On-demand movies and DVD Rental companies – where is the Indian opportunity?

I spent some time thinking about the movies-on-demand & DVD rental industry in the last few days and the opportunities / challenges / market size for the same. There has been a lot of buzz recently in the DVD rental industry because of emergence of more than a few companies serving the said market. I had profiled CineSprite, an online DVD rental company, a while back and the comments had interesting information on the other players; this post will try to look at the opportunities in this industry on a whole and these companies in particular. 

Traditionally the needs for on-demand movies have been fulfilled by the local DVD rental shops and they have been very generous with the rental rates, courtesy piracy – the first and the biggest challenge for any authentic entertainment business in this industry. These are small-time, unorganized businessmen – and being able to afford large inventory is a perennial problem for them. Companies like Cinesprite, SeventyMM, Madhouse, Catchflix promised to solve that problem by building organized, well-run companies specializing in DVD rentals with an eye on the national market. IPTV and movies-on-demand served over internet by companies like Rajshri offers yet another lucrative option to the consumers. In order to better understand the opportunities - I posed the following questions to Cinesprite (Amit), Catchflix (Vinay) and Madhouse (Nandini).

 

Q: Who are your biggest competitors – other DVD rental companies / local DVD rental shops, etc? And what are your thoughts on why you are best suited to address the market?

 

Cinesprite: We are here to serve the needs of a different set of people, the upwardly mobile corporate executives and their family. These are the same set of people who earlier used to rent movies from a local store but are not able to do so now because of their busy schedules. We are trying to close the gap that this set of customers feel (at a conscious or a sub-conscious level they feel this way) – the key ones being unavailability of time to visit local stores to rent or return movies thus paying late return charges, they are more individualistic and want variety in their choice or rentals. Thus we don’t see ourselves in competition to local stores as both are serving different needs.

As far as other online rental companies are concerned, the market is large enough to have any direct market share competition.

 

Catchflix: Currently, it is a fragmented market to competitors are a mix of high-end movie rental stores, small neighborhood, pirated DVD sellers, and online rental service providers like Seventymm. Here is why we are best suited:

Transactional Pricing: Unlike subscription-based DVD rental models, Catchflix offers a transaction-based rental service (Rs. 99 for 1 DVD, Rs. 149 for 2 DVDs, Rs. 189 for 3 DVDs). Members can keep the DVDs for three days, with free delivery and pickup. There is no monthly commitment.

Next Day Delivery: We promise next day delivery and we also give members the option to choose the delivery date. In the case of other services, members create a queue of movies and just wait for them not knowing when they will get what.

No Membership Fee or Deposits: Catchflix does not charge any membership fee or security deposit which sets it apart from the other service providers. Our members are mostly urban professionals who are responsible folks. Hefty security deposit is a way of making everyone pay for carelessness of a few and puts off movie aficionados. 

Website and Service Quality: Our members also find our website very rich and user-friendly and our service very prompt.

 

Madhouse:  Let me answer the latter first, Our USP: Madhouse provides the convenience of multi-touch point interaction to its customers. Madhouse is not an ‘online only’ rental site. Madhouse’s rental service is available for members / customers via web, phone, SMS and physical touch points.

Madhouse offers Monthly Subscription Plans and Individual Movie Packs (pay as you go) providing a wider choice for customers.

Madhouse does not charge a one time registration fee and has affordable pricing for its plans and packs, with nominal refundable security deposits.

The movie rental space is getting all the prime attention, currently. On one side are the organized players, of whom most or all of them are online rental stores, on the other are the local video libraries, who are either illegal entities or have limited inventory. Both of them poise challenges, but it is too soon to say who the biggest competitor is.

 

Other questions answered by the companies in the PDF file here.

I will not go into the comparison as to which is better since I don’t have a strong opinion but, I am sure, a lot of readers would. From the response of the companies above, it does look that they strongly believe in the fact that the market is big enough and it’s the right approach to serve the market. Given the fact that these companies are targeting high-income society who already have access to high speed internet connection, I feel that their biggest competitor would be IPTV and movies-on-demand programs launched by companies like Rajshri (they plan to have the premiere of Vivah, their latest movie, on http://www.rajshri.com) and not local DVD rental shops. Ajay has come up with an excellent post on Indian Netflixes – will they work? He is very apprehensive about this industry and ends his post with “Enuff said to scare away the any entreprenuer even remotely willing to think about DVD rental as a viable business plan. I wish I am wrong, and this can really become a good business and many of these guys have good exits.“.

My take on the entire thing and the Indian opportunity is the following:

• I see the DVD rental business, in its current model, as being able to attract attention for at least next 3-4 years (provided the investors are willing to keep pumping money), after which the speed / availability of the broadband connection will become a big barrier for these businesses.
• The low-income society aren’t that fashionable in requesting “I want to see the episode 15 of Friends from Season 2″. Their choice is limited to watching the more recent movies and the cheap pirated DVDs from the local DVD shop will work for them (unless we can control piracy – I, honestly, am not so hopeful).
• It will, eventually, be the game of content – when it comes to targeting the high-income society. Getting high-quality content will be much more affordable and easy-to-deliver in the digital format in the long run – which proves advantageous to IPTVs and on-demand movie portals.
• I see all these companies changing / tweaking their business model in the next few years. One model could be to start auctioning the DVDs once it becomes a little old and the normal requirement becomes substantially lower than peak requirement. There could be many more such models, that I am sure these guys can come up with.
• A positive thing is that it will still be 3-4 years before the Indian Netflixes start facing that problem and if one plays the game well, they should have gotten a critical mass of paying customers. Even if I have 100,000 regular paying Indian customers (is that a very bad guess?), I can do many more interesting things with it.

Again, I just wanted to reiterate my belief that a business model that became successful in the US will mostly not become successful in India, as is - with the exact same business model. Tweaking it just a little can yield amazing results.

Promotions: (All 3 companies have given their promo-code, feel free to choose your favorite one)

1. Cinesprite gave me a promotion code that gives 15% discount to the first 50 rental subscriptions signed up through this blog. This offer is valid for signups till Nov 25th, 2006 – so feel free to avail it.
   Promo Code: LATESTININDIA
2. Madhouse Signup to avail a 10% discount on the first month rental or the first movie pack.
   Promo Code: latestinindia
3. Catchflix Signup to get Rs. 50 off on your first movie rental. That means just Rs. 49 for a DVD for 3 days with free delivery and pickup.
   Promo Code: latestinindia.