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Ahead of video launch, Saavn raises Rs 635 crore from Tiger Global, others

Music-streaming company Saavn has raised $100 million in funding led by Tiger Global Management as it prepares to launch a video service.

, ET Bureau|
Updated: Jul 08, 2015, 02.25 AM IST
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Music-streaming company Saavn has raised $100 million in funding led by Tiger Global Management as it prepares to launch a video service. 
Music-streaming company Saavn has raised $100 million in funding led by Tiger Global Management as it prepares to launch a video service. 
MUMBAI: Music-streaming company Saavn has raised $100 million (Rs 635 crore) in funding led by Tiger Global Management as it prepares to launch a video service that could offer it a buffer in the challenging music market that's drawing global giants like Apple.

The money was raised at a valuation of $300-400 million, a company representative said. New investors such as Quilvest, which manages $36 billion for some of the world's richest families, also participated. Majority of the capital came from existing investors.

"We will be investing very heavily in our product roadmap, user acquisition and launching new services like video," said Rishi Malhotra, cofounder and chief executive.

The financing will help Saavn, founded in 2007, compete with domestic music streaming providers such as Hungama, and Gaana, owned by the group that publishes The Economic Times, as well as overseas firms like Rdio. Apple Music arrived in India last week along with the launch of its new streaming service in 100 countries.

Ahead of video launch, Saavn raises Rs 635 crore from Tiger Global, others Existing backers Bertelsmann India Investments, the domestic arm of the German media conglomerate; American media corporation Liberty Media; Hong Kong-based hedge fund and New York-based family office Mousse Partners, also participated in Saavn's latest fundraise.

"It is largely an inside round" said an executive at a rival company.

The company, in which actor Ranbir Kapoor is a shareholder and brand ambassador since 2014, was advised by Mumbai-based Avendus Capital and New York-based LionTree.

"Saavn continues to innovate consumer products designed for India's growing mobile user base," Tiger Global partner Lee Fixel said in a statement.

Saavn said it is adding 1 million active users every month, and has increased its user base to 14 million from 11 million in March.

The size of India's music industry is pegged at Rs 980 crore. It is expected to grow at a compound annual rate of 14% from 2014 to 2019, with digital channels or digital music accounting for a 55% share, according to a KPMG-FICCI Frames report.

"Unfortunately, there is no one-stop shop for music which has 100% of the content consumers want irrespective of genres, region and record labels," said Ashish Joshi, vice president, digital and business head – Fluence, at CA Media, which focuses on investments in entertainment, technology and media companies.

Joshi, who was a senior executive at Dhingana previously, said high minimum guarantees charged by record labels is another issue the industry has to resolve for music streaming to become a viable business.

While physical sales of music have been declining, monetisation will be challenging for music streaming companies. Besides infrastructure problems such as slow Internet and low credit card penetration, Indians also typically do not like to pay for content. KPMG predicts that only 1-2% of music is legally purchased in India with the rest being pirated.

This offers both a challenge and an opportunity to music streaming services.

Interest in the space comes on the back of expanding Internet penetration as smartphone sales increase. The country's smartphone user base is expected to reach 651 million in four years, as India progresses to become the largest mobile-first Internet market, Cisco said in a report.

"Mobile was 10-15% of our usage 3 years ago, but now it has reached 90%," said Malhotra. "India has almost become a mobile-only market."

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