Moser Baer started diversification by foraying into the PV industry in 2005. The company created its entertainment unit in 2006 to focus on home entertainment and revolutionised the business by introducing DVDs and VCDs at Rs 34 and Rs 28 when lead players in the business, T-Series and Ultra, were selling titles at Rs 150-300. While locking horns with the likes of T-Series and Ultra in the Hindi film segment, the company has also entered markets such as Tamil Nadu, Kerala, Karnataka and West Bengal with titles in regional languages.Moser Baer’s entertainment business achieved net break even in less than 12 months and logged revenue of about Rs 42 crore in the fourth quarter of FY08. The company expects to grow the business to Rs 840 crore by 2010.
The technology company’s aggressive diversification strategy over the past couple of years has been driven as much by market realities—the diversification was aimed largely to counter the global slowdown in the optical media business—as by its growth ambitions. What makes the story more interesting is the company’s adaptability, which has helped it grow faster than competition. Incorporated in 1983, the company started producing digital storage media (floppy disks) in the year 1986 and went on to become the second largest optical storage media (CDs, DVDs etc) company in the world by 2007. (The largest is Taiwan’s CMC Magnetics Corporation.) Now, the New Delhi-based company is leveraging its strength in its core business to break new ground. The obvious diversification was a forward integration of the storage business into the home entertainment content business. So, using its expertise in DVD production and distribution, it got into the distribution of film DVDs.And building on the strength of film DVD distribution, the company has got into theatrical distribution and film production. In the true spirit of a trailblazer, the company is putting in place a distribution model along the lines of an FMCG company—it is tapping neighbourhood grocers and kirana stores and has started selling its film DVDs across Delhi via cycle carts. That’s where Moser Baer is moving ahead of others in the business. It is trying to be an end-to-end player— right from producing a film to bringing it to the customer’s doorstep.
The next logical step was to launch its own television set. In August, the company launched Moser Baer LCD TVs, and faced a stock out in three weeks flat. The reason:competitive pricing. Take a 40-inch high-definition Moser Baer LCD TV. That would set you back by Rs 55,000. A Sony LCD of the same size would cost you Rs 70,000 and a Samsung Rs 65,000. The pricing strategy for its televisions is similar to the strategy used for DVDs and CDs—that is, price it a notch lower than global brands such as Sony, Samsung and Philips, and only slightly higher than pure-play domestic brands. Moser Baer controls the supply chain, manufacturing, design and user interface organically for its branded television while the panels are imported from Japan and Korea.To have a control over the consumer interface, the company has also set up three retail stores in the national capital region that showcase its consumer electronic products and IT peripherals. Plans are afoot to set up 20 such stores across India by the end of 2009.
The opportunity in home-based entertainment is immense. As the Indian Entertainment and Media (E&M) industry report 2008 by FICCI and PricewaterhouseCoopers (PwC) points out, “Home video market has witnessed dynamic changes in the last four years, having achieved a growth rate of 30% over the period 2004-2007. Its contribution stands at 8% of the overall film industry revenues in 2007, up from 6% in 2004.” In 2007, the home video market was estimated at Rs 7.5 billion, up from Rs 6.5 billion in 2006, implying a growth of 15% from the previous year. It is expected to reach Rs 15 billion in 2012, translating into a cumulative growth of 15% over the forecast period. Yet, a large chunk of the market remains untapped. Smita Jha, associate director at PwC and an expert on the home entertainment industry, says, “If one were to look at the home entertainment and theatrical market in India, less than 20% of the revenue can be attributed to in-home entertainment and the rest to theatre visits. In the US, in contrast, 70% of the revenue is generated from in-home entertainment and only about 30% from theatres.” Jha believes, companies in the home entertainment space, are expecting the market to swing as out-of-home entertainment becomes more expensive and consumers become more technology savvy. Typically, a family of four or five can watch a movie at home spending a fifth of the amount they would have spent at the theatre.
How will the next few years pan out for Moser Baer’s entertainment foray? Shonali Magarkatti, associate director, Ernst & Young, points at the challenges, “The Indian home entertainment industry is nascent. The main models are the rental market and the sell through market with DTH players still testing waters. Online and kiosk options are just picking up in India. Acquiring content at an affordable price and overcoming piracy are the biggest challenges.” And given its low margin strategy, distribution will be the key. Magarkatti lays down the recipe for success: strong distribution, right pricing and quality content.