The Future of the Online DVD Rental Market in India

Half a dozen players already and more joining in! Is the online DVD Rental Market really that lucrative?
Ones even got acquired by another!  And we even interviewed the acquiree!

BigFlicks backed by the Reliance Power House hasn’t even started splurging the Rs 10 Crores its set aside for advertising!

Let’s look at the funded chaps: SeventyMM. They received $7 Million from Matrix Partners and $2 Million from Draper Fisher Jurvetson initially.

Excerpt from an interview of Avnish Bajaj (Matrix Partners) by PaGaLGuY.com:

"Q: Recently Matrix Partners has invested in an online video selling (should be rental) company called Seventymm. Could you tell us your analysis and thought behind the investment?

A: Today there are 16 million VCD players but three years down the line one is going to have 40 to 50 million DVD players and about 40 million odd VCD players. If you assume approximately 80 million households, on an average a single household rents 1.5 to 2 movies a month and each movie cost per average Rs. 50. At this point of time what we are assuming is one dollar per movie and approximately one to two movies per household per month. That results in a $ 160 million of revenue per month and about $ 2 billion per year!"

Wow! $2 Billion revenue per year! Sounds fantastic.

Now 80 Million households watching 2 movies per month via a rented DVD could be a little on the higher side.

Why?
Firstly, Multiplex visits have become more of an overall family outing experience.
Rampant Piracy and easy availability of pirated DVD’s. Especially in a city like Mumbai. The prints are not always ‘pathetic’ as assumed. Local DVD Shops. Lowering of DVD costs (Moser Baer etc)…

Via the pure online model of DVD rental, one would be targeting mainly the Net-Savvy junta in the age group 18-28. College goers and Working Professionals. Not the typical Indian Kyonki Saas Bhi Kabhi Bahu thi Housewives – These are the ones who would actually be seeing 2+ movies per month. So housewives would prefer TV watching and with DTH’s increasing popularity and of course On-Demand Movie Watching definitely doesn’t seem to be a distant dream any more.

The College goers and young Working Professionals in Metro cities would be the ideal audience to target – but then again, these are the ones who also like to hang around with friends in Malls and Multiplexes. These are also the ones who might be aware of Torrent download sites. I am sure 3 years down the line – Broadband penetration would increase remarkably too. We might even have Web Streaming of movies.

The future – What might work?

Most of these players are targeting metro cities like Bangalore, Delhi and Mumbai – mainly because business volumes might be higher here. But in the future, I see greater success in smaller cities like Indore, Jaipur, Nasik, Cochin, Lucknow etc and even smaller cities like Guwahati, Jabalpur etc.

Why? Mainly because this is where an online service can really showcase its service.

How? Suppose I want to see the movie – Bridge on the river Kwai.
Chances of local DVD shops not having this movie are pretty high. Pirated versions are also going to be next to impossible to find. So this is where a SeventyMM can really prove its point.

But entire businesses cannot be built on 1-2 such sales right? This is where an offline-online integration comes up. Presence of an offline store coupled with an excellent online interface would be the way to go. Delivery period of the rarer movies can be a little longer, and these can be sourced from other branches if and when required.

Eg:
In the States BlockBuster launched something Netflix had no answer to – intelligent integration between the website and their retail outlets.

Something like this increases the options of promos and further marketing. BlockBuster’s offering basically turned every mailed movie into a coupon for a free movie at any BlockBuster outlet and was a huge success.

What else?

How about allowing stores, entrepreneurs and individuals to create their own rental stores and earn money or credit on a revenue sharing basis?
That is exactly what iLetYou.com did.

Basically provide an eBay like platform to all your users, where they can rent out their own DVD’s. Handle the mailing logistics for them and the potential becomes immense.

As of now, the Yo! China investment by Matrix Partners makes much more sense than the SeventyMM one but I’ll be happy to be proven wrong in the future.

Some local players that you might not have heard of:
HomeView – Delhi
Friday Box Office – Bangalore
ClixFlix – Mumbai

Innovate @ WATConsult
 

3 Responses to “The Future of the Online DVD Rental Market in India”

  1. Prasath
    June 23, 2007 at 12:17 pm #

    Online dvd rentals will never be a hit. Even if they price Rs10 per movie, Noone will rent till the piracy is abolished,
    If a net savy guy does not get a movie, say Bridge on the river Kwai., He will simply download it, using his existing unlimited broadband connection

  2. Siva Rajendran
    June 25, 2007 at 11:37 pm #

    I believe online DVD rentals can succeed if they take some initiatives like releasing foreign language films other than English and advertise them innovatively .
    More on that here – http://www.bizdewz.com/2007/02/dvd-at-34-rs-so-what.html

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    [...] these rental services. Investors see a huge potential in movie rental service in India. Check out this interview with the investors behind Seventymm. Personally speaking, I am still hesitant to tie up with one of [...]

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