One of the rather interesting outcomes of having been largely out of the loop for close to a month is that it helps you differentiate better the stuff that determines what wheat is and what chaff is. Unfortunately, in the digital domain in India, there is much more of chaff than wheat. I will dig deeper into the numbers when I have a bit more of time to spare, but for the time being this will be posted mostly as a rant.
It was yesterday, during one of our regular conversations on the state of the industry, that I told Nikhil that even for the successful large digital players in India, the scenario is not all that great. There is really little upside to being in the business right now, even if you are on top, for it is near-impossible to accomplish scale in the business beyond the numbers that are already there. And even at ~20 crore INR per quarter, those numbers certainly don't look that great, when you can see that the addressable opportunity won't allow for more than, at the most, half-a-dozen players on that level.
Outside the internet domain, the only sector that offers some kind of respite is telecom. Even here the scope is really limited with horrendously high entry barriers and shrinking margins. The poster child of the past couple of years — mobile VAS — does not look all that great these days and the segment itself is now looking ripe for major consolidation as margins shrink and IP-related costs spiral out of reach. Take VAS out of the telecom equation and the picture becomes rather dreary. If you allow people to use phones only for their basic purpose – to make and recieve calls – the industry size would shrink dramatically. And the trouble with add-on services is that they tend to be rather temperamental and hard to sustain at low cost in the longer run.
Saying television is a mess is an understatement. Even though everyone still wants to start a channel, less than a handful have any chance of ever being on the path to profitability. Most don't have a lifeline that goes beyond the hope of being acquired by some larger player or being made the potential conduit for a foreign player to come to India. Most of the news channels are running losses and mired in debt. And the best part is that none of this still makes it easy or cheaper to start a channel, so the disruptive opportunity is also non-existent, without even taking into account that the software production houses that service most channels are roughly the same handful.
Obviously, none of the powers to be will admit to most of what is written above since it goes at the heart of their raison d'être. But we do need a rethink on how to up the addressable opportunity that can actually be addressed from now to the next five years. Let us admit it, the current opportunity size is just way too tiny to justify the kind of money being burnt in trying to say that it is a future-looking investment. None of the current products really have much appeal even in semi-urban areas. So, addressing the rural areas does not even come into the picture here.
For any company to be successful in the next five years in the digital domain in India, it is necessary for them rethink everything they do from the ground up. It is unlikely that the current scenario will change in the next 2-3 years. We need to use that opportunity to build for a different India and also invest in products that will aim to open up the marketplace, than to keep building clones of western products that have a hard time finding sustenance in the existing market place. It needs thought, leadership and strategy that is different from what we have known till now. It would be interesting to see if that ever comes around.