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.
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.
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.
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.
Innovate @ WATConsult