First off, there is no denying that the DVD revolution is possibly the biggest thing that could have ever happened to movie buffs.

Today, six cities including Bangalore, Delhi, Mumbai, Chennai, Hyderabad, Kolkata account for 70 per cent of the DVD player penetration in the market.

According to Federation of Indian Chambers of Commerce and Industry (Ficci ), a PWC report states that there is a huge upspring in plasma TVs and home theatre surround sound systems, which has boosted the demand for home video products like DVDs and VCDs.

The home video market in India — largely the rental market — was estimated to be about Rs 4 billion in 2005. Over the past two years, it has grown by about 15-18 per cent per year. The share of the home video market is estimated to be six per cent of the total film-based entertainment business. This is expected to grow to about 14 per cent by 2010, driven by the shorter-release windows in the theatrical business.

India has approximately 15 million DVD players and this figure is expected to touch 70 million by 2010, which translates into a vastly untapped video rental market.

The present market scenario

The global broadcast technology market is worth $11 billion and is set to grow at 11 per cent with the pace being set in Europe, Middle East and Africa. This fact was highlighted at Broadcast Asia 2007, which is Asia’s biggest industry event held in Singapore from 19 -22 June 2007.

The country has over five million home video and DVD subscribers and current penetration levels are expected to grow 31 per cent, according to the PWC report.

The home video market is going to almost double from Rs 830 crore in 2007 to Rs 1,700 crore in 2010. The drastic cut in the price of DVDs has allowed DVDs to be sold through supermarkets as well. In the international scene, the total market has grown to an estimated 8.8 million subscribers at the end of 2006, with total estimated rental revenue of over $1.2 billion.

Adams Media Research and Netflix internal estimates project that the total market will have more than 20 million online subscribers in the next four to six years. The DVD rental business is in the season of mergers, the latest to happen is the biggest fund raiser in the rental space Seventymm has acquired 100 per cent equity of the oldest rental service agency Madhouse.

Moser Baer in the entertainment basket

One player that is looking to change the dynamics of the home video market is Moser Baer. Its entry into the home entertainment market was marked by its move to slash the prices of DVDs and offer regional titles. This positioned the company among the top contenders and the biggest guns of retailers entering this market.

Its set to change all the dynamics of the entertainment market and the problems conflicting the industry like high prices of DVDs which had given the rise of steadily flowing of piracy and high fragmentation in this business.

Companies are releasing video content in DVD and VCD formats to ensure the highest quality standards, but also to significantly reduce costs. Moser Baer's fully licensed titles will be available at Rs 28 for an Indian film VCD and Rs 34 for an Indian film DVD - price points that we said before, will not just redefine the Rs 650 crore ($150 million) home entertainment business in the country, but also put it on the path to a four- to five-fold growth in the next three years. Of this, Moser Baer aims to have at least 50 per cent market share.

One of Moser Baer's recent releases

Pricing strategies: Moser Baer will also be releasing non-film titles in the following areas at different price points, including VCDs at Rs 49 and DVDs at Rs 69. Two VCDs will be priced at Rs 89. All English movie titles will be marketed (VCDs at market price of 49 and DVD of Rs 69). The company is also planning to launch single VCDs of songs in the range of prices starting from Rs 20 in all key languages.

Distribution: Moser Baer is also setting up exclusive branded outlets (owned or through franchise) at about 300 locations, in addition to alliances with large format stores established by various retail ventures in the country. They have established a network of carrying and forwarding agents in all the states of India.

Other players slashing prices: Shemaroo & Eros

Other players in the market include the veteran Shemaroo. The firm recently introduced three new pricing categories for some products starting at Rs 66. Shemaroo VP Hiren Gada says that the last time DVD prices were reviewed was in 2004. He adds that the firm anticipated the competition in terms of prices and more players a few years back which is why it has sought to diversify itself.

More price cutting has come from Eros International which has slashed its entry price on DVDs, cutting it down from around Rs 150 to Rs 99 to keep in tune with the dynamics of the market.

One of the films in Shemaroo's low price catalogue

Eyeing the potential of this sector, Reliance Entertainment, Nimbus and Percept are among the other players looking to enter the home video space with competitively priced products. Reliance is investing $ 100 million in its home video division Bigflicks. This has both an online and an offline component.

The online component will mainly target NRIs. The offline component will consist of retail stores across the country. By the end of this financial year there will be 100 stores in 10 cities. In three years there will be around 500 stores in 50 cities. They will function as neighbourhood stores. They will offer DVDs for rental and sale. While the pricing strategy has not been decided upon Bigflicks COO Kamal Gianchandani says that it will be competitive.

No drastic price reduction: Excel Home Video

This animation film has done well for Excel

For some of the other existing firms it is still a 'wait and watch' strategy on the pricing front. Excel Home Video which focusses on Hollywood is not going in for huge price reduction anytime soon. Excel Home Video MD M N Kapasi says that it is not a question of high price or low prices.

"So far the introduction of low price discs has not affected our business. We will reduce the price of our products marginally to push up volumes but it will not be a drastic reduction.

"Demand is a function of content. You can have cheap hardware but if the software is not there a firm will not find takers. At the current price level of our DVDs and VCDs we are satisfied with the volume of business. We will be doing a study now to find out what the consumer expects. Is it a low price or is it quality they seek? Depending on that we will take a decision on how we go ahead."

No need to plunge prices: Sony Pictures

Sony Pictures which has a home video unit is also adopting a wait and watch strategy. The firm feels that its price points are reasonable and with that price point it claims to compete successfully and at the same time make profits.

