Movie rental business to see Rs 600 cr investment  ( July '18,2008, Business Standard)

FILMS: Rising real estate costs, overheads and movie prices fail to daunt the nascent industry.

The online movie rental business will see an investment of more than Rs 600 crore over the next three years. The plan is to increase the number of subscribers to around 12 million from the current 110,000.

The money will come from the national players in the market— Anil Ambani's Bigflix, Bangalore-based Seventymm and Delhi-based Movie Mart.

Currently, the annual turnover of the business is around Rs 40 crore. A subscriber pays Rs 300 a month and gets to watch unlimited number of DVDs, home-delivered.

The business faces issues like escalating realty costs and ever increasing fee for content acquisition. Lack of logistical support also plagues the business.

Kamal Gianchandani, COO, Bigflix, says: "Content acquisition, talent crunch, piracy and the escalating realty prices across large cities are adding to our costs, but we are committed to this business as there is a definite need gap for home viewing."

The company has opened 80 stores across 10 cities, including the metros. Bigflix plans to invest of Rs 400 crore over three years and plans to open 500 stores.

Subhankar Sarkar, COO, Seventymm, says: "There are around 48 million homes that have DVD players. Even if each such home rents two movies a month by paying Rs 100, there is huge potential. If one is able to get 10,000 subscribers in a city, then the business becomes cash positive in that city."

The company currently claims a subscriber base of 70,000 from operations in six cities. It will start operations from 20 cities by 2009. However, it is far from breaking-even.

Suresh Mansharamni, chairman, Movie Mart, says: "When we entered the business, we realised there will be huge investments required for going national. That is why we have tied up with Dutch logistics company TNT for delivery of our DVDs across 300 towns."

He added: "We save much from this. Our annual sales turnover is Rs 5 crore. We are making money from day one."

"Bigflix and Seventymm together employ nearly 900-delivery boys. Then there are rentals and content acquisition costs that make this a very capital intensive business," says an industry analyst.

There is also an expensive scramble for movie titles. Gianchandani from Bigflix says: "Content acquisition is about 40 per cent of our cost."