Posts filed under bwcinema

Online movie distribution - a disruptive force?

Written by: Vivek Garg

On Dec 20th, 2006

Recently I got to spend a lot of time at home with little work at hand. Along with gears of war on Xbox live I wanted to watch lot of hindi movies. After finishing new titles from the local Hindi movie rental shop, I decided to give a spin. I took a $3.99 subscription for unlimited movies for 3 days. I watched 4 Hindi movies with DVD/VCD quality online. They support 1 mbps and 512 kbps bitrates. After a few hiccups like clearing the browser cache, windows media player update and lowering the bitrate, I got the no jitter streaming to work in full screen. I hooked the laptop to my TV and audio receiver and voila, I was enjoying new titles that are not in stores with better quality.

At my corner store, I pay $1 for VHS and $2 for DVDs and these are 2 day rentals. It turns out that unlimited $3.99 subscription works out great. With heavy broadband penetration in US and not on time availability of VHS in local store, I wonder if these players are going to disrupt the business model of local stores in US and in India eventually. Let’s look at the players involved in this media distribution game, and the ones that can potentially disrupt existing channels.

1. Brick and mortar rental stores. These stores offer local distribution. People in the same locality go to the store, rent a movie for limited time. Advantage is no hassle local access. Disadvantage for these stores are limited shelf space, bad quality and late fees.

2. Online DVD rental companies (Seventymm, Madhouse) are already gaining popularity in India. For more players, look at this article by Anurag Gupta. They have obvious advantage of unlimited shelf space. DVD players are increasing in India every day. Estimates say that number will reach 50 million in 3-4 years. Here is the transcript of Rishi Navani on talking about their investment in Seventymm.

3. Cable TV, IPTV, video on demand (VOD). You can buy movies at a click of your remote. It will take some time for the infrastructure to develop in India, but this can be potentially disrupting to online DVD rental space. Disadvantage is the initial investment cost to the end user. Ideally, this will be the best option for home users. TV and remote rule the living room and any solution leveraging this can use it to their advantage.

4. Online streaming (, With broadband penetration increasing in India, 1.9 million by end of 2006, this can be the most disruptive in this space. In his interview Rajjat Barjatya says that Rajshri Media is currently focusing on the NRI community. And rightly so, given the current infrastructure in India. PC penetration is still less than DVD players. Computer skill set is required vs. DVD rental which can be operated using mobile phones & courier services. Biggest advantage is that producers and banners can choose this as their distribution channel (e.g. Vivah) and one can watch new movies before their DVD comes out.

We have seen this game played out in US. Netflix (online DVD rental) successfully crushed Blockbuster (local store rental chain) and now Blockbuster is using innovative, in store exchange programs along with online DVD rental to come back. VOD is already becoming an important player and Netflix has plans of online streaming. We will see how this game will turn out in India where we have huge gaps in number of television sets, DVD players and Mobile phones versus PC and broadband connections.

Along with the distribution channel, each player will have to figure out the best subscription model that suits the market best. Like every subscription model, they will face the issues of SAC and Churn. Who do you think has the best subscription model in this space right now? Given the Indian market, who has an advantage in this game? If you have a bunch of money, where would you invest right now?

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