Another day, another Youtube competitor is born in India

Jayadevan PK August 6, 2018

On June 28, Times Internet Limited announced that it acquired a majority stake in J2 Interactive, a South Korean company for $140 million. The group had acquired 60% of the Korean firm, because it owned MX Player, one of the most popular apps used by mobile users in India to watch videos.

It was the biggest acquisition ever by the digital arm of the Times Group. The deal which had been in the works for nearly 9 months and was closed in October 2017. Yet, until news broke in January, very few people in the upper echelons of the digital media industry knew of J2 Interactive.

In the coming days, it’s going to make an even bigger splash. Because big plans are being made at the company to tap into the video streaming space. In a few weeks, MX Player, which was primarily an offline video player, will morph into a full-fledged video streaming app.

A beta version of the app, which was released on the Play store earlier and was picked up by the press on Saturday, is just the start. It has plans to launch with original videos, focussed on Hindi and other regional language consumers. It will also start selling its inventory to marketers looking to tap into this audience, taking on YouTube and others.

“Over 20 original shows are planned for the first year across Hindi and regional languages like Tamil, Telugu, Marathi and others,” Karan Bedi, the CEO of MX Player told FactorDaily in an interview. It has announced plans to create over 50,000 hours of premium content. The company, as per one source, is expected to invest over Rs 100 crore in original content for starters. Bedi declined to confirm that number.

Karan Bedi, CEO, MX Player.

As of now, the beta app features a lot of content from Youtube, but going forward, it will switch out that content in favour of original and licensed content.

MX Player was mostly an offline application that supported various video formats on Android phones. In India, at a time when data was scarce, people shared videos with each other using Bluetooth or had songs and videos loaded at mobile recharge shops. MX Player could handle nearly any format thrown at it and so it was incredibly popular among these users from smaller towns and cities. But things have changed now. Data has become cheap after the launch of Jio and video consumption has gone through the roof in India. This has helped fuel the growth of companies such as Hotstar and YouTube.

Also see: Why new TV is exactly like old TV

“Right now, users get content from third-party sources to watch on MX Player. Can we enhance that experience? We’re not messing with what you use MX Player for. But here’s an entire library of stuff, both licenced and original content, that we are working on,” says Bedi, an economics graduate from Stanford who took over as CEO of MX Player in September 2017. The new player will also feature a library of licensed content across movies, television series and short format content across genres.

Most of the work in the last six months has gone into making the technology infrastructure better suited for streaming, building recommendations and making the app lighter and faster.

MX Player, now being run out of the 7th floor of the Times Tower in Mumbai’s Kamala Mills compound, has built a team of over 120 people– spread across technology, revenue, marketing and content. What makes MX Player an important player in the market is the sheer size of its user base.

At the end of March, as per one estimate, MX Player had 172 million monthly active users and 65 million daily active users in India. That’s second only to Youtube which has about 180 million monthly actives and 120 million daily actives in India. It also makes MX Player much larger by numbers than current market leaders like Hotstar, Voot and SonyLiv.

MX Player’s quiet arrival into the streaming video space was not anticipated by many in the digital media space.

“It’s disruption,” says Sree Sivanandan, a former AOL executive who now runs media consulting firm NetworkOnomy Ventures. “Looks like Times Internet is planning a Youtube killer,” said Sivanandan, who points out that success in the business will only come at the end of a hard-fought battle with rivals with equal or better proposition to advertisers.

Bedi, who used to run the digital business at Eros before joining MX Player, wants to attract a newer set of audience as well. The idea is to go after millions of young viewers who don’t have much to watch on television (dominated by family-oriented shows) these days.

Unlike Youtube, which primarily has user-generated content, MX Player will focus on originals and licensed content. This will make MX Player more palatable to advertisers as one of the alternatives to Youtube, where advertisers worry that their ads might show up next to low quality or sometimes even objectionable content. Bedi believes that the content mix and close integration with brands will be a compelling proposition for advertisers. “So we can tell the advertiser, hey look, you can participate in the content, the inventory and the platform and we’re the only one providing it at this scale,” he said.

