Wednesday, March 24, 2010

Indian Media & Entertainment Industry Report

Who says print media is a dying breed. Atleast in emerging markets such as India, where disposable incomes are beginning to rise thanks to a strong economy over the past few years, the media and entertainment industries show no signs of slowing down. The annual FICCI survey (carried out by KPMG this year) of these industries reveals some interesting numbers. Print media revenues are expected to grow at a CAGR of 9% between 2010-2014. However, what is more interesting is that subscription revenues in TV & Print are estimated to grow at a CAGR of over 12% during the same period. The report is packed with stats and gives a ringside view of India's M&E sectors. You can download a copy of the report from KPMG India, or view it below.
FICCI-KPMG India Media & Entertainment Report 2010

Saturday, March 20, 2010

3G/WiMAX Finally off-the-block in India

India appears all set to finally auction 3G spectrum after one false start too many. Over 9 incumbent and new entrant operators have applied for the bidding process. While the list has all the usual suspects, a few names sure make you wonder. Videocon, with operations reportedly in only one city currently, Etisalat DB with no operations on ground and S Tel, an operator with a professed interest in low-ARPU C circles of the country makes one wonder if the hype around the India mobile story still continues to be strong. While 3G definitely can act as a boost to low-ARPU hit telcos, however, it is not likely to be a magic pill that will help new entrants rapidly pose a credible threat to established market leaders. At least not with the limited amount of spectrum that is up for grabs. It is in this context the Telenor's response to stay away from the auctions appears a well-taken decision. Indeed, opportunities to gain a 3G presence will increasingly present them as an inevitable market shakeout looks more certain with every passing month.

Despite past expectations, global players that currently don't have a presence in the market have stayed away from the bidding process. While one can debate ad nauseam the benefits of entering or staying away from the Indian mobile market at this point in time, a little less competition might be just what the doctor ordered for this hyper-competitive market. And while we are at it, here's hoping that the 3G pricing, when it finally hits the market in Sept 2010, is more realistic than what we have seen.

Thanks to the delayed 3G spectrum auctions, the collateral damage is more visible on the broadband front. While mobile growth has been extremely strong in the last few years, the same cannot be said of broadband growth. With limited fixed-line network presence across the country, and lack of last-mile unbundling, broadband has been the biggest sufferer thanks to lack of wireless options thus far. Naturally, the auction process for Broadband Wireless Access, tied to the 3G auction process, has received more applications, 11 in all. It has also attracted the attention of technology majors such as Qualcomm who are hoping to queer the pitch for WiMAX proponents in the auction. However, that is unlikely to take away from strong bids from WiMAX operators who are looking to use the technology to reach an under-served audience. To me, these auctions are probably far more significant in terms of the impact that they can have on India.

Be it 3G or WiMAX, it is about time the Indian consumer gets to experience the benefits of technology advancements. Here's hoping that the auction process and the subsequent service launches finally see the light of the day.

Friday, March 19, 2010

Will Microsoft's Windows Phone 7 Series Bring Focus Back on End-User?

Software behemoth Microsoft is usually not the company that gets top-of-the-mind recall when someone mentions smartphones. Particularly, in the post-iPhone era, Microsoft's foray into building software platforms for smartphones has been turning into an eminently forgettable chapter. And it is not just mindshare, the numbers speak for themselves. Gartner has recently published its 2009 handset market share figures, and Microsoft's slide is evident. The company slipped from its third position in 2008 to fourth behind Symbian, RIM and Apple, accounting for only 8.7% of all smartphones shipped globally.

Microsoft appears to have recognized the precarious position that it is in, one bordering on irrelevancy in the market for a mobile operating system. And in a manner which is very un-typical of the company, Microsoft chose to tackle the problem head-on with its launch of the Windows Phone 7 Series, which despite being a mouthful, packs a punch. While Microsoft has take a completely different and bold approach to the design of the OS, it is more interesting to see the impact that Microsoft can have on the overall smartphone ecosystem, that increasingly appears to be to shaping up as a bubble that I had earlier alluded to, one dominated by an inordinate focus on mobile applications.

