Sector Watch: India's Entertainment & Media Industry

At a time of flux in the entertainment and media industries in the United States and elsewhere (declining subscriber base for print media, disintermediation from internet video hosting), the Indian market is experiencing heady growth.According to a newly-released report, co-authored by PriceWaterhouseCoopers and the Federation of Indian Chambers of Commerce and Industry (FICCI), the Indian Media and Entertainment industry is expected to grow from its current size of $9.7 billion to $22 billion by 2011, a compound annual growth rate of 18%.

The table below summarizes the components of this growth. Some of the numbers are almost certainly understated. For example, the size of the music industry is probably distorted by piracy, while the internet advertising market is distorted because of a lack of reliable reporting services.

I'm Back (With News)

My apologies for the long silence. I've been working through some recent developments in my professional life. In fact, they pertain to the focus of this blog, so I will share them here. If you've read this blog with any regularity, you know that I am very optimistic about India's growth prospects over the next 25-30 years. Sustained growth for 25+ years is transformative - we've already seen how 15 years of growth (since the 1991 reforms) have utterly changed the urban landscape. This is arguably the most profound development globally that I will witness in my lifetime. I'd like to participate in it, and help where I can, rather than watching from afar (in my case, from the Bay Area in California).

With that in mind, my wife and I have decided to move to India. We will leave the Bay Area in a couple of months, and move to Bangalore. I will join the Google office in Bangalore (they're hiring!) as a Product Manager. It's an exciting role, in a great company, at a time of enormous opportunity. I can't wait to get started!

I intend to keep blogging, during and after the transition to India. I hope that the changed perspective I can bring from being on the ground in India will be useful.

Thank you all for your patience during the long period of silence. I'm back in the blogosphere and would love to hear from you! Send me your comments and thoughts! In particular, if any of you have moved from the US to India, I would love to get your advice as we plan our move back.

All Together Now....

Will Price (who is fast becoming one of my favorite bloggers) has another great post on the virtues of alignment. The key point he makes is that entrepreneurs can context-switch effortlessly, but that same capability cannot (and should not) be expected of the organization as a whole. In fact, this is the key test of the maturity of an early-stage company founder.

When your company starts out, you are hunting for validation, for a niche. You conduct small-scale experiments, involving marketing campaigns and product prototypes/demos. You then gather feedback and hopefully find a segment or two where the value proposition is easy to demonstrate, the need is urgent, and there is money available to solve the problem. You then double down on those segments. First, work your tail off to get anchor, referenceable customers, and then use those to streamline and accelerate the sales process. All the while, the product team is conducting small-scale experiments to identify the next couple of segments to target.

At least, that's how things should go. In practice, this discipline is very hard to achieve, and organizational alignment falls directly as a consequence of not following this disciplined approach. I've seen a couple of key areas that lead to a lack of alignment in the organization:

• Failure to set up clear, time-bound success (and failure) criteria. Early-stage companies do need to experiment; its unclear up front in most cases where you should be selling your product, who the ideal customer is etc. However, too often these experiments are not controlled. Without an up-front definition of when to consider the experiment a success, and when to walk away, its too easy to be led into one rat-hole after another, where success is just over the horizon, just one demo away. A common case is when you're able to get a toe-hold into a large enterprise and keep trying to accommodate their every request for information, for endless meetings, for product enhancements etc, without a clear idea of the end game. While the sale may eventually happen, the opportunity cost for the organization is immense.

• Trying to do too much. You've conducted a couple of experiments, and found a couple of areas in which your product might add value. However, these areas don't have a lot to do with each other. You might rationalize this away and find connections where none really exist, but really you know that you've come to a key decision-point. Do I invest in solving problem X or problem Y? The thing is: you have to pick and quickly align the organization behind your choice. If you don't, the default trajectory is that there will be people in the organization who try to solve each problem, and the organization eventually splinters.
  

Alignment is relatively easy to test for: ask your marketing and sales people what they think the company does. Then ask your engineers. Ask the back office folks: finance, adminsitration, HR. Ask your customers. Ask analysts and the press. Ask them once every quarter. If the responses are roughly the same, then congratulations! You've kept the organization aligned. If not, don't fool yourself - you've got a serious problem and you need to address it as quickly as possible. Alignment is relatively easy to test for, but I don't see it happening too often. Could it be because we don't particularly want to know the answer?

