Television

'Home entertainment is not a commodity but a content- driven business' : M.N. Kapasi - Excel Home Video MD

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For Excel Home Video, it is time to expand as big companies like Anil Ambani's ADAG are planning an entry. The firm recently added MGM to its portfolio of Hollywood studios it has deals with. It is also tapping the TV DVD segment aggressively this year.

Eventually, Excel plans to get into local content as well for the overseas markets. Indiantelevision.com's Ashwin Pinto caught up with Excel Home Video MD M.N. Kapasi to find out more about the home video market and the company's growth plans.

Excerpts:

With how many studios does Excel have deals structured?

We are the home entertainment licensees for among others Fox, Touchstone, Hit Entertainment and Merchant Ivory Productions. Recently, we added MGM to our catalogue. We also have a lot of independently acquired international content. These include documentaries and special interest products. We also have some children's titles. We recently launched an educational product called Love And Intimacy.

We have a revenue sharing arrangement with the studios. We also have the master license of Electronic Arts.

What is the share of Hollywood studios have in the home video market? How is Excel faring and what is the growth rate you are expecting?

Studies have shown that international content in the home video business has a large share. For Planet M, for instance, 45 per cent of home videos sold are international.

Within this category, Excel has a 40 per cent market share. We expect growth of 25 per cent CAGR.

Generally how many units do you sell on an average for a title?

This is difficult to pull out. The industry which is nascent, is still hits-driven. One big hit or a flop, can skew the average. A big title normally does 15000-200000 units. An average performer sells around 10,000 units.

For this year so far, our top sellers have been Dor, Pirates Of The Caribbean: Dead Man's Chest, Night At The Museum, Cars and The Devil Wears Prada.

Excel has been scouting for a strategic investor for quite some time. Has anything moved on this front?

We are always open to this option. A partner would add to the speeding up of our growth. The partner could be forward or backward integrating.

How has Excel gone about improving its distribution model?

The addition of our gaming division has strengthened our distribution. That is because every gamer is a movie buff.

We have chased the non traditional distribution model quite aggressively. This includes having a presence in major retail stores which do not have music but have movies and games. A division in our firm actually looks after this aspect.

We do not have baggages. Firms that are older than us came into the home video area with baggages. They had the psyche that home entertainment is more a rental product than a retail one. Our aim was to make the home entertainment space an ownership business rather than just a renting one.

Could you talk about your Movies and More division that launched last tear?

It is a retail chain division focussing on films. It also sells games and music. It is run by movie buffs and targets a captive audience. We are now looking at category management tie ups.

Right now there are 14 outlets in Mumbai and Pune. The target is to reach 40 outlets across different cities by the end of the year.

Now you have ATM machines and online selling companies dealing with DVDs. How is Excel adapting in this changing environment?

We are a technology savvy firm. We know how online buying happens in most developed countries. We have used the internet in the past for gift ideas, pre order campaigns. The internet works well for this.

One problem for a Hollywood fan is that only a fraction of the films released in the US are available on home video in India. That is also the case with theatrical releases. Do you see this situation changing or is there not enough demand for Hollywood beyond blockbusters and franchise properties?

The scope is there to expand. We have tried new things over the last couple of years. We have released direct to video titles. This year we are looking at TV titles.

However the certification process is the one factor that slows us down. Even though home video is a private decision, unlike cinema which is public we still have to get our products certified. The TV show Prison Break has been sitting with the censors for the past seven months.

'We are open to strategic investors. A partner would add to the speeding up of our growth'

Could you elaborate more on the television DVD plans?

This is a very niche segment still in India but there is a market for it. Due to the size of our population even that niche is large. This year we are focussing on this area.

We are looking to have 20 titles here. Six to seven titles are already present in the market. We will launch new seasons of shows like 24, Desperate Housewives, Lost, Alias. Commander In-Chief is another show that we will launch on DVD. TV shows on DVDs in developed markets contributes 22 per cent to home videos revenues. We expect similar growth in India.

Does Excel have plans to get into the rental business as well?

Our Movies and More division is capable of adapting to the rental model. We had the idea that it should be like Netflix- a rental, online hybrid. But there are challenges.