The smartphone market has been in a phase of hyper-attention (and strong growth too, I must add) for the last couple of years. More so with the significant attention that is being paid to applications and their ever-increasing download numbers, particularly from the Apple Store. This overwhelming focus on applications has meant that every player in the telecoms and handset space, and their neighbor, has an app store. However, increasingly, the discussion appeared to be veering so much towards applications, that the overall user experience and a primary focus on the end-user was probably lost along the way. While Apple offered a highly engaged audience for mobile developers, Android with its open approach promised to unshackle developers from the restrictive rules of Apple's vertically integrated ecosystem. Phone launches were accompanied by significant noise on how many applications that users can download. More worryingly, the primary target market for smartphone vendors appeared to be developers and how to bring them aboard. The implicit assumption has been that users will flock to the platform that has more applications. Take the recent announcement of the Wholesale Applications Community from the grand alliance of 27 mobile operators and device vendors which was clearly aimed at attracting developers onto a platform that they control. And this thinking is increasingly becoming more prominent. Indeed, a Wall Street Journal story suggests that the recent purge of risque apps on the Apple store might get developers to abandon ship and move to Android. Like most of the focus in recent times, the end-user is completely missing from the picture. The singular focus on developers is too hard to miss.

I am in no way denying the important role that developers get to play in the smartphone ecosystem. Indeed, I'd attribute the strong success of smartphones as a category to a potent combo of killer apps + high carrier subsidies. However, that should not be reason for any one stakeholder in the ecosystem to upend the consumer's position.

It is in this context that I find the Microsoft approach to a mobile platform refreshing. The UI in itself has eliminated the need for users to jump between applications. While it might be a tiny change in the overall context, however, I view that as indicative of the consumer returning to the forefront. It represents a design where the end-user takes precedence over all other stakeholders. Microsoft's presentation at the MWC has been remarkably bereft of a focus on applications. In fact, the company has gone on to the extent of not disclosing much info for the developer community, reserving it for a separate developer-focussed event.

Microsoft's focus on the consumer, and this time the enterprise category, with exchange, sharepoint and office functionality in-built is likely to work in favor of a significant proportion of enterprise users. In the smartphone space, players including Apple and Android vendors have targeted this segment as an after-thought. Driven by the idea that enterprise consumers can be a profitable proposition, multiple vendors and carriers have tried to push through smartphones into the enterprise, but haven't seen real great successes against the likes of RIM. However, Microsoft's Windows Phone 7 arguably holds the strongest potential for enterprise adoption, thanks to its native feature-set.

Microsoft has, over the years, shown that it has vision when it comes to desktop computing, user interfaces and the like; and this launch certainly proves that they have the potential and capability to boldly think out of the box when it comes to mobile platforms. However, it remains to be seen if this vision can be translated to execution. But as far as I am concerned, I believe Microsoft has already made its contribution in changing the course of the smartphone industry. By bringing the focus back on the end-user, it is forcing its current competitors to acknowledge and act. And in the long-run, despite the success or failure of Windows Phone 7, this development is likely to have a positive impact on the overall industry. Indeed, there are very few, if any, examples of industries that have thrived by focusing on any element of the value-chain that reads other than end-users.

Thursday, March 18, 2010

YouTube’s live sports broadcast deal is watershed moment for online video

This post first appeared in VentureBeat

YouTube is taking a major step today with its first live sports broadcast deal. It will be streaming live the Indian Premier League Championships. Such live broadcast deals have hitherto been the bastion of traditional pay TV operators. The Google-owned site signed an agreement with the organizers back in January and retains rights for two seasons.

The IPL is a tournament of a short-form of cricket that has become extremely popular in the last couple of years. The tournament spans 60 matches over the next 45 days. The IPL is currently in its third season, and has already seen runaway success in attracting eyeballs. By acquiring global rights (other than the US market, where Willow TV has the rights) for online streaming, YouTube is testing out a whole new business territory.