Resources for Entrepreneurs at Stanford

The fact that there are so many resources for entrepreneurs available online is both a blessing and a curse. It's hard to know which sites to focus on, and how to make sense of sometimes contradictory advice. I will not attempt to provide a comprehensive list here - it'll be obsolete as soon as it's published. Instead, I would like to point you to some entrepreneurship resources provided by my alma mater, Stanford University. There is a lot of great information, videos, podcasts among other resources, all available freely and online. Take a look at these sites - there's great information available for you here:

• Stanford Entrepreneurship Network. The umbrella organization for all entrepreneurship-related groups within Stanford.
  

• Business Association of Stanford Engineering Students (BASES). Lots of great information. Particularly recommended are the weekly newsletter that highlights entrepreneurial activity in the Bay Area, and the Thought Leaders seminar series (of which, more below).
  

• Center for Entrepreneurial Studies, Stanford University. Deals with all things entrepreneurial at Graduate School of Business. Lots of research papers, videos of speeches given by entrepreneurs and venture capitalists, and an "Entrepreneur Resource Database" that connects entrepreneurs with potential partners or investors.

• Entrepreneurial Thought Leaders lecture series. The lectures are free and open to the public; they occur every Wednesday from 4:30 to 5:30PM at the Skilling Auditorium at Stanford. If you can't go, the lectures are all available online, along with handouts and other supplemental material.
  

• Stanford Technology Ventures Program, Stanford University. Deals with all things entrepreneurial at the Engineering School. So far not a lot of useful material for entrepreneurs - most of the presentations have to do with teaching entrepreneurship - but stay tuned.

Can entrepreneurship be learned? Probably not, but you can certainly benefit from understanding what others have done, and forming your own pattern recognition rules.

This Just In: Indian VC Investment Doubles in 2006

From a new report produced by the US-India Venture Capital Association, Venture Capital firms in India invested $508 million in 92 deals in 2006. That's an average deal size of $5.5 million, which shows the bias towards growth capital rather than risk capital. These numbers are just about double the 2005 numbers of $268 million in 44 deals.

Peter Bamkole's MISFIT Framework

The mission statement of this blog is to examine the effects of innovation in developing economies. It's ended up becoming very focused on India, mostly because of my own background and experience. I will attempt to remedy this as much as I can and provide a broader perspective. I plan to bring in guest bloggers from Brazil, South Africa and China in the coming months. But let's start with Nigeria.

The Nigerian government has recognized the importance of entrepreneurship in their economic development, and has made its study required for all university students. Leaving aside the irony of government mandated entrepreneurship, it is a worthy cause. To promote entrepreneurship in Nigeria, the government set up an organization called Enterprise Development Services, funded by, among others, the World Bank and HP Nigeria.

Peter Bamkole, General Manager, Enterprise Development Services, was in the US recently, and spoke about the challenges of setting up the conditions to support entrepreneurship and innovation in Nigeria. It's very interesting reading, particularly his method of analyzing the conditions that negatively affect entrepreneurship. He calls it the "MISFIT" framework. It's an acronym that expands to:

• M – Market. How do you provide people access to markets and an understanding of the requirements of that market? For example, how is a small business owner in Nigeria to tackle the US market? Where does she get information about regulations, for example?

• I – Infrastructure. Lack of predictable and stable power supply; high transportation costs.

• S – Support Services. Support organizations that provide mentorship and guidance to entrepreneurs are too few and far between to provide the level of service needed.
  

• F – Finance. Lack of risk capital available to entrepreneurs. Some of this is also due to entrenched mindset of debt vs equity, since that was the only option for a long time.
  

• I – Information. As Mr. Bamkole puts it: "lack of access to information significantly reduces the motivation to venture. In the USA and other developed countries, information abounds. This in no small way helps entrepreneurs make “informed” decisions when venturing. They can research the sector/industry they are about to venture into and the best strategy to adopt, etc. Where there is no access to information, it's like venturing in the dark."

• T – Technology. The entrepreneur lacks access to the tools to drive efficiency and productivity gains.
  

The interview is worth reading and/or listening to, and the MISFIT framework applies to all developing economies to one degree or another. Good luck to you Mr. Bamkole!

