It's an industry that's just about emerging, but these days it doesn't take too long for consolidation to set in. Bangalore-based DVD movie rental company Seventymm had bought out its Delhi-headquartered competitor Madhouse. The cost of the acquisition is being kept under wraps. Apart from helping Seventymm gain a leadership position in the DVD rental business, the acquisition will also help the company get a good foothold in Delhi and Chandigarh where Madhouse has a strong presence with a multi-nodal channel strategy. Says Raghav Kher, CEO and Founder, Seventymm: "This acquisition should further strengthen our strategy and execution abilities."
The co-founders of Madhouse, Sameer Guglani and Nandini Hirianniah, have joined the Seventymm management team. With Madhouse in the bag, Seventymm boasts roughly 28,000 subscribers across five cities (Bangalore, Delhi, Mumbai, Chennai and Chandigarh). And the company will be a ten-city operation by this year-end.
The acquisition gives Seventymm a head-start in the business that's being looked at closely by a number of big corporations. Anil Ambani's Reliance-ADAG is said to be gearing up to enter this industry with the launch of the online movie rental business, and Harish Thawani's Nimbus and Moser Baer are also eyeing this space.
Moser Baer is already selling cheap DVDs in the market. Existing players in this sector, which is expected to be worth Rs 2,000 crore by 2010, are Catchflix, Cinesprite and Movie Mart. That DVD rentals is a red-hot business is evident from the venture capital that's finding its way into these companies. Only last year both Madhouse and Seventymm received funding. Madhouse got Rs 1.05 crore, whilst Seventymm soaked in Rs 43 crore from two rounds.
Home video penetration is still low today, at roughly 3 per cent of total television households. But PricewaterhouseCoopers (PWC) projects that this figure will increase by 25 per cent over the next five years. "We expect the home video households to increase from a present base of about 3 million to about 13 million by 2010," says a PWC analyst. Seventymm hopes to rope in 1 million subscribers over the next five years, and is targeting revenues of Rs 500 crore by 2012.