—and revived its own sagging fortunes.

Shemaroo is similarly piloting a range of Bluetooth speakers pre-loaded with devotional content, including recitals of the Bhagwad Gita in Hindi, English and Sanskrit, in the market at present. Priced at around ₹4,000, the speakers are receiving positive customer feedback, Kranti says, even as Shemaroo is gearing up to launch these speakers commercially soon.

Gada says that new products like speakers and Bollywood merchandise could easily account for10-15% of Shemaroo’s top line to begin with. simple experience that will allow users of all ages and economic profiles to access content easily,” says Kranti.

Gada says that new products like speakers and Bollywood merchandise could easily account for 10-15% of Shemaroo’s top line to begin with.

These new business lines, along with ShemarooMe, will play an important role in helping the company realise its vision of growing five-fold in five years, which would entail atop line of ₹2,000 crore by 2022-23.

The Shemaroo CEO points out that Bollywood has been a part of India’s social fabrics in since time immemorial and its emotional connect and nostalgia value is unparalleled. Therefore, it stands to reason that with its gold mine of content and willingness to experiment, Shemaroo has barely scratched the surface of a vast market. And the going could get better. Watch this space.

(This story was originally published in the June 2019 issue of the magazine.)