Jul 30, 2008

Business - Home video business gathers momentum

What’s common between Johnny Gaddar, Aamir and Life In A Metro other than all three being rather offbeat , Bollywood ‘experiments’ ? Well, expectedly, none of them had a great run at the box-office , but all three did remarkably well in the home video space. Says Kamal Gianchandani, COO of Reliance ADAGowned home rental chain Bigflix: “Johnny Gaddar has been our top rented movie for the last seven to eight weeks and has remained in the Top 10 ever since it was released.”That certainly does say a thing or two about the Indian home video market, which, sellthrough and rentals put together, is estimated to be worth approximately Rs 1,100 crore, with rentals pegged at Rs 600 crore. In fact, with the virtual explosion of the DVD player market in India, the home video market is growing in leaps and bounds — a far cry from the 80s and early 90s, when the low penetration of expensive video cassette recorders and players (VCRs and VCPs) severely crippled the home video market, restricting the bulk of movie consumption to cinema halls and good old TV. Today, the home video business is growing at a CAGR of 35%, and according to Sanjay Sharma, COO of Nimbus Home Entertainment, which owns rental chain Showtime, this rate of growth will continue for the next three to five years. Adds Subhanker Sarker, COO of online video rental service Seventymm : “In mature markets like the US, film industry revenues from home rentals are as high as 50%-80 %; in India the figure is only 5%.” he says. The potential is more than obvious. It’s for this reason alone that the friendly, helpful neighbourhood video rental store — ‘friendly and helpful’ primarily because the store was invariably the purveyor of a steady supply of illicit soft porn videos — is facing severe competition from big organised players like Bigflix, Seventymm, Showtime and Clixflix, all of who have been in business for the last four years. What’s interesting is that all these home video rental brands have not only acquired large member bases, they are increasingly looking at growing into pan-Indian entities. Seventymm, for instance, is present in seven cities and boasts of a member base of 70,000. Bigflix currently operates in 10 cities with 90 stores, apart from being online. Showtime is the latest entrant in the business, and has ambitious plans of expanding to 40 cities by the end of 2008. Potentially, the market is big and there’s space for everyone. But that isn’t preventing the players from scrambling for consumer mind share. Bigflix, which launched officially in May 2008, spent roughly Rs 15 crore a month across mass media and online. Seventymm, in comparison , has a modest advertising budget for the current year — just Rs 8 crore. Video SaGa And Dale Edwards, co-founder , Clixflix candidly admits, “Our principal challenge has been raising funds to match our growth plans.” And the game is rapidly moving into one of creating differentiation as quickly as possible. Seventymm, for instance, is trying to make every consumer interaction a ‘filmy’ one. “If you are not at home when a courier company comes, they leave a ‘We missed you’ card; our card is titled ‘Mein Yahan , Tu Kahan’ . Every communication with the customer re-emphasises the brand promise,” says Sarker. Seventymm’s brand building initiatives include road shows in housing complexes and corporate offices, where they encourage people to sign-up . Showtime conducts similar programmes, says Sharma, adding that the company is “also looking at doing deals with corporates to acquire those customers, having retail tie-ups , local store promotions and member-lead-member programmes” .The internet has been one of the major drivers of the home rental business, and all players have a significant presence online. It helps that establishing a website is much cheaper than leasing expensive real estate to set up a brick-and-mortar shop; and a large chunk of the target audience is online anyway. “Most customers who rent a DVD are tech-savvy and know how to search for a title on the net,” says Sarker. And not only does the net make searching for a specific title from among thousands much easier than the physical act of trawling through racks in the store, online shopping habits help the brands track individual consumer preferences better. For example, Clixflix has developed software that not only monitors the operations live across both store and online models, but also records and assesses transactions so as to enrich the customer’s experience. “Clixflix effectively plays the role of content aggregators,” says Edwards. It goes without saying that the internet also gives these players a big edge over the ‘friendly neighbourhood stores’ in terms of range. “About 80% of video libraries have only 200 titles and don’t have new releases. In our case, we have about 14,000 titles available under a single roof,” says Sharma. Bigflix also offers customers the option to download movies from its website. Although this facility is available only to NRIs for now, it will soon be open for Indian consumers , says Gianchandani. “Most of the action in this business will happen on the internet, convenience being the biggest driver,” he adds. That said, the click-andmortar model appears to be as much in favour: Showtime, Bigflix and Clixflix have their stores located in residential neighbourhoods . “We want to find locations which have better neighbourhood capacities , where customers can walk in anytime. Customers on high streets are floating audiences , unlike neighbourhoods which have captive people,” explains Sharma. That said, one of the most critical components for survival in this business is logistics management. Transportation of DVDs to and from customers’ houses, the proximity of the warehouse to the store and the availability of manpower are issues that the rental brands have already started grappling with. Bigflix is trying to work its way around the problem by outsourcing this part of the business. “Say, for example, if it is possible for the post office to do it... but then reverse logistics and accountability are two of the major problems, and we are trying to find a solution for that,” admits Gianchandani. An offshoot of the revival of the home rental business is the significant check on piracy. Attractive rental plans and the variety on offer has hooked the consumer, and with most movies nowadays being available on home video within three months of being released , the incentive to watch poor-quality pirated stuff is lower. Credit for this, of course, needs to go to optical storage producer Moser Baer, which effected a dramatic reduction in the price of VCDs and DVDs in India . The fact is that the organised home rental brands are able to price themselves so attractively purely because the price of DVDs has come down drastically. The picture is not lost on Harish Dayani, CEO, Moser Baer. “Some of these players are renting Moser Baer DVDs through their websites and this is illegal,” he says. “We have sent them legal notices. We are producing DVDs purely for home consumption; these are not supposed to be used for commercial purposes.” We definitely haven’t heard the last of that as yet. For that matter, if Moser Baer chooses to apply pressure on the big rental chains and push comes to shove, the whole home video rental business might take an altogether different twist. As Shahrukh Khan’s character in Om Shanti Om reminds us, picture abhi baaki hai....

2 comments:

Anonymous said...

does anyone think porn is the only business still thriving during the credit cruch? I think many folks seek refuge in buying and wanking porn during the crunch


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