2012: Internet and Mobile VC investments

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Investment opportunities in Digital Entertainment – Alap Bharadwaj

A quick analysis of the entertainment sector that is served via technology in the US reveals three main areas of interest – Music, Gaming & Video.  Music & Video can be further divided into purchased and radio/streaming and Gaming into console and handheld, all of which are doing fairly well in the west. Given India’s status as a late adopter, the question remains – Will the country’s entertainment focused technology companies see the same success that their American counterparts have?

The answer varies for all three subsections and in my opinion hinges on a critical difference in the engagement propensity of users when interacting with these different mediums. Beginning with music, I don’t believe tech companies focused on this space, be it pay and download or radio, will have much of a future. The average internet consumer in our country has gotten used to downloading music in ‘lossy’ (mp3, etc) compressed formats and widespread piracy of the latest music both in Hindi and English hardly provides much incentive to switch to paying. Hard evidence exists in the form of Apple’s continued reluctance to open their blockbuster iTunes music buying service to the Indian public.

Additionally the problem with offering a radio service in India is plagued with its own issues. The ability to listen to internet radio at work would be disabled for the majority of India’s working public (due to strict work policies against such actions) and the poor quality plus high cost of India’s 3G networks make streaming of radio and on demand music a distant dream. While a case for exception can be made for technology companies focused on providing cloud services for people’s personal music collections, these too would suffer from the access problems mentioned earlier. Above all music as an entertainment medium might have many consumers but suffers from the critical flaw I mentioned earlier – the users are not engaged, thus reducing inclination to pay for such content.

Gaming and Video however do not suffer from this flaw. Both sections boast scores of engaged users with the inclination to pay. The gaming market has largely been tapped and conquered by the Xbox360, Playstation 3 and the Nintendo Wii, but what off the online video market? This is the area I believe with the largest chance for growth. Indian GEC and Bollywood content has virtually no presence online and any exceptions are pirated content that regularly get booted off websites like YouTube. Indian content is crying out for a desi version of NetFlix or Hulu backed by demand across India and more importantly abroad. Investors would queue up for companies that would be able to offer a high quality offering in this space as the model has both a proven growth strategy and significant exit potential due to the availability of appetite from retail investors for public equity of this nature as well as global acquirers.

I strongly believe that video will be the space to watch in the coming years on a variety of fronts. Content aggregators (a la Netflix) as well as companies focused on enhancing the viewing experience and constructing analytics and software for the unique conditions in India will flourish in the coming years. Investors have already backed certain players – Althea Systems, that makes a social video browser called Shufflr, raised US$ 3 MM from Intel Capital in November 2010 and Apalya Technologies, that specializes in Mobile video streaming, has raised three rounds of funding, the latest in January of this year. Given that the video focused technology space has seen investment, we now expect to see significant investor appetite for players in the content aggregation and video destination space.

Is India ready for the Tablet PC revolution? – Uday Disley

It will not be long from now that all of us will have a tablet pc in our hands, much like what we would have experienced with a smartphone few years ago, only this time the adoption will be much faster. While Steve Jobs may feel happy about this, but as usual he waited for an year, before he officially launched his Ipad in India. He may have been ill advised not to launch in India, but will Mr Jobs regret, maybe yes, here are some points that he may have missed

A)     3G/ Broadband access: For a country where last mile connectivity has been one of the biggest issues when it comes to internet penetration, 3G/ wireless broad band access should solve the problem. The penetration will be aided by access which will become cheaper as competition increases. There is already talk within the industry that RIL, which has a pan India license for broadband, will do what RCom did for mobile telephony with its prices when they launched, and the rest as they say is history.

B)      Entertainment: When your mother-in-law is active on facebook, you know that social networking is really working in the country. I wouldn’t be surprised if she opted for a 500 gms device which pretty much covers more than her computing needs. Besides this, there is enough and more data on the increase in consumption of entertainment over the internet to substantiate the need for a hand held device. With a tablet, you can literally carry entertainment around with you, as opposed to lugging a 3 kilo laptop (for doing the same things).

C)      Price: Well all of us want the coolest thing that we own, to be the cheapest (price). The tablet’s are at an ‘early adopter’ stage, but there already seems to be a price war (thanks to Steve Jobs for an aggressive pricing on the Ipad). Our prediction is that the price of tablets will drop drastically over the next year or so. The reason is simple, thanks to Google’s android, the hardware is more or less commoditized. Recently I met an entrepreneur who plans to sell Android based tablets at about Rs.10K, while his landed price being Rs.6K (no points for guessing where it is landing from). Now you can expect the second round of handset wars between the likes of Spice, Micromax, Karbon and other homegrown brands. While you may never get the snob value of carrying an Ipad, but I believe that a majority of Indian consumers out there couldn’t care less.

D)     ‘I still have my doubts’: While many may argue that a combination of access, low price, and a ‘better than PC’ user experience is not a sure shot recipe for success, analyse this; you like and use your mobile more than your PC/laptop (and always had a freakish desire to throw it away when it hung); you are a compulsive social network user (you have facebook on your mobile and access it at least 3 times in a day) and last but not the least you wished the laptop was mobile enough to accompany you to the ‘pot’. If you still are in doubt you might just be missing out on the next big wave.

So is the tablet going to change how we do our computing, guess it will not, but it has the potential to be as disruptive as digital music players (thanks largely to ipod), has had an impact on how we access music and the music industry at large. You may still have PC’s, laptops and tablets co-existing, but the way we use all of this will change drastically. So the question really is ‘which side of the opportunity are you on?’

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