Think of what Google is to search, YouTube is to video, Zite is to print, or iTunes is to music and apps. They are aggregators that have become media brands in their own right. Globally, stand-alone media brands have found the going tough online, or on mobiles. There are some successes, an Economist or a Disney, but largely the digital ecosystem has defeated big media. The power centre in the “new media” ecosystem in most mature markets is invariably an aggregator: someone who offers a range of choices — across technologies, content and formats.
Who will be the giants in the new media ecosystem in India? Will it be an aggregator-turned-media company like Hungama, or a new-media savvy Times Group? These questions are fun to ponder over given how distant India is from the disruption that the internet has wrecked in global markets.
This is because at about 100 million users, the wire-lined, PC-based Net is still a minnow in terms of reach, as compared to newspapers (345 million readers) or television (700 million viewers).
But the mobile is not. At 873 million, India has more mobile users than television viewers. They, therefore, represent a powerful media force — offline or online. And that is why watching the space for mobile entertainment gives you critical clues to the way this market is headed.
Of these 873 million users, more than 373 million can use the internet on their mobile, going by Telecom Regulatory Authority of India data — though how many actually do is unknown. On an average, most telecom operators earn 10 per cent of the revenue from data services. That figure should double, judging by mature markets. So while the PC-based internet continues its torturous journey of penetration, the mobile, in all probability, will create new media intermediaries sooner.
For very long, it was predicted that a telecom operator (telco) would be the “new media” giant of the future. With their ability to market and bill for mobile entertainment, telcos have done a great job in helping the market grow from almost nothing in 2000 to over Rs 10,000 crore in 2011. But how long can they dominate?
There are several reasons for the churn in the digital media ecosystem, not the least of which is the revenue share. Content firms get only five to 15 per cent of the Rs 10,000 crore in mobile entertainment revenue. Between 15 per cent and 20 per cent goes to the aggregators, the back-end guys who bring you the content, the technology, the payment systems and the adverts. Between 60 per cent and 80 per cent is retained by telcos. In Europe, Japan or other parts of the world, content companies get a bulk of the revenues.
As both aggregators and content firms battle hyper-competition, falling margins and stagnating top lines, they are finding it easier to go directly to device manufacturers and consumers in a bid to increase their revenues. Zenga, a mobile TV operator, for instance gets roughly half its revenues from embedding its technology and content in handsets, 40 per cent from reselling content to other aggregators, and 10 per cent from advertising. Hungama is actually a media company that publishes formats and distributes content across 2,800 platforms in over 35 languages and 127 countries. Its pitch to content firms: you focus on creation; let us get you the money. That was never what the telcos said.
On the other side are huge media firms, such as the Times Group or Network18, which have robust internet businesses. The reason Times does well selling content on the Web or phone is cross-media synergies. The average aggregator doesn’t have access to expensive ad space in The Times of India, the largest-selling English newspaper in the country, or on the group’s TV channels or radio stations. Nor does it have access to the group’s content. So, there are equal chances that a large media company could become the big guy in the digital space as well. The only issue here will be neutrality. Many media firms may not want the Times, or Network18, or any other competitor to aggregate and sell their stuff.
Out of this churning the digital ecosystem in India will throw up a set of intermediaries who will become as powerful as, say, Hulu or YouTube. Whether this will be an aggregator-turned-media firm, a telco, an old-fashioned media firm or a combination of the three is the question.