As you said, there is a lot of content in the US that we don't even have a fraction of. You find rental products in the grey market and through parallel imports. For instance, the film Borat has not been rated and is available for rental. If we were to get into rental, then we would have to compete with this. A level playing field does not exist. Having said that, firms like Reliance are setting up rental outlets and we are looking forward to seeing how they fare.

You mentioned the tie up with Electronic Arts last year for interactive gaming. What progress has been made in this area?

There were start up issues and the tie up was novel. We had aggressive price points and avoided titles which have parallel imports. The gaming industry like home video, has parallel imports.

We brought in new capabilities. We released the Harry Potter And The Order Of The Phoenix game which was at the same time as the global launch. Next year there will be Fifa 2008. At this point in time we are not talking with Indian game publishers. Electronic Arts realised that we have in-house synergies which would help the games business.

Since we have the market leader in gaming with us, we would like the business to settle down before distributing other firms' products. The amount of money that Electronic Arts puts into making a game is sometimes equal to a Hollywood blockbuster. That is why their products are at least twice as superior to the competition.

Packaging is important when it comes to purchasing decisions. What innovations has Excel done recently in this regard to distinguish its products?

It is around 15 per cent of the effort that we make in product presentation. It is important that packaging connects with the film. We also provide value adds and also in terms of the picture and sound quality. International content has DTS, THX certified sound on them.

There are only two Hindi films that have DTS sound on the DVD. Both of those titles, Lagaan and Parineeta, were released by us. Parineeta was the first Indian DVD to have a director's commentary.

What are the major titles coming up?

We have Pink Panther, Bond titles to launch from MGM. We will be launching the TV show The Simpsons on DVD. We will be releasing films like The Last King Of Scotland, Eragon, Peter Pan Special Edition, Apocalypto.

In terms of marketing what are the kind of activities that Excel does to create buzz around new titles?

The home video segment has a limited marketing budget. So we innovate. One programme is exchanging VCD tiles and the consumer only has to pay the difference to get that title in DVD. This has worked well.

We find that this particularly happens for premium classic titles like Titanic, Sound Of Music. We also have a money back guarantee for all our products.

We do tie ups with hardware retailers. So if someone buys a DVD player from a certain retailer there will be our coupons offering a discount. That way it makes it easier for the customer to immediately start a library. In the past we have also done synergy marketing like re-releasing a film on home video when its sequel was being released theatrically.

There is a lot of talk about low prices of DVDs. Does Excel have plans here to reduce prices which would lead to more sales?

We have around 30 different price points. We have animation VCDs priced at Rs 50. Then we sell a complete season of a TV show like Lost for Rs 2000. Sometimes we also have different price points for the same product. For instance while the Parineeta DVD was sold at the Rs 300 price point, we came out with a Collectors Edition for the film which cost Rs 600.

This is based on consumer research. I don't think that home entertainment is a commodity business; it is a content driven business. Do you buy a book just because it costs Rs 30?

We do consumer price point promotions. We have a promotion running with 200 titles. Each is not more than Rs 333. Our dubbed VCDs are cheaper than the English VCDs.

The challenge in local content is that prices are coming down. How will you cope with this?

In terms of prices, the feedback we have been getting is that often cheaper priced DVDs have the quality of a VCD. It is the equivalent of buying cheap T-shirts from street vendors that quickly get ruined in the washing machine. Does the consumer only care for a low price and not for quality? When we get a nod to this answer, then we will have a re-look at our strategy.

Right now we do not want to compromise on quality. Parineeta, Corporate and Dor sold over 1,00,000 units at price-points that are 10 times higher compared to low priced DVDs that you refer to. Great content, good quality at the right price-points and penetrative distribution will always have the ‘Consumer’ with it.

We also want to sell Indian content on home video abroad in countries like the US, UK, Australia from next year. The NRI market is underserved in this area. We have already started putting plans in place for this. In those markets the content on home video might be there but the quality is lacking in terms of presentation. We will make sure that our products are available with as many retailers as possible. We, however, do not plan to set up our own stores abroad.

What are your expansion plans?

We will have more local content next year. While some film producers have started their own home video label, there are also independent producers who do not have their label. They do not have an outlet as they do not have the economies of scale of putting it in place.

Our aim is to release six to eight films next year. We will scale this up as we go along. We are looking at a revenue sharing model with the producers and we are confident that this will happen as we are transparent in our operations.

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