The IPL constitutes what are called Twenty20 cricket matches between eight teams made up of players from multiple cricket-playing nations. Revenues from advertising and sponsorship will be shared between Google and IPL, with YouTube offering the content free to consumers. The tournament itself is big money. TV broadcasting rights for 10 years were reportedly purchased by India’s Sony Television Network and Singapore’s World Sports Group for over $ 1 billion. In previous years, while online streaming was available on the official website of the tournament, however, it was geo-blocked in nations where the IPL had TV broadcast deals. That is changing this year. YouTube’s deal with IPL requires them to delay the stream by 5 minutes in countries where they have simultaneous TV broadcasting. Moreover, the online streams promise significant interactivity and customization. Viewers will be able to select their camera choice and freeze and fast-forward footage.

YouTube is reportedly going to stream the match at four quality levels. Google is also bringing its social network Orkut into play here through IPL-branded communities while engaging in both print and outdoor advertising promoting the event.

The timing also appears to be right. Comscore reports that by end of January 2010, over 10 million Indians had visited a sports site in the month, an increase of over 97% year-on-year. Viewer engagement also recorded strong figures, with both total minutes spent and total visits recording growth in excess of 100%. Google is expecting over 10 million unique visitors, and over 40 million cumulative viewers through the duration of the IPL. To put this in context, India had over 8 million broadband subscribers [PDF] (defined as speeds >256 Kbps) at the end of January 2010. Sponsors too are looking to cash in on the latent demand. One of the sponsors on YouTube, telecom operator Airtel is upgrading the access speeds of all its fixed broadband subscribers who wish to watch the matches to 2 Mbps, although fair usage/tiered limits still apply.

What does this deal mean for YouTube? Google is stepping on the pedal when it comes to generating revenue streams on YouTube. This tournament, when viewed in the context of YouTube’s tryst with legal content is interesting. YouTube has, to date, been primarily a forum for user-generated content, but it’s been trying for a while to increase the proportion of content that it can sell advertising on. User-generated content is great for pulling in the numbers, but it is deals such as this that will likely help YouTube make money. Already, large name-brand advertisers including Coca Cola, Samsung, HSBC, and HP are said to have signed up for advertising in India, with each of them said to be purchasing between 5-10 million ad impressions. YouTube will also be producing over 20 clips per match, which will be up for sponsorship, and it is likely to deploy several ad formats including homepage ads, pre-roll and mid-roll ads, and banner ads next to the video player. Advertisers get an opportunity to target a global audience. In the UK, which has a sizable cricket audience as well, local advertisers are being brought aboard.

YouTube is no stranger to live/high-traffic events. Its live streaming of U2’s concert last year attracted over 10 million viewers. The site had also hosted highlights of the Beijing 2008 Olympics, but only in geographies where digital rights could not be negotiated. Experience from such major events could ideally help YouTube refine its pitch for streaming other sporting events. While the current agreement offers content free, YouTube could indeed explore paid subscriptions of such events at a future date. Again, all of this depends on how successful the company is at hosting the event without technical hiccups.

For pay TV operators, who traditionally have paid significant broadcasting license fees to gain exclusive access to sporting events, YouTube’s entry is sure to shake up the scene. There are not many ways in which broadcast TV can compete with the interactivity offered by online viewing. In markets such as India, where cable and satellite subscription is still growing and broadband penetration is very low, migration of ad dollars might be limited. However, in a market such as the UK, YouTube will likely eat into the potential ad revenues that ITV4 (incidentally, a free-to-air channel) looks to generate. And if you take into account that set top boxes that allow YouTube content to be streamed to large-screen TVs are also making their presence felt, pay TV operators, such as Sky, that have traditionally relied on exclusive sports content definitely have reason to be concerned.

For Google, the imperative of making YouTube profitable is becoming more pressing with every passing day. By gaining rights for online streaming of major sporting events, YouTube gets a solid chance of trying to position itself as a comprehensive online video destination. One comprised of user-generated content, video rentals, on-demand premium clips, and live events. Viewed in that context, YouTube’s current deal with the IPL indeed appears a step in the right direction. If YouTube succeeds in creating a compelling usage experience for the viewer, one that betters broadcast TV, then rest assured, Google is going to be a regular fixture at event rights auctions around the world.

