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In December 2006, Moser Baer India Limited (Moser Baer), the world's second largest optical storage manufacturer, announced its foray into the Indian home video market. Moser Baer had set up a separate Entertainment Business division to spearhead its entry in the entertainment sector through these initiatives in content distribution. Yogesh Mathur, Group CFO of Moser Baer, said that the company would leverage its proprietary technology and manufacturing strength to offer VCDs and DVDs at prices as low as Rs. 28 to Rs. 34 respectively.
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Moser Baer also said that it would spend up to Rs. 5 billion over the next few years in this new initiative, which included plans to acquire copyrights and licenses for 7,000 movie titles in all major Indian languages. Harish Dayani (Dayani), Chief Executive officer of Moser Baer's Entertainment Business, said that the company aimed to own exclusive copyright licenses for 40 percent of the Hindi films made in India by end of 2007.
The company also planned to leverage its distribution network to make its VCDs and DVDs available to customers across all major metros and small towns. This would include setting up of its own branded outlets and developing alliances with large format retail stores.
Dayani said, "That is how all FMCG companies do business and we will to do that for our home video business. The idea is to make the products available in every nook and corner of the country be it a paan shop, general store or for that matter retail chains dealing across product categories in addition to those specifically selling music and movies."1
Many analysts welcomed Moser Baer's entry in the Indian home video market and expected a shakeup in the industry. The Indian home video market was highly fragmented and affected by rampant piracy. Moser Baer said that as per a research study, India had over 26 million DVD/ VCD users and had witnessed a growth rate of over 25 percent.
However, despite this high potential, the home video market accounted for only 7 percent of the total film industry revenues of Rs. 79 billion.2 This was quite different from developed markets such as the US, where the home video market was as large as the theatrical market in terms of revenues.
Moser Baer's entry was expected to change the pricing dynamics in the industry as the existing VCDs and DVDs were priced between Rs. 100 to Rs. 200, and Rs. 200 to Rs. 600 respectively.3 The company intended to make movies more affordable for home viewing and encourage consumers to build their own personal movie library.
In addition to growing the market, analysts expected Moser Baer's low-price strategy to affect the home video piracy market. However, some industry experts felt that video piracy would continue to remain active as it was the new movie releases that were mostly affected by piracy.
Hiren Gada, vice president of Shemaroo Video, a leading market player in the home video market, said "Pulling down prices may curb the price-sensitive piracy-a movie being copied and sold for 10-20% of the original price. But what will be hard to tackle is the time-sensitive piracy, which happens because, according to law, there has to be a time lag between the theatrical and home-video release of a film."4
Moser Baer would have to work with movie producers and film distributors to shorten the time to market a new movie release and allay their fears that the home video market could affect their business. Moreover, Moser Baer could find it difficult to provide low prices for the latest movie releases as the rights would be costlier when compared to old movies. Technology obsolescence was also a key threat. But, the company said that it was prepared and had made investments in new technologies such as Blu-ray.
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1] Ashish K Tiwari, "Moser Baer entertainment will tread the FMCG route," www.dnaindia.com, January 14, 2007.
2] "Moser Baer Forays into Entertainment Space, Enters Home Video Market," www.moserbaer.com, December 21, 2006.
3] "Moser Baer India steps into Home Entertainment and Video Market," www.techshout.com, December 22, 2006.
4] Sanjay Bhattacharya, "Lights, Camera, Action...," www.screenindia.com, March 09, 2007.
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