Moser Baer disrupted the DVD/VCD home video market with price differentiation/low price-point strategy (moser baer’s dvd price was Rs. 34, while others were selling at Rs. 100-150)
But the low cost doesn’t seems to be sustainable and Moser Baer has hiked the price.
Typically, home video rights are sold for a period of five years. After that it is again auctioned. So, players need to break even and make a decent profit during that period. As per reports, video rights of movies like Welcome and OSO were sold at Rs 1.5-2 crore. Thus, the challenge is to do million-plus copies to ensure profitability.
Say, a home video right is sold for Rs 1 crore. At a price of Rs 45 a VCD, margins aren’t more than Rs 15 a copy sold. This is because of 30% retail margin (around Rs 15) and another Rs 12-15 for making the CD as well its packaging.
By this logic, the company needs to sell around 6,70,000 copies just to break-even. And to make a decent profit, at least a million copies or more over a span of five years. And that is increasingly turning out to be a tough proposition. Also, today the Indian market is tilted towards the VCD market, where the margins are wafer thin. “Its 80:20 in terms of volumes in favour of VCD market,” ET
So, the next bet for Moser Baer is to reach out to the mass market and invest in wider distribution of DVDs/VCDs; and the company has come up with an innovative strategy for this – cycle carts.
Moser Baer has already rolled out 100 cycle carts and is planning to increase the number to 2,500 by this year.
Three carts were first rolled out in August on a trial run in Kolkata and the official country-wide launch came through early this year. Each cart that can carry about 35 titles with five CDs of each title, comes at a substantial investment of Rs 20,000-Rs 25,000 each.
“We are yet to reach the breakeven point. Currently, we sell about 15 CDs per cart per day. To break even we have to sell a minimum of 20 CDs per cart per day, which we hope to achieve soon – BS
A classsic case of localized distribution and contextual selling (i.e. local movie CDs/DVDs).
Did someone ever thought the cycle carts which traditionally used to sell ice creams, vegetables will one day carry CDs?
The times, they are a changing!