Indian Media Industry: Outlook and Trends

Aayush Jain
Can media-tech become the new hot favourite for VCs?
February 2016, Tiger Global Management invested $10 Mn in TVF (The Viral Fever). If you ask an average young Indian adult about how many startups they knew about that were covered in that week’s news, they’d be at a loss for words. Ask them what TVF is, they’ll tell you about their shows, respective characters and even the storyline. ‘Permanent Roommates’ and ‘Pitchers’ had already become poster boys for short form content creators (who publish their work over digital screens and platforms), by the time the investment came in.

The way people in India now consume content and how it is delivered has changed drastically over the recent few years. Let’s look at a few observations to find out what has happened, why it has happened and a few pointers to where Indian Media is headed in the future -

Key drivers of the change - Content, Analytics, Mobility and at the heart of media industry Infrastructure.

Infrastructure
Access to internet has been the key for driving changes and will continue to do so in the coming years. This access has been enabled by increase in the number of end user devices along with the network coverage. 4G network has been rolled out by all major players - Airtel, Vodafone, Idea and the new class bully, Reliance (Jio).

As far as India is concerned, majority of the population is still untapped and hence infrastructural initiatives like ‘Digital India’ and implementation of the IPv6 will help unlock this new audience.

Analytics
Gone are the days of TAM. Before the rise of digital platforms and IPTV, it was not possible to get real time and accurate data about the viewers. New devices, interactive screens and platforms = new analytical methods. Consumers are constantly giving signals to content players on what they like, what they will/will not pay for, who they like to see and what they like to do on the platform/device when they have the time. All this generates significant amount of data which companies are starting to analyse, derive collective insights and use to improve the quality of engagement with customers. Advanced techniques are being used to perform analytics on audience type, campaign measurement etc. and use them for new levels of consumer journey, time-based and location-based optimisation.

Mobility (M for Mobility, M for Mobile.)
Be it the app ecosystem or the ability to browse on the go - mobile content consumption has exploded in the recent few years.Though it should also account for laptops and tablets (basically any portable device having the capability to play/display media content) what is primarily driving it, is mobile screens.

India has about 290 million smartphone users and over 360 million (estimate) mobile internet users now (~60% of total Indian internet base), this number is expected to hit almost 690 million by 2020. Majority of this current mobile internet user base do not consume content on highly sophisticated apps like snapchat, Vimeo or even YouTube for that matter as data in India is quite expensive and everyone doesn’t have WiFi. What drives this consumption is everyone’s favourite app - that can run on 2G data, compresses files when sent and guess what? it’s primary feature is chat. WhatsApp.

Indian smartphone consumers behave very differently as compared to the ones in developed economies, there lies a challenge and an opportunity waiting to be exploited. This uniqueness might be in the form of jugaad- memory cards with pirated video content/movies being rented out nowadays instead of DvD’s or the fact that a lot of indians are still in the ‘downloading the content’ phase rather than ‘streaming it online’ phase.

What are the shifts that are happening? How is ‘digital’ driving the revolution

Long-form to short-form content
Digital advertising, people streaming music online, gaming and news on the app/social media are the flag bearers of the digital media revolution. People are moving from long form content (News articles and feature films/TV serials) to shorter versions (InShorts, ‘webisodes’). There has been a definite shift towards short video consumption - 85% of viewers (surveyed) view videos shorter than 10 mins and only 33% watch long video formats [Vuclip's Global video insights 2015].

End of linear TV era
As mentioned earlier, over the top video (OTT) services is the new norm. Lukup media, Hooq, Yupp TV, OZee, Vuclip and VOOT are some of the players in this game. A lot of traditional content is being ported onto these OTT platforms and then consumed as Video On-Demand (VoD), Live TV and Catchup TV. Watching the highlights or the entire video of last night’s EPL football match is now possible on the Hotstar platform (one of the most popular and STAR group’s captive OTT platform in India). A lot of original content is also being posted now directly on these platforms (TVF, AIB, ScoopWhoop etc) in the form of short movies or ‘webisodes’.

A lot of Indian broadcasters have launched captive OTT platforms (Sonly Liv, Hotstar, EROS Now etc.) however what these media giants have not been able to fully exploit though is the subscription revenues. It is still a mamoth task to get the indian content consumer to pay for content over IP - thanks to Youtube, Indian consumer is used to consuming content for free. The way these content makers monetize is only through contextual advertising (product placement in the videos).

Satellite formats to IP formats
The shift from satellite TV to IPTV often termed as ‘Cord cutting' is still very far away for the Indian scenario. Some math might help explain this:

USA
Cable TV $60-$80 a month , Netflix $8-$12 a month

India
Premium DTH subscription = Rs 500, Netflix basic pack = Rs 500 + cost of high speed internet (which is currently expensive in India)

Also this shift from satellite based to IP driven distribution platforms will bring significant focus on media-tech products (data compression, file formatting, encryption etc.) and VC investments in the same. This shift will lead content makers to flourish - as IP will foster the open distribution platforms as opposed to satellite platform with heavy carriage fees.

