 "Guy with most local content will win in on-demand space: Siddhartha Roy")
Hungama is one among the largest players in the on-demand entertainment space and is bullish on the growth opportunities posed by a massive influx of smartphones and faster 4G LTE connectivity. With a base of 64 million users, of which 16 million are paying users, Siddhartha Roy, CEO of Hungama.com, in an interview with Alnoor Peermohamed said that building a micro payments infrastructure and distribution channel are of utmost importance, something which global entrants such as Netflix and Apple aren’t tackling.
You have been quite bullish in the past one year. What’s going on?
It’s been a pretty fascinating year from the perspective that if you look at the playout that’s happening I believe that it’s been driven by one core inflection and that’s the device. Three years back we had 12 million devices and this year we will sell 120 million devices. And that has driven the core transformation of what you would call the larger value chain.
Obviously with that the larger core ecosystem of data and the fact that 3G is something that came in, was there for about 2-3 years and we’ve now gone into 4G LTE and we’re starting to see the rollout of a couple of the key guys and that augurs extremely well for a company like us.
You’re roughly sitting with about 135 million people on 3G but over 300 million on the Internet. This over the next 2 years is going to be 600 odd million. Now that new 300 million people are mainly going to be driven by middle India, where we believe entertainment is the single biggest funnel under which this entire value system will stack up.
What opportunity do you see in India?
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Culturally as a country we consume a lot of entertainment. Our music is a derivative of our movies and even our news has six hours of entertainment. So it’s this loony market where there’s a great amount of consumption and consumption of entertainment is rather cultural to us.
The other big playout is that we’re a young nation and we’re a single TV household, where during prime time the content being played out is largely focused towards the female in the house. So what you would call the larger youth of India, is not necessarily getting their content consumption value and they’re moving to mobile. That to us is where the opportunity lies.
To put things into perspective, last month we had 64 million active users. Of this, 16 million users paid us money, and to us that’s the larger opportunity. If you micro charge and are able to create a distribution structure, the consumer is willing to pay.
Can you throw some more light on micro payments?
That’s our core focus in India, to build real businesses and get money out of it, rather than take a Silicon Valley clone and try to make it work in India. That’s largely because of the lack of credit cards. Only 400 million of our consumers have bank accounts, out of which there are 18-20 million credit cards out there. So how do you go charge the customers?
We’ve been a great partner to the telecom industry, and we’ve used the them to create great momentum and micro charging models for people to pay. Why? Because the customer is comfortable with paying through that. Today you can buy our music service for Rs 5 a day. So you have a one-day service, a one-week service, a one-month service, a three-month value service and a six-month service – all different packs.
It could be as little as Rs 1, but it’s that which will add to the effective revenue per user you will be able to generate and get revenues from the content that the consumer is consuming.
You were one of the players that was willing to subsidise the data costs of consumers. With the TRAI ruling what has happened?
We are completely in the middle. The regulator has gone and said that do not create differential on the data per se, but we will be able to create value packs around our services. If you’d gone ahead and created differential pricing in terms of data, that would have led to some form of data adoption, but that’s completely fine. We were not only trying to play on the data packs with telecom providers, we were largely playing on the payments.
So today, I have a Rs 29 pack of our Rs 99 music service on 4G for Idea. It has nothing to do with the data, we’ve from day one launched it as a consumer offer. If you take Airtel, we say if you exchange your SIM from 3G to 4G, if you were getting 2GB of data, you will now get 4GB of data bundled with the Hungama Play service. So we’re not playing with the differential pricing of data. They’ve all come to us and said we want to play with your service.
These are different marketing and service bundling ideas that will continue to happen.
You’re betting big on 4G, how fast do you think the adoption will be?
I think 4G will playout very differently from what you’ve seen in the west. We’re probably the only market where 3G has been rolled out with only 5mhz. Across the world, from what we’ve heard, 3G was rolled out on a minimum of 15 -20 Mhz. This fundamentally means that the quality of 3G networks in India is hugely challenged. For 4G, we’ll see this being attempted at 20 Mhz, and in the case of Jio, they have a great mix of bandwidth from 800 to 2200 Mhz, so he’s got a good mix of spectrum.
That’s the reason why this entire thing of 4G with video and 4G with entertainment becomes a value creator and that’s the reason you’re seeing what Airtel is doing with those advertisements. They’re driving it only with content, because they realise if they need to move consumption, they need services that can create consumption.
Global players such as Netflix and Apple are entering the space, will this hurt you?
The way I look at it, is it’s going to be propositions. When the West started the cut-the-cord movement, cable was at $100-150. So when the young adult decided he doesn’t want to see TV anymore, for him it was $9.99 for Netflix, $14.99 for Spotify and $14.99 for Hulu. You add all that up to around 35 bucks and it was a great proposition because you got your entire entertainment needs and were still saving around $75-80.
Mind you, in India, our average TV subscription in Rs 200. Netflix is at Rs 650 if you want to consume content in HD. Plus, you have content type. In India you see any region, International consumption contributes just 5 per cent of consumption. International music, on telecom networks contributes just 3 per cent of consumption. So if you want to build real services for India, you’ve got to have content for India.
Right now it’s so small that there’s nothing like I’m competing with him and the customer will see only his value and not see me. First let’s go and get people to sample the service, I believe there’s enough space right now for all of us to partake because we’re growing the market and each of us brings a set of nuances to our business which is different to each other.