Moser Baer is shaking up the home video market with its low pricing. While VCDs are available at Rs 28, DVDs are priced at Rs 34.

Will the market dynamics change as new players like Adlabs hatch plans to enter the business?

In an interview with Indiantelevision.com's Sibabrata Das and Ashwin Pinto, Moser Baer entertainment business CEO Harish Dayani elaborates on how the home video market will never be the same.

Excerpts:

Why did Moser Baer decide to get into the entertainment and home video market?
Moser Baer is the world's second largest optical storage manufacturer. As we make 10 million discs a day, we have economies of scale. We can manufacture a disc at a price that not too many people in the world can match. Having such a strong backend in this form of business, we were somewhere in the commodity space. The obvious forward integration for us was to add content. In India, there is nothing like entertainment as far as replication on a product like a disc is concerned. This is where the whole thing started around a year ago - and we had the money to do it.

When several home video players like Time have folded up, what made you think that Moser Baer could fix it right?
We felt there were gaps in the industry which we could fill. The home video market is fragmented and has local players. We saw an opportunity in this to have a pan India presence. Distribution is another area that needed attention. Also, consumer branding is important.

How did you take care of the content?
We realized that if we were to be a major player, we needed to own content on a large scale. We acquired 7000 movie titles and have become the largest content owner, controlling one-third of the entire film production chain. We picked up content from different sources (including from Time). We decided to be the first company that deals with home video in all languages.

Isn't regional films a significant component of this?
We have close to 1800 Hindi titles. The rest is regional - Tamil, Telugu, Marathi, Punjabi, etc. Besides, we have around 600 international titles sourced mainly from independent producers.

But how do you source top content when the big Bollywood studios like Yash Raj Films have set up their own home video labels?
We simply can't. But there are many who don't have their home video labels. And we ourselves will be in the film production business.

Pricing seems to be an important strategy for Moser Baer. How much volumes do you have to reach to make this a profitable business model?
People say that Moser Baer sells products at a low price. For us, price was the outcome of other factors; it definitely was not the starting point. Surely, we wanted to have a pricing that the masses would find attractive. So we priced DVDs at Rs 34 and VCDs at Rs 28. And it is not that we are operating under negative margins.

When you start buying big Bollywood movies and have to pay a high content cost, will your operating margins not puncture?
We have all kinds of movies. For me, a 1950 film is as important as Munnabhai as it will generate a certain amount of interest among a certain section of audience and be commercially viable. The concept of old and new movies are irrelevant. In terms of recent titles, we have films like Life Mein Kabhie Kabhie, Ek Chalis Ki Last Local. Apne has yet to come. We also have two films of Venus.

How do you align with the international studios as they are already having exclusive distribution deals with the other home video players?
We will be busy for a year with the amount of titles that we have. Even if we release 30 titles a day, it will take me over a year and I am not a magician. In terms of tying up with big international studios, the question is in terms of adding value. We are setting up our business. When we have established ourselves, then we can talk to other players with confidence and authority. We have to demonstrate how our business model works.

How are you sprucing up your distribution network?
When we were toying with the idea of entering into the home video market, we realized that we could have a strong backend but that does not necessarily make for a business model. Home video distribution, or for that matter the entire entertainment distribution, is wholesale-oriented. Entertainment firms have a few select group of wholesalers; what the wholesalers do after they get the product, nobody knows. We felt the need for a distribution network that is similar to an FMCG system. We wanted to have our own distributors spread across the country.

Most home video businesses have 20-40 distributors across the country. We have 500. We feel that every town must have a distributor. We do not want to depend on a wholesaler in a large town who will cater to a small town. We tell distributors to give the product to retailers in their area. Entertainment product in this country is available in some 20,000 stores. Our product is available in 100,000 shops and we are just two months old. The aim is to take this to a chain of 300,000.

What are the margins you are offering to the distributors?
The wholesale distributor has a five per cent margin while the retailer enjoys a 25 per cent margin.

How crucial is branding as part of Moser Baer's strategy?
The myth in the entertainment industry is that people just go and buy titles at any price and it does not matter who is selling them. We want to break that myth. Our message is that Moser Baer is adding a lot of value in terms of the quality of manufacture. We have a certain image. It is not just Munnabhai MBBS; it is Moser Baer Munabhai MBBS. It is important that we reinforce faith in our product in the mind of the consumers.

Will you have your own stores as part of the branding exercise?
We have two - one in Pondicherry and the other in Ahmedabad. We will have 50 by the end of the year and 250 by the end of 2008.

What are the plans on the film production front?
We have signed a co-production deal with filmmaker Anubhav Sinha for a basket of 12 movies. We have also signed up with Anthony D'Souza (Ishaan) and Priyadarshan. We are also negotiating with four big filmmakers. The first movie to kick off, though, is Shaurya.

We will also produce movies that we will release for the home video market. This should happen sooner than later. We also plan to get into the film distribution business but at a later stage.

How much are you pumping in for your entertainment business?
We intend to invest Rs 5 billion over three years. A major chunk of this, of course, will be towards the home video business.

Is the home video market dynamics up for total change?
Will consumers look at our price and wonder why other titles from other firms are priced much higher? Possibly. That is for them to decide. Some players may charge higher but eventually the price will come down from where it is now for everybody. I don't believe premium or popular content can command a three figure price. The home video business model will be viable for those who are able to stay around in it.