Business Today

Rural magic

Media Magic’s pre-loaded content cards and kiosks - stocked with Bollywood movies, songs and games - are a hit in rural India. But can the company fight off competition and grow in a deeply fragmented market?

Anusha Subramanian | Print Edition: August 23, 2009

Let us entertain you: Vijay Singh (L) & Vivek Palod
Let us entertain you: Vijay Singh (L) & Vivek Palod

Not so long ago, I escaped to the Garhwal Himalayas for a trekking trip. To my complete surprise, I found that my porters and guides were not so different from youth in Mumbai, listening to music and watching Bollywood movies on their mobile phones at heights of 16,000 feet.

It can sometimes be the only form of community entertainment for these men who are either busy escorting tourists up and down mountains during the busy season, or who have no television at home. Their phone is not just their phone—it is their radio, MP3 player, gaming console as well as television.

This is a phenomenon that is rapidly becoming commonplace throughout small town and rural India, where memory cards loaded with content are being snapped up by cellphone-toting youngsters at a rapid rate. This is precisely the audience that Media Magic—started by entrepreneurs Vijay Singh and Vivek Palod—is determinedly targeting.

“There is a big opportunity in these markets,” says Palod. “Besides, it makes a lot of commercial sense. The lease rentals in metros and bigger towns don’t justify the competitive business that we are in. We wanted our own level playing field and ecosystem to grow with our franchisees,” he adds. (Prior to launching Media Magic, Singh and Palod had started Mobile Magic, a chain which sold cell phones and accessories.)

Mobile Magic And Media Magic
Founded in: Mobile Magic, 2004 and Media Magic, 2008
Focus: Has brought entertainment to the rural consumers on their hand-held devices (mobile phones) at a low cost and easy mode of delivery
Scale of Business: Mobile Magic’s revenues are Rs 20 crore but stalling. Media Magic revenues are Rs 10 crore but the company expects to log Rs 40 crore by the end of this fiscal (March 2010)
Presence: 48 stores in 30 towns across 9 states (mainly the west and north). Looking to move into the south. Media Magic products such as pre-loaded memory cards are sold in their own outlets as well as in general stores in small towns
Investors: The first Mobile Magic store was set up with a bank loan and thereafter through a franchisee model. Currently looking for funding for Media Magic

Media Magic sells content in the form of pre-loaded 2GB memory cards that are hard to resist for anyone starved of entertainment in the hinterland. These cards contain fulllength hit Bollywood movies such as the Akshay Kumar-starrer Bhool Bhulaiyaa or even older classics like Bobby. Also available is a vast range of film music, wallpapers and games. Customers can procure these cards— ranging from Rs 399 to Rs 599 each—through Media Magic’s own stores or dedicated kiosks at mobile retail shops or at most general stores where the firm doesn’t have a presence. The company sells content in Hindi as well as Marathi, Bhojpuri and Bengali.

Small town, big market
Media Magic’s rural foray makes good business sense from a number of perspectives. First, its founders are both small town boys—Palod is from Jalgaon and Singh from Nagpur (both in Maharashtra)— and they have an instinctive feel for their market and customer demography.

Secondly, they have hinged their business model on solving the one significant barrier to content delivery in rural India. “Physical content delivery makes more sense than the online model because broadband penetration and connection is still low in rural areas,” says Palod. Thirdly, the market for mobile content is huge—some Rs 4,850 crore—and growing fast.

So far, Media Magic is the most visible player hawking content cards to rural India. It’s dominance in this market is further solidified by exclusive tie-ups with Hungama Digital Media Entertainment (all digital content) and Shemaroo (movies and videos), the biggest players in the digital content space today.

Moreover, its partners are buoyant about the company’s prospects. “Media Magic has very good mobile retail distribution presence across the country and rich media content for the mobile space rides well on this,” says Hiren Gada, Director, Shemaroo Entertainment. “Its rural presence is big and that’s a plus for a company like ours. We have seen there is a huge appetite for content from this market,” he adds.

Rural Kings Of Content
No direct competitor in the memory card space
Exclusive content deals with Hungama (all digital content) till 2011 and Shemaroo (movies) till 2012
Is selling its products even through rivals such as Spice Mobile’s Hotspot and Essar’s MobileStore
Large current rural consumer base of 100 million

After four years, Mobile Magic stores are spreading fast: from the interiors of Maharashtra and Gujarat in the west, to the interiors of UP and Bihar in the north. From three exclusive stores in the first year, the company has expanded into a chain of 45 franchisee stores dotted across 30 towns in nine states. One can find Mobile Magic stores in Sangli, Latur, Satara, Karar, Jaunpur, Meerut and Hardoi, to name a few.

Five years ago, Palod and Singh had different ambitions, primarily selling cell phones and accessories in Nagpur. The switch in focus from handsets to mobile content was a nobrainer. “The retail business is currently seeing a slump and the margins in this business are as low as 3-5 per cent,” says Singh.

“We realised that the content services business had more potential since, for most youths in small towns, the mobile phone doubled up as an entertainment device,” he adds. The two figured that margins in this still-nascent market were upwards of 20 per cent. Despite the downturn, Media Magic has had a turnover of Rs 10 crore that is expected to reach Rs 40 crore for the year-ending March 2010.

Media Magic has also garnered a number of important fans, including retail mogul Kishore Biyani. The company was the winner of corporate reality show Chota Business Bade Sapne, Ban Jao Biyani organised by Future Group and a leading Hindi business channel, outstripping 2,500 other contestants from across the country.

“I found the promoters of Media Magic to be extremely grounded. They are in touch with the regional trends and know the pulse of the rural consumers very well,” says Biyani. The promoters are now looking to raise $2 million (Rs 9.6 crore) for expansion purposes and plan to set up touch screen kiosks to sell content at airports and malls in small towns.

Will the big boys play?
Media Magic’s biggest hurdle going ahead is the fact that the landscape for card-driven content is deeply fragmented. While the company’s exclusive tie-ups give it a leg-up on the competition, handset companies like Nokia and service providers like Airtel are increasingly offering free downloads to consumers, thereby likely to erode its revenue pie.

Plus, if and when heavy hitters like Biyani’s Future Group or Essar Group’s Mobile Store decide to jump into the rural content game, Media Magic will have to come up with a whole new bag of tricks to keep up with these giants’ retailing, marketing and distribution firepower.

Until then, however, Singh and Palod’s magic will continue to spread across small towns and villages across India.

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