Ever wondered what made Harish Dayani spearhead Moser Baer entertainment sector to sell DVDs and VCDs at the cost of toothpastes and soaps? Must have some connection with his 10-year stint at FMCG company Hindustan Lever Limited.

Despite facing various peer allegations that Moser Baer does not know to conduct business and they are spoiling the market, Dayani is unperturbed. In an exclusive free wheeling interview with Businessofcinema.com, Dayani talks about Moser Baer’s entertainment journey, hardship, challenges so far; strategy to conquer the home video market and what lies ahead.
 
With what reading and understanding of the entertainment market did Moser Baer start out? Did it capitalize on shortcomings of the industry?
Our idea was to not be yet another home video company. There are a billion movie lovers in the country who speak different languages, but do not watch movies at home. Reasons being, firstly this was a pirate infested industry. Secondly, there was no pan-India home video company per se. Thirdly, one needs to price VCD and DVD at a rate that will generate demand and create a habit over a period of time to watch movies at home.

Our vision was to be a pan-India company that looks at content distribution in all languages on a national basis, with the objective of reaching to the masses. For instance, in a normal course one cannot exploit Hindi content in Madurai, but because I own Tamil content and have a strong distribution in Tamil Nadu, my Hindi content can ride on Tamil.

Also, there is a catch 22 situation that since movie DVDs are expensive, people do neither buy DVDs nor DVD players. So with our seeding operation, we brought down software prices to make people buy a DVD player. Hence the population of players will go up and over a period of time people will also buy DVDs.

With 120 million television homes and only 30 million homes with DVD/VCD players, there is tremendous scope. Also, a distribution model whereby DVD players can be sold through our exclusive Moser Baer outlets is in the offing.
          
Within a year’s time you have gained leadership position in the market with respect to quantity of content. What is your vision hereon?
Not only quantity of content, but also in terms of quantity of ownership of content. But with respect to releases in the market, we have barely done about 35 percent. Each month we struggle to release approximately 500 – 600 titles, because till we do not have our entire content in the market we cannot extract its value.

Since quite a bit of the content is time bound, with every day that we lose in releasing the content in the market, the copyright is also reduced by those many days. So, that is the struggle which is currently going on, on the content side.

How difficult/easy was it for you to establish in the retail network?
Initially it was difficult to establish ourselves in the retail network because people did not believe in the model. They felt the margins were low and the volumes could not be as large as we were projecting. But in the last few months the distribution system has been expanding. Today our product is being sold in general stores of small towns.

What is your current market share in terms of sales? What sales figures have generated from Moser Baer’s home video division?
We have so far only released 35 percent of the content, so market share is something we will know six to eight months from now. But the fact remains that at the national level we are pretty huge.

The cost of acquiring films in the books of accounts is amortized over 5 – 7 years depending on the tenure of the rights, while the sale proceeds are accrued every year in the books. How does this affect your profitability?
That again depends on the catalogue and new film. A catalogue has steady sale over a period of time, therefore apportioned over a period of five or 10 years or perpetuity, as the case may be. New films have very skewed sales, 70 percent of the sale takes place in the first year of the operations and the balance 30 percent over a period of four years.

How does your low cost strategy work? What is the break up Rs 29 and Rs 34 in terms of manufacturing, margins etc.?
It is of no consequence. We look at low margin and high volumes. New movies are acquired at higher cost, but sell more copies. Older movies sell fewer copies, but are acquired at lower cost also.

We give about 25 per cent margin to the retailer, 5 per cent to the distributor, 7-8 per cent is distribution cost and VAT in the country, plus marketing costs and all this put together takes about 40 percent. We are left with 60 per cent, which takes care of the manufacturing as well as the margins.

Did you envision that after your entry in the market, competitive companies would also change their price points? Did it affect your stand and strategy in the market?
Yes we knew that. But we were very confident that what others do will have little impact on us. Other players think ours is a price model and by dropping their rates they can compete with us.

Our business model is not price led. We have a plant, which can cater to large production, make a quality DVD at low price, market and distribute them, which others cannot. Then came the price, which was only the outcome.

If someone says we are selling content at low price, well, there were others too who sold content at low prices, but no one created the impact that we did.

Can you elaborate on your operating model? It is the newer movies that sell high volumes but your library is dominated by old movies, which do not have high sales and moreover you sell them at low rates, so what exactly is the business model that Moser Baer operates on?
Every product has its role to play. Individually the older movies may be small, but in a catalogue they become large. A catalogue creates its own system with respect to distribution model and visibility in the market.

When a new movie home video releases hordes of people come to pick it up, they then browse through the old movies and pick any if they like to. Therefore both complement each other.

