Monday, June 30, 2008

Online DVD Rentals Market Analyis - June 2008 round up

Executive Summary:

Evolution of movie rental business in India dates back to the advent of VCR's way back in 1980's. Since then this market has been growing steadily with constant evolution in terms of technology and reach. While western countries have been way ahead in this business by getting it registered as an industry in itself (DVD rental subscribers in the US and Europe, generate more than $1b of consumer spending), Indian business community has started taking a note of the emergence of this trend in Indian consumer market. With the mass proliferation of cheap DVD players in Tier II and Tier III cities, the Indian consumer is going gaga over watching latest movies in the comfort of their houses at a cheaper rate . There have been a number of small retailers who have sprung up in the neighborhoods which are catering to the demand of consumers all around India. These sentiments have been duly noted by some early entrepreneurs and some big industrial house like ADAG and Nimbus who have launched online and retail outlets in major cities. Companies like seventymm claim to have over 70,000 customers and expect to reach a subscriber base of 4 million in next 5 years while ADAG promoted intends to open 500 bigflix stores by year end in around 30 stores.

Key Service Providers:

The market as of of today cannot be tagged as an organized sector but is slowly moving in that direction. The current rental service providers can be categorized as:

1. Local Retail Video libraries: These have been around since 1980s and have been offering limited collection of movies in various languages. Majority of these retailers keep pirated copies and are hard to keep check on.
2. Exclusive Online DVD rental sites: These web sites offer movies on rent through home delivery in selected cities or areas within select cities. They offer a wide collection of movies in different languages but are constrained in terms of geographical distribution.
3. Online DVD rentals with retail formats: These companies started off with online DVD rental web sites and have slowly started setting up retail video libraries. The entry of ADAG promoted bigflix and Nimbus promoted showtime proves that there is a big market that need to be tapped in coming years as the quality of broadband improves.
4. Kiosks: Kiosk based DVD rental service is probably the most recent model which is under pilot but if found acceptance will give a tough competition to neighborhood libraries.
5. Online movie streaming services: These services were quite common to sites offering podcasts or bollywood music but with ADAG promoted bigflix targeting NRI consumers, one can get movies on rent through streaming or can download-to-own.
Common Features:

1. Most of the web sites offer subscription based services which offer flexibility to consumers to select an appropriate plan based on their usage pattern.
2. The ordering and fulfillment model is similar across the web sites which involves registration under a subscription plan --> creation of a movie queue based on preferences -->Free home delivery of queued movies --> Returning movies in-store or free pick up
3. The movies offered are in various Indian languages covering different genres and titles with sites boasting of a collection of around 10,000 to 15,000 movies.
4. Many of them offer sticky features like movie reviews, bollywood news and gossip, updates on latest albums etc.
5. There is an element of web2.0 paradigm where in each movie can be assessed by the consumer and can put up his reviews for the benefit of others.

Market Opportunity

The market is still in a very nascent state and will start showing signs of consolidation when there are more serious players entering into this space. There is still lot of scope for companies to innovate and serve the movie crazy Indian consumer. While these services are largely restricted to metros, there is a growing need in Tier II and III cities where internet penetration is slowing on rise and disposable incomes are showing new signs of economic independence. Its a golden opportunity for regional players to create a niche market by customizing and building localized services to capture the market in the early stages



I have made every reasonable effort to ensure that all information in this report is correct based on secondary market research. I assume no responsibility for any inadvertent errors.

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