VC investments into media space
Media has been dominated by strategic investments and financial investors have not been extremely bullish. However, given the proliferation of IP formats that will lead to lot of technology play into media industry, I anticipate increased interest and activity from VCs and financial investors.

Hence leading to the conclusion (and back to the top of this post) that internet HAS to become cheap and accessible to drive this change - fibre connectivity infrastructure is key in the overall growth of media industry.

These consumer behaviour changes and the drivers of that change present a wonderful opportunity for startups to exploit and for established players to re-invent themselves

Stats and figures taken from the Indian Media and Entertainment Industry Report (by FICCI and KMPG) After combing through their quarter report, one statistic that leapt out at Anil Joshi’s trained eye was that of an unfulfilled demand in the intercity cab industry owing to an unorganised and unnecessarily expensive model of service. On the advice of the Unicorn India Ventures team, Instacab pivoted to a completely different model, rebranded themselves to their current avatar and Roder.in was born. A couple of months later they received their first round of funding from Unicorn India Ventures.

Advising a startup that shows potential and finally investing in them is a first of its kind exercise by a VC fund. This is but one of many examples of the new trends of early stage VC Funds showing benevolent support to potential investee companies. While we have seen an abundance of VC funds investing large sums of money at the growth stage for established startups in the last decade, investment at the seed and early-stage is a recent phenomenon. Newer and more recently established firms like Unicorn India Ventures are offering a more hands-on approach by investing not only the funds at hand, but also their time, expertise and industry connections in order to drive the businesses of their portfolio companies.

Unicorn’s novel approach

Mentorship Program:
Unicorn India Ventures brands itself as ‘Mentor Capitalists’ exemplifying their importance of a mentor for a particular business. The company has a select pool of mentors who are a mix of senior professionals, executives, exited entrepreneurs and researchers from different industries and domains. In case of the mentorship program, each portfolio company is assigned mentor who is an industry expert. Mentors are expected to spend a minimum of 3-4 hours per month with the founders where they advise them on product definition, course corrections, opening markets and clients and strategic vision.

Incubation:
Apart from mentoring, Unicorn also runs a virtual incubation program where they incubate companies mainly to help entrepreneurs grow with or without funding. During this process, the partners spend substantial time with entrepreneurs initially to help them gain traction and subsequently are available on a need-basis. In case any of these companies fit in the scope of the investment strategy of Unicorn, the entrepreneurs also have the opportunity to avail of funding apart from the initial mentoring sessions. The idea of this initiative is to help the company fine tune its business and make them funding ready.

Hiring, Compliance and Accounting support:
Unicorn is always on the lookout for fresh talent for its portfolio companies, already having scouted interns for three of their portfolio companies across functions like software development, business development, analytics and social media. “We have strong ties with the IIT’s which helps us monitor the talent out there and in turn can help feed that talent into our portfolio companies”, said Aayush Jain, Principal of the fund. Another important aspect is the complete sanitisation of the startup. Unicorn makes does an intensive due diligence of investee companies and helps them meet the requisite legal compliance and accounting norms. “This helps these companies to smoothly raise follow-on financing quickly with clear compliance and accounting standards”, said Aayush Jain.

Scaling up:
When the investee companies are ready to scale up to other cities Unicorn provides them with resources wherever possible. When one of the Pune-based portfolio companies - Pharmarack - wanted to expand their operations to Mumbai, Unicorn shared their office space and resources to ease their transition. “This helps the company focus on what is important - scaling up the business - as they don’t have to worry about other trivial issues and spend unnecessarily on a work space which is at a premium in places like Mumbai”, said Anil Joshi.

Financial modelling:
Most of the startups struggle with financial modelling, especially when they are growing. Unicorn identified this gap and created an in-house capability of this same function. With this, the investee companies can build a realistic financial model and not just an excel sheet. This new initiative has not only helped portfolio companies but also Unicorn itself, in monitoring and helping portfolio companies to be on the growth path.

Entrepreneur in Residence (EIR) program:
Brutal honesty with the entrepreneur in question is one of the chief tenets of early stage funding and sometimes the best ideas with the best intent doesn’t always lead to the best results. In such cases, while in the advisory stage of the company, Unicorn hands out a harsh truth to the entrepreneur but also offers support through the EIR program. Unicorn inducts the founder into their operations. He works closely with the portfolio companies and when there is a good fit, the portfolio company inducts the said entrepreneur into a senior role. “We worked closely with an entrepreneur by the name of Anupam Sarawagi with his startup and were happy with the effort he was putting in. However, We didn’t see much potential in the business itself, which was later realised even by Anupam. That’s when we gave him the opportunity to work with us in an EIR role and when we found a good fit with Pharmarack, they were happy to have him on board as co-founder”, said Anil Joshi.

India is at the precipice of a startup revolution and the investors are taking notice. Early stage VC funds are looking at different ways to get increased value for their investment. One such method is by using all their resources at hand to scale their portfolio companies to new heights and make them even more valuable for the next stage of investment.

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