With the acquisition of MX Player, the company has cracked the reach problem. But providing diverse, high-quality content, will still be a challenge.

With the acquisition of MX Player, the company has cracked the reach problem. But providing diverse, high-quality content, will still be a challenge. Original content is an expensive business. “It’s all about the amount of money these guys are going to put in. That’s a very costly game,” Sivanandan points out. Hotstar has its parent Star India spending thousands of crores on buying rights for sporting events. SonyLiv has a similar advantage with its parent being a television network.  Netflix plans to spend nearly $8 billion on content in 2018, a portion of which is being spent in India where it is chasing the next 100 million users. Others such as Amazon Prime are also in the market buying content. When looking to grow to the next set of users, MX Player faces a challenge: how do you differentiate, spend judiciously and grow a high-quality content library beyond English shows?

MX Player might be able to lure creators by offering them reach that is almost as big as that of Youtube and also a share of revenue. Since it’s going to build on the Times Internet platform, it can use Columbia, the Times’ advertising platform to help content creators monetise. It could also consider offering creators a better revenue share (Youtube keeps about 45% of the revenue). The company will also have access to assets produced by the Times Studios and other entertainment content churned out by Times Group publications such as Femina and Filmfare.

Video advertising in India and TIL

The video advertising market in India is pegged at about $300- $400 million in size. There are dozens of OTT players in the space including market leaders such as Youtube, Hotstar, SonyLiv and Voot. With MX Player, the Times Group, which has been looking for ways to increase its share of digital revenues, will get a foothold in the fast-growing video market.

Company executives largely see it as plugging a gaping hole in its portfolio. If you look at the figure below, you’ll see that the Times Internet Platform is split across three core sections– owned and operated media, new media platforms and classifieds and transactions. Within new media, the group already runs NewsPoint for news, Gaana for music and various other apps. Video, was a large, untapped opportunity in the company’s bouquet as its earlier attempt at the segment with BoxTV wasn’t a winner.

Times Internet Platform is split across three core sections– owned and operated media, new media platforms and classifieds and transactions.

The $140 million price tag for 60% of MX Player might sound expensive at first. But if you really look, the company gets 65 million daily active users for that price. That’s roughly $2.15 per daily active user. To acquire a similar stake in, say ShareChat, a social networking company, or DailyHunt, the company would have had to shell out much more. If one goes by media reports, ShareChat was valued at $400 million and DailyHunt was valued at $500 million. They have somewhere around 3 million and 12 million daily active users respectively. That puts the cost per daily active user in the range of $133 – $33. Viewed from this angle, it looks like a very smart acquisition even if one accounts for the fact that these didn’t originally come to MX Player to stream videos.

Increasing competition

One can argue that the video advertising market is too crowded and there’s too little money in it with Facebook and Youtube dominating it. But with advertisers opening up to alternatives like Hotstar, there’s a possibility that ad dollars will shift to other platforms as well. Moreover, if India follows the footsteps of other markets like China or Indonesia, digital advertising and online spending will boom when the per capita GDP breaches the $4,000 mark. We’re currently at about $1800 per capita and the magical mark is at least a decade away as per experts.

Then there’s always the risk of newer players coming into the game. Take, for instance, SHAREit, the Android app which was mostly used by offline users to share files. In May, SHAREit acquired South Indian mobile app Fastfilmz to grow its content catalogue. At the time, Jason Wang, the managing director of SHAREit talked of the company’s ambitions to serve the Indian video consumers growing needs. “We believe that in a mobile-first consumption environment like India, a platform like SHAREit is the answer to all entertainment needs,” he said in a statement. DailyHunt is also working on beefing up its video library.

A platform where advertisers can spend at scale can rake in moolah as India gets closer to that $4000 mark. Until then, it’s probably bloodbath for platforms, the golden age for creators and lots of binge watching for us, the viewers.