DVD Rental Market Can Be As Much As $2.4 Billion By 2010″

atrix Partners India recently invested $7 million in Seventymm, an online DVD rental company based in Bangalore. Seventymm started its DVD rental service in Bangalore early this year while it has just kicked off its operations in Delhi. The company has so far received $10 million in venture capital with Draper Fisher Jurvetson (DFJ) putting in $2 million in the first round. Seventymm is founded by serial entrepreneur Raghav Kher and it has Eric Meyer, co-founder & former CIO of Netflix, as an advisor on the board. Rishi Navani, Founding Managing Director, Matrix Partners India, is joining the board of Seventymm as part of the investment.
I asked Navani why he invested in Seventymm. Navani thinks there is a huge market opportunity lying ahead. First the installed base of DVDs is expected to reach 50 million by 2010 from the current 13 million or so. An indication is that India already has 40 million VCD player base. So as the price of DVD players crash to Rs 1,200-1,500 level (from Rs 3,000 now), the penetration is expected to increase. Once the DVD installed base reaches this level, Navani thinks, it has to be supported by DVD rental service. Taking an average rental of $5 a month for 40 -50 million users, this gives a market opportunity of $200 million a month or $2.4 billion a year. Considering a market leader is the one who has 15-20 per cent market share, that’s a definitely a large market. Seventymm is the first mover in this space – at least the most visible first mover.
Online DVD rental has several advantages. For one, it’s scalable and you can cater to not 1,000 users or 10,000 users but a million users. You capture a metro market with a centralised warehousing and a few delivery boys, he says. But this can be a difficult thing to do in large cities like Delhi and Mumbai.
As for consumer choise, Navani says there are many other advantages – for instance, the DVD library can be as huge as 10,000 or 20,000 titles. Then you get to watch the original DVD not the pirated DVDs. You can keep the DVDs as along as you want (that’s what Seventymm does) – two DVDs at a time. Then you get to see the DVD you want without waiting for long like one does in a neighbourhood shop.
He, however, admits there are challenges too. For one, how easy is to get consumers sign up for the service? Since it’s online DVD rental, the internet penetration also has to grow at the same rate. Navani thinks that the DVD installed base and internet penetration would grow in tandem. Then there are going to be competing offers like DTH, IPTV and digital downloads which will be the real obstacle. So how many people would dish out $5 a month is something that remains to be seen. “It’s a consumer marketing business. Seventymm team is very experienced in consumer marketing,” says Navani. Now Raghav Kher and his team has a huge execution challenge ahead.