But there are few movies in your catalogue like Apne, Naqaab and Jab We Met and also very few like Sholay or Hum Aapke Hain Kaun which have the ability to drive primary sales…
The difference in volumes of older movies and new ones is probably 1:10. Our older movies may not remain on the bestseller charts because they sell small volume. But collectively when you talk of 2000-2500 such movies, it becomes very, very large. With older movies we are not looking at the charts.

If Naqaab sells 100 units and Sholay sells 10, it is fine, but that 10 x 2000 becomes much bigger.
          
What is the unit sale for movies like Apne and Jab We Met and for a movie like Naqaab?
I would expect Apne to do six digits upwards. Naqaab because it didn’t do so well it is not into the six digits but it’s reasonably well. Jab We Met has far exceeded the sales of Apne.

By when is Moser Baer likely to become more aggressive in acquiring newer content?
We are aggressive and we want everything. I have gone through the entire list but there is nothing available. Yash Chopra and Eros have their own label, so those movies are out. There is a lot of junk available. However, movies which are under production and are of certain value, inadvertently belong to people who have their own label.

We have 10,000 titles and are struggling to release 500 every month, so it is keeping us occupied. Six to eight months later, we will see and in between wherever there is an Apne, Naqaab, Anamika, My Friend Ganesha, Ek Challis Ki Last Local and Jab We Met…whatever comes our way we just pick it up.

Home video market for Bollywood films in the overseas also has scope. Are you targeting that market as well?
Yes. We would certainly like to take Indian content outside India, but we have not done anything concrete on that front. India itself is so big and complex.

After we have settled down here we will look at going to US, UK, Canada, South Africa, Middle East and Singapore. Depending on distribution margin and packaging required for overseas market, the rates may be worked upon.

What about distribution of Hollywood films home video in the Indian market and their rate plan?
We are looking at getting them in India, but all the studios have a tie up in India. So till the licenses do not expire we cannot get them.

Over a period of one year things will start looking different. We will certainly try to sell them at rates less than today. But at the end of the day, we will have to work in close coordination with Hollywood studios because they will also have a say in it.

Moser Baer has acquired Hollywood films for theatrical release. But if film distribution is not on the anvil for the company, then why are you acquiring films?
Home video rights of certain films are not available until we take the whole package. International studios like to deal with a single window system.

So either we take all the rights or let others take the rights, who then will add their margin and give us the home video rights.

If sellers/producers do not support the idea of selling just home video rights (and you have to buy satellite and theatrical also), then how will you go about it in the long run?
Well, wherever producers feel they cannot give only home video rights we pick up everything, like in the case of Apne, Showbiz and Bhootnath. What is wrong in acquiring the satellite rights and selling it further at a little more margin? It is a win- win situation.

Moser Baer had targeted 50 stores in India by the end of the year. What is the status on that?
About 15 are already in place. We’ve rolled our stores in Pondicherry, Cochin, Madras, Hyderabad, Ahmedabad, Delhi, Kolkota and other places. Mumbai is on the radar but since real estate rates are high, it will take some more time. As per our model, we will have shops 600 – 800 sq ft shops, which will be designed to our specifications and will keep only Moser Baer films. No other store can have the capacity to accommodate our entire range in all languages.
 
Will Moser Baer license content to movie rental companies like BigFlicks? Since your content is already available for purchase at such low rates, what will the rental rate be?
Companies like Seventy MM have spoken to us, but have to revert to us with their business model. Whatever be their business model, we would just like to have a certain amount of margin. We are in the business of delighting consumers, whether he is delighted by our pricing model or rental services.

What is the status of Moser Baer’s home production films?
Shaurya is complete and we are looking at releasing it in April. Anubhav Sinha’s co-production Sankat City should be wrapped up soon. The film stars Kay Kay Menon, Rimi Sen, Anupam Kher, Chunkey Pandey and is directed by Pankaj Advani. This will release by May/June.

The casting for Zindabad produced by Anubhav Sinha is being finalized.

What is the breakup of your Rs. 500 crore investment for a period of three years?
Whatever is required in any business, we will invest, whether it is for film production or home video.

Going forward what are you expansion plans?
In the entertainment space we are looking at everything. In home video we have a business model, which can make a difference in the life of a consumer. Wherever we believe that we can create a difference we will enter into those businesses, but if we feel we will be just a ‘me-too’, we won’t venture into it.

So how is Moser Baer making a difference in the film production business?
In film production, we are not. Film production is more strategic. It gives us back the content. Why should I go out and buy content at a premium. Secondly, film production is the mother of all the businesses on the industry. It gives relationships and clout, and that clout then helps me in buying content.