Shemaroo started as a circulating book library in 1962 and became India’s first home video library in 1978. More than a decade later in 1986, it diversified into the acquisition of home video rights. In four decades, it has seen the face of home video change from VHS to VCDs and now DVDs. And when the satellite television boom happened, Shemaroo began monetising its catalogue of over 1,000 films by offering them for exhibition on various networks. Today, as the television industry warms up to DTH, Internet and mobile platforms, more distribution opportunities have opened up.

Hiren Gada, director, Shemaroo Entertainment, who is in the driver’s seat of the family-turned corporate business, shares his thoughts on the road ahead in the home video segment with DNA Money’s Arcopol Chaudhuri. Excerpts:

Home video prices witnessed dramatic changes in 2007. One year later, what has been the impact on the retail ecosystem?

The low pricing strategy by some home video labels has not yielded the kind of sales as one would have expected. That’s one reason why prices are now going up.

Your home video prices have found a middle ground though…

Yes. We did our own survey of consumers, distributors, retailers and did a profitability analysis. Today the ecosystem of home video market consists of producer, home video label, distributor, retailer and consumer. When everybody makes substantial money, the ecosystem will be in equilibrium. Unfortunately, this pricing has disturbed it significantly.

Today if we sell a VCD for Rs 30, the retailer’s margin is not more than Rs 6. Do you think Crossword or Reliance Retail will survive on that margin? How will they make profits? We (Shemaroo) have therefore kept our prices in tandem with equilibrium.

Our VCDs cost Rs 45, 66, 99 while DVDs cost Rs 99, 169, 299. The DVD market has not yet grown though and its fairly low volume compared to VCD.

But, there’s this whole debate over whether low pricing and advancement in home video release dates has managed to curb piracy to some extent?

See, pricing cannot be a panacea to piracy. It can’t be a remedy, because you’ve got to pay the producer, government, distributor and retailer. The pirate is not paying any of these. He’s just selling one master print. And then it becomes equivalent of a peer-to-peer network. He spends Rs 10 and sells it at Rs 15. So, the original priced at Rs 30 can’t compete with the pirated copy anyway.

Therefore, how low pricing has been able to combat piracy is not proven yet.

With a library of over 1,000 titles, wouldn’t it make sense for you enter the online and offline video rental businesses?

We’re not considering setting up retail outlets. We’re strengthening our distributor network to push sales further. The challenge for movie rental business is same as home video distribution business. There is still the window of 4-8 weeks after the movie is released in theatres and original home video is not out in the market.

This is the time when customers can source the pirated copy from the neighbourhood mom-n-pop stores. Since 60% of rental business today depends on the pirated products, the customer is always going to opt for it.

What are your key focus areas then, over the next one year?

As a corporate, one of the key focus areas in the current fiscal is creation of our own content. We’re investing roughly Rs 65 crore over the next one year in production of live action and animation films. In animation, after Ghatothkach,we want to produce about 2 films in a year. In live action genre, we’ve got about 3-4 films in various stages of production right now. Within the home video business one of the focus areas is the non-film category -spiritual and health, television, children’s edutainment content.

With several DTH players entering the market this year, how are you monetising your home video library for payper-view?

Currently, the hold-up is that the DTH rights are bundled along with satellite rights to TV channels. Secondly, on an industry level, the revenue till now from DTH pay-per-view has not been very significant. Hence, the case for unbundling those rights from the satellite rights has still not been strong enough. In fact, maximum pay-per-view happening is on new films.

A big-budget movie today, fetches anywhere between Rs 8-12 crore in television rights alone. Out of this, if you look at the DTH component, the producer’s share may not be more than Rs 20-30 lakh. When this becomes significant enough, the larger DTH operator will come directly to home video labels like us and buy rights on an exclusive basis. Those movies will become his USP, but that critical mass or point has not yet come.

Source : DNA