Music Labels Shift Focus from Soundtracks to Full Entertainment Control
Indian music labels are making strategic moves beyond their traditional roles. They are now investing directly in film production companies. This shift aims to address the persistent challenge of weak monetization from music streaming platforms.
Weak Streaming Revenue Drives Strategic Investments
Recent deals highlight this emerging trend. In December, Saregama invested ₹325 crore for an initial stake in filmmaker Sanjay Leela Bhansali's company. Earlier this month, Universal Music acquired a 30% stake in Excel Entertainment. These investments signal a clear intention by music labels to secure a foothold in film production.
Industry experts point to the economics of music streaming as a primary driver. Per-stream payouts remain disappointingly low, often just a few paise. This makes it difficult for labels to generate substantial long-term value, even with extensive music catalogues. Additionally, fragmented rights enforcement limits how effectively music intellectual property can be monetized through traditional channels.
In contrast, the film and OTT (Over-The-Top) ecosystem presents more lucrative opportunities. It offers diversified revenue streams including content distribution rights, music royalties, performance rights, and global syndication.
A Convergence of Pressures
Anushree Rauta, equity partner at ANM Global, explains the rationale. "The move is being driven by a convergence of pressures, rather than a single trigger," she said. "While the Indian music business continues to grow in scale, it is increasingly exposed to music platform economics, limited pricing power, and a dependence on content created elsewhere."
Rauta emphasizes that these decisions represent a push towards vertical integration. Film and series content sits at the top of the entertainment value chain. By acquiring stakes in production houses, music labels move closer to where creative decisions are made. This influences what kind of music gets commissioned, which legacy works are adapted, and how soundtracks are positioned within projects.
Production Houses Face Their Own Challenges
Simultaneously, large production houses are navigating a difficult phase. They face an unpredictable theatrical market, steadily declining satellite television revenue, and a selective OTT ecosystem with uncertain budgets. In this context, music labels bring stable capital and seek long-term alignment. Production houses offer the certainty of content creation. These investments are therefore as much about managing systemic risk as they are about chasing growth.
Rahul Hingmire, managing partner at Vis Legis Law Practice, frames the issue differently. "The issue is not slowdown, it is dilution of control," he stated. "Music labels today depend heavily on aggregators and platforms for discovery, pricing and timing. Their assets are valuable, but the trigger points for monetization are outside their hands."
Hingmire adds, "Film production changes that equation. It puts the label at the start of the IP cycle—script stage, casting stage, marketing design stage. That shift from reactive monetization to planned ownership is the real driver."
From Rights Holders to Ecosystem Owners
Charu Malhotra, co-founder of Primus Partners, views this as both diversification and strategic integration. By investing in film studios, music labels move upstream into content creation. They no longer just monetize the soundtrack after a film is made. They gain earlier access to intellectual property. Owning or co-owning films means they benefit from multiple revenue streams, not solely music rights.
This transition is evident in Saregama's earlier majority acquisition of digital media company Pocket Aces and the expansion of its in-house film production arm, Yoodlee Films. These moves signal a conscious shift from being a passive rights acquirer to an active content stakeholder.
The commercial logic finds support in recent examples. The film "Dhurandhar" featured several successful tracks adapted from Saregama's existing music catalogue. This demonstrates how catalogue-led music can outperform freshly commissioned works while significantly lowering creative and financial risk.
A Fundamental Transition in the Industry
Gaurav Dagaonkar, CEO of music licensing platform Hoopr, describes a deeper change. "This shift is often described as diversification. But in reality, it reflects a far more fundamental transition—from being rights holders to becoming ecosystem owners," he said.
In India, where streaming payouts remain modest at roughly ₹0.05 to ₹0.10 per stream, labels recognize that owning music alone is insufficient for sustained value. By investing in film and content studios, labels gain early influence over storytelling. This allows music to be embedded organically into narratives rather than added as a post-production layer.
Dagaonkar notes that labels bring significant strengths to this new role: a deep understanding of audience preferences, proven hit-making instincts, and powerful distribution networks. Music-led films consistently benefit from stronger recall, heightened pre-release momentum, and a longer cultural shelf life. Their soundtracks continue to create value across radio, streaming, sync licensing, live performances, and international markets long after a film's release.
A Dual Strategy for the Future
Looking ahead, music labels are likely to adopt a dual strategy. Ashima Obhan, senior partner at Obhan & Associates, explains the approach. Music catalogues will continue to be nurtured, especially given the long-term value of evergreen songs in streaming and licensing. However, content production will be prioritized as a way to secure future-proof relevance in a market where consumer attention is increasingly fragmented across platforms.
Hardeep Sachdeva, senior partner at AZB & Partners, echoes this sentiment. "We are likely to see a dual prioritization. Music catalogues will remain the bedrock of these companies, given their enduring licensing value," he said. "However, content production will be treated as the growth engine, an avenue to secure relevance and scale."
The result is a transformation of music labels into integrated entertainment companies. In this new model, music and content reinforce each other rather than compete. This integrated approach aims to ensure long-term sustainability in India's rapidly evolving media and entertainment economy.
