Gaana losses balloon by 4.2X in FY19; revenue falls over 27%

Music streaming space has turned hyper-competitive after the entry of Spotify and YouTube Music in India. Existing players - Gaana, JioSaavn (formerly Saavn), Hungama and Wynk have been battling out each other for a long time.

Among the companies mentioned above, Times Internet-backed Gaana is a formidable player being the first streaming platform to claim 100 million active users mark. However, the milestone didn’t remain significant for long as JioSaavn crossed the milestone in the same month - April 2019.

While the duo has been boasting of the envious scale, the growth appears far from translating into operational revenue. At least, not for the Tencent-backed Gaana that witnessed a 27.5% decline in its revenues during FY19.

According to filings with the Ministry of Corporate Affairs, it posted revenue of Rs 121.22 crore in the last fiscal as compared to Rs 167.35 crore in FY18.
Notably company's last year revenues were inflated after the company wrote back expenses worth Rs 61.31 crore payable to its holding entity.
As a result, the company’s losses also increased to a whopping 4.2X from Rs 46.04 crore in FY18 to Rs 193.17 crore in FY19.

Importantly, the operating revenue of the company dropped by 22.48% in FY19 to Rs 78.34 crore from Rs 101.06 during last year. About Rs 41 crore topline has come from the interest on fixed deposits and gain from the sale of current investments including mutual funds.

The total expenses of the firm rose in the tune of 45.8% to Rs 314.39 crore during the 12 months period ending March 2019 as compared with last fiscal year. The procurement of services was the biggest individual cost factor for the company in FY19, totalling Rs 126.41 crore, followed by advertisement & promotion at Rs 108.46 crore.

In FY18, Gaana had spent Rs 66 crore and Rs 56.08 crore on service procurement and promotions respectively.

Prominently, paid subscriptions have contributed 33.52% of total revenues while the rest came from online advertising. The company has made Rs 26.02 crore from the subscription. It’s a jump of about 2.4X in the revenue generated by subscriptions in FY19 in contrast to the previous financial year. During FY18, it earned about Rs 10.83 crore from paid membership.

Generating close to one-third of its revenue from subscription is a good sign for Gaana and other subscription-based audio, video or hybrid streaming platforms. The 140% hike in revenue from paid membership in a year strengthens the belief that subscription is the way forward in online entertainment space in India.

Gaana’s financial performance in FY19 doesn’t appear impressive at all since its revenue shrunk by almost one-fourth and losses shot up by over 300%. But it's worth noting that the company operates in an over-crowded space and prioritising growth over unit economics, so the high burn is not surprising.

We will keep an eye on annual financial reports of other music streaming apps in FY19 to analyse the online music industry holistically. Meanwhile, what you think about Gaana’s financial health in the last fiscal?