World stage for growing Grammy

Showing a 156-per-cent net profit increase in the first quarter, on top of its 141-per-cent rise in net income last year, GMM Grammy is surging back from its worst time two years ago. At that time, the music industry was hit hard, as new technology enabled illegal copying and transfer of music using MP3 format.

Even though piracy is still rampant, Grammy has come out of the crisis, thanks to a reorganisation and change in approach to include the whole works of the music industry. Apart from selling music on CDs, the company included every channel that could make money - organising concerts and selling concert VCDs/DVDs, sending artists to present commercial advertisements, selling karaoke and collecting copyrights from commercial uses and selling ringtones and full-song downloads.

GMM Grammy's chief financial officer Sirichai Tantiponganant said the "momentum" from reorganisation would continue for a while and he was confident the company would achieve no less than 25 per cent growth in earnings for this year.

But the next challenge is to find new growth platforms. Digital technologies provide an "exciting" opportunity. Sirichai said, during the past five years, Grammy's income from digital business has grown more than 450 per cent and the profit margin is as high as 55 per cent. Incomes have jumped every time new technologies have emerged - ringtones, ring-back tones, full-song downloads, to name a few.

"Future growth will follow technologies. Two potential areas are 3G [third-generation mobile phone], which will enable faster downloads of photos and music-video clips, and the Internet if it becomes more developed. Currently, more than 90 per cent of our digital incomes is from mobile phones," he said.

A television drama's ("Sawan Biang") soundtrack by Aof Pongsak, for example, has been downloaded more than 600,000 times, with each download priced at Bt30.

Another area of growth could be international business. Grammy, Sirichai said, must look beyond Thailand and think how it could appeal to audiences in neighbouring countries. A growing factor is the blurring of lines among content provider, technology provider, the media and local and foreign cultures. Through websites such as YouTube.com, Thai consumers can now watch any artist from anywhere in the world - which means Grammy's standards must match international levels, Sirichai said.

To spearhead its overseas expansion, Sirichai said, Grammy is seeking foreign partners, who have a national and also a regional foothold to help the company ease its entry into several markets at once. A partnership with a regional media company is expected to be announced in the third quarter.

Sirichai said international expansion is not easy but the gains are great. "One artist, if successful, can contribute as much as 30 per cent of a company's revenue. We must find ways to give birth to T-pop [Thailand pop]."

Another promising area that will reshape the industry is the amendment of the broadcasting bill. If the regulatory framework and regulations are settled, the television industry will experience a boom time with an abundance of new channels and stations to be set up. This will benefit Grammy as a content provider.

In the past two years, Grammy stocks have doubled from Bt6.50 to about Bt13 per share currently. Still, Sirichai said, investors have not yet given a full value to Grammy stocks as the P/E (price-to-earning) ratio is currently 12 times the average rate of the Thai stock market.

Entertainment stocks should normally command a price premium, and investors have also not taken into account hidden assets such as the company's library of 10,000 songs.

"The Beatles have more than 100 songs and each is worth a million baht," Sirichai said.