For those of you based in the US that want to watch the IPL matches, YouTube has clarified that you’ll be able to view them 15 minutes after they have ended.

Google to offer stripped-down Nexus One phone in India?

This post first appeared in VentureBeat

Google may be preparing to launch a stripped-down, low-cost version of its Nexus One smartphone in India, and possibly other developing markets, according to speculation on multiple Indian technology sites. The rumors appear to have originated in a tweet from a TV show producer. But irrespective of how it got started, it sure highlights the importance that Google is placing on the developing markets.

Apple has historically focused on building high-margin products and slapping the legendary Apple Tax on them, but this strategy hasn’t found many takers in markets such as India. Indeed, many would say Apple has priced itself out of the market. In India, the iPhone 3G 8GB model is priced at about $680, while the 16GB variant is priced at about $790 (the 3GS has not yet been released, possibly due to the limited uptake that the 3G version has met). However, Google’s entry into the mobile handset space has to do with more than just device margins. The company is trying to increase the avenues by which consumers can interact with its services. Be it in the mobile space through Android or through its attempts at experimental fiber networks. And it is in this context that emerging markets such as India represent a large market that Google can ill-afford to ignore.

India is adding close to 18 million mobile subscribers every month, and the Indian telecom regulator TRAI estimates [PDF] there were around 127 million wireless subscribers accessing data services (essentially GPRS/EDGE based mobile data services) at the end of September 2009. That is a sizeable number, and one that continues to grow. Mobile advertising, too, is beginning to make its presence felt. Admob metrics [PDF] from January 2010 show India accounting for over 5% of all ad requests, behind only the US and ahead of many other developed mobile markets including Japan and the UK.

Moreover, Google already has some strong traction in the market. A Comscore September 2009 reportestimates that Internet users in India spent up to a third of their online time on Google sites, a figure that is over three times the global average. Given such strong usage indicators of its services, Google will want to build on its brand strength, while simultaneously tapping into the fast growing mobile space. Google is already experimenting with multiple mobile products for its Indian audience, including Google Phone Search (search using voice calls to a toll-free number, with results being sent as a text message), Google SMS Search (search using text) and Google SMS Channels (SMS-based mobile communities). Putting a feature-rich, yet low-cost phone into the hands of its users appears the right next step.

It is in this context that a stripped-down version makes sense from Google’s perspective. Google has previously signaled that it considers India an unfriendly marketplace for smartphones. One can only speculate on what components might be tossed, but there are a few low-hanging fruit. India does not yet have 3G networks, given that the required spectrum has not been auctioned yet (although that will likely change soon, hopefully). Similarly, GPS and WLAN chipsets could be on the block, if Google is looking at cutting down on the radios. The display, too, could be swapped out for a less expensive and smaller LCD screen as opposed to the OLED display that the Nexus One currently boasts.

The resulting device would definitely not be what Google calls a “Superphone“, and therefore would not qualify for its online webstore. However, that might do a world of good to Google if it were indeed to launch such a phone in India where online commerce is still finding its feet. Apple found out the hard way that in a large country such as India, having a presence at the neighborhood handset retailer store is critical to driving uptake (Apple’s iPhone is primarily available only at select carrier-owned distribution stores, which are very limited). While Google might not have the experience of dealing with large third-party distributors, it has shown that it does not shy away from such challenges. Indeed, the very fact that it chose to launch its own distribution channel for the Nexus One in the US is testimony to that.

India would likely not be the only target country for such a stripped-down version. Brazil comes readily to mind as another good candidate. For Google to translate its successes on the desktop to the mobile web, a strong presence across devices will be inevitable, be it through carrier partnerships or through Android-based phones, or better-still, a Nexus-One style device where Google exerts significant control. And emerging markets such as India with its large mobile base are probably the right entry point.