A spokesperson says that there is no sudden need to plunge the prices when consumers are willing to make a price value comparison on a particular film. At a super low price one will bleed. It is worth noting that Moser Baer has an advantage. Since it is a disc manufacturer it can bring prices down more effectively than the competition.

The webslinger has proven to be a winner for Sony Pictures on the home video front as well

Moreover, with the advent of lower cost DVDs, new distribution channels are likely to open up, thereby expanding the availability of DVDs more than they currently are. Several players are betting on home videos becoming a FMCG product being sold through multiple retail points like super markets and departmental stores apart from traditional music and video stores. Also, with the expansion of organised retailing in India, over the next few years, home videos are likely to get wider distribution reach.

However, the key issue is what impact will low pricing of DVDs have on the rental business?

As of now the rental business whether online or offline is yet to see the full impact of the low cost DVDs. It might not get affected in the short term as most of the renting happens for new Hindi and international releases mostly priced between Rs 299 - Rs 599 for DVD and Rs 149 - Rs 299 for VCD. The price reductions are usually introduced for older movies, classic titles. However, if prices for international and newer Hindi products also fall drastically in the next three years, as has been predicted by Moser Baer, then the rental business will certainly get affected.

Industry players however don’t feel that low cost DVDs will have a major impact on cinema revenues. That is because theatre viewing is a different experience with the family as an outing. Video cannot replace that experience. Further, several films have a great impact on the big screen, compared to the small screen.

Theatrical business will generally not be hit as there is a hold back period of 2-10 weeks before the original home video can be launched legally by the home video rights owner. Normally, the film completes its theatrical run by then.

The Online DVD rental markets

Coming to the fast expanding online DVD rental business that poses competition to the DVD market, include players such as Madhouse, Seventymm and Clixflix among others.

Reasons for splurge in the Online DVD market

• Internet penetration in India is growing not only in the urban areas but also in B and C class cities which has made possible the entry of this market in rural and small areas. The number of individuals who accessed the internet has increased marginally from 10.8 million to 13.0 million in 2006.

• Local rental stores provided the customers with only limited editions of popular bollywood flicks, nothing besides that.

• Cheap content and poor quality makes it hard for the consumer to get good quality DVDs at rental stores.

• The organised movie rental business has checked the rampant problems of pirated versions.

The leading players include:

Madhouse (www.madhouse.in)

Madhouse, which rents out original and legal disks, is among the earliest players in the sector. It claims to be the first rental service Indian company to offer movie rental services accessible via a multi-channel model. This includes customer interactions through the web, SMS, phone and kiosks. Founded in December 2004, Madhouse is headquartered in Delhi. The rental service was launched in the tri-city region of Chandigarh, Panchkula and Mohali in May 2005.

Madhouse was acquired by Seventymm this year.

Seventymm (www.seventymm.com)

With a funding of Rs 100 million from US based Draper Fisher Jurveston and 32 crore funding from Matrix Partners Seventymm is currently based in Bangalore, Delhi-NCR, Hyderabad and Mumbai. It was launched in 2005.

Cinesprite (www.cinesprite.com)

Cinesprite.com, which was launched in 2006 with nearly 10,000 titles, is a DVD rental site that offers subscription plans ranging from one to 12 months with an activation fee of Rs 150 and Rs 250 depending upon the package the viewer chooses.

Moviemart (www.moviemart.in)

Movie Mart, a new comer in this space was launched this year. The website is also a subscription based DVD movie rental service providing its members access to a library of motion picture, television and other film entertainment. The member can choose from their subscription packages and also offers unlimited validity period for four DVDs at a time at a price of Rs 999. These prices are key in combating the falling prices of software.

Catchflix (www.catchflix.com)

Catchflix online rental service was launched in may 2006. It covers Bangalore, Mumbai, Delhi- NCR, Bhubaneswar, Hyderabad. It offers a 50 DVD package at a cost of Rs 2899.

Clixflix (www.clixflix.com)

Launched in October 2004, Clixflix plans to expand nationally. It offers a package of six DVDs a month at Rs 399 and unlimited DVDs at Rs 799. This is a Mumbai based rental agency.

Bigflicks (www.bigflicks.com)
This is Reliance's online video service and will mainly target the NRI market. It has launched its on-demand movie download service. It offers films in Hindi, Marathi, Tamil, Telugu, Punjabi and Kannada that will be available for either download to own at a fee or for free streaming. The firm says that its USP is that it is the first and only online movie library with the largest regional content. The download price ranges from $2 - $15.

BigFlicks.com will offer 2000 titles in the first year and there will be revenue sharing arrangements with the content owners. The site is also looking at acquiring Indian television content apart from looking to connect with subscribers in America, UK, Canada, Middle East, Australia and South East Asia. The site aims to have an easy interface and navigability. It offers downloading speed with bit rates of 1500 kbps.

Conclusion

Thus, it is not surprising to see why online DVD rental chains and retail majors have forayed into sales and distribution tie-ups apart from acquiring copyrights from content DVD manufacturers. The market is booming and online DVD rental companies are looking to expand through tie-ups with retail chains.

The Indian entertainment industry is worth about $5.2 billion out of which the film industry alone is worth about $1.5 billion. Even though the online DVD rental players have a tiny market share presently, they are planning to grow rapidly and expect to reach $100 million within the next five years. DVD content owners are experimenting more with packaging to make the product more attractive as well as providing added value features.