50 Most Important People on the Web?

PC World has a list of the "50 Most Important People on The Web." Yes, we all know that these lists are marketing gimmicks and not serious attempts at analysis and measurement of influence. Still, it's a lot of fun to go through them. This list is interesting because it contained names I had never heard of before and because it has informative blurbs against each entry. While there will be endless quibbling about the choices in this list, there was one stark reality that leapt out at me: the lack of non-US spots on the list. I could count only five:

• #13 Henry Chon, CEO of Cyworld. The Korean site that inspired MySpace.
• #15 Niklas Zennstrom and Janus Friis, the creators of Kazaa, Skype and now Joost.
• #20 Jack Ma, COO of Alibaba.com. Business to business portal and control of Yahoo! China.
• #43 Mikko H. Hypponen, F-Secure. Finnish security maven.
• #48 Mohammed and Omar Fadhil, Iraqi bloggers. Writing about the situation in Iraq from the ground in Baghdad.

There's no question that the vast majority of content, as well as underlying infrastructure and tools, come from the United States. Even so, just 10% of the total list representing the world outside of the US seems like a very low number to me. Keep in mind that the US accounts for about 20% of all internet users and is growing slower than every other region in the world.

I'm sure the compilers of the list had no plan to consciously exclude, but I really hope to see this number increase over time.

India Poised

Some of you might be familiar with the "India Poised" ad campaign organized by the Times of India media group. It's an ambitious undertaking, and basically amounts to a nationwide call to action that consists of three points:

• Think big. Think scale.
  
• Don't ignore social inequality.
• Build an engaged civil society.

The website is an interesting combination of the positive (e.g celebrating unsung heroes) and the cautionary (e.g. underperforming sectors). They even have a slick TV ad that's worth a watch.


This is the second large scale branding/nation-building campaign I've seen out of India in the recent past. The first was meant for an external audience, the India Everywhere campaign at Davos last year, while this is targeted domestically. It's an interesting use of marketing to drive economic growth & empowerment. I wonder if there are analogues in other developing countries, and if so, how effective these campaigns tend to be.

Cultural Context in a Global Era (Part 1)

A few weeks ago, there was an interesting article in CIO magazine, advising American tech leads how to manage relationships with their Indian vendors. While there is no question that the values and work ethos of an increasingly globalized elite are converging, these cultural differences are real, and should not be underestimated. The article starts out with a very broad generalization:

...it helps to look at the cultures of India and the United States in broad strokes. India is a deeply traditional group-oriented society; tightly knit extended families place a premium on harmony. Survival depends on interdependency, on keeping each other happy. “Your first goal is to make sure nobody is upset by what you say,” says Storti. “If the group is not strong, if it is upset by confrontation, you are in trouble.”

Compare that with America’s fractured families scattered throughout the country, an ethos of individualism and lore filled with Wild West cowboys and a promise that anything is possible if you work hard enough. The United States is a land of grab-for-it. Subtlety is the exception, in both speech and manner. And when an American talks, it’s usually to get his point across, not to create harmony.

While obviously very broad and sweeping, this strikes me as a pretty accurate representation about how business in conducted in either place. Anyone looking to work with an Indian service provider would do well to read this article. In my last post, I talked about the importance of social networks (the physical kind) in conducting business. I pointed out one reason for this: as a way to bypass non-functioning institutions in the redress of problems. The more general reason is brought out in this article: the difference between group-centered and individual -centered cultures.

Articles of this sort tend to go in one of two extreme directions: either dismiss any differences at all as an outdated concept for knowledge workers in the information age, or emphasize the differences to such an extent as to "exoticize" the other. This article has struck the right balance in accepting the global nature of work, while acknowledging the tribal nature of human relationships.

This article obviously begs the question: what cultural advice could you give Indian vendors working with US companies? More to come on this topic.

SMS is the Platform

A good friend of mine, Rishi Bhargava, recently returned from a trip to India. He shares my interest in technology, innovation, and the emerging Indian market. We had a long chat after he returned and he had some very interesting observations, which I'm going to summarize here:

• SMS is the Platform. We already know about the importance of mobile devices to technology adoption in India, but my friend made an even more pointed observation: your product or service has to be accessible via SMS to have any chance of gaining a large user base. Even when people buy data-enabled smartphones, they often have no interest in mastering a new interface when SMS is familiar and easy-to-use. For example, jewelers are paying for SMS-based alerts for price changes in precious metals. These same people are not familiar with the internet and are unlikely to be early adopters of an internet-based marketplace for precious metals.
  

• Lack of Trust Hinders Adoption. The medium for social networking is the clearest indication of the generation gap. In India, for people in their 30's or older, social networks are largely physical. Business is done in this way and social relations are conducted in this way. It's a perfectly rational response to the lack of effective remediation and redress. If you got cheated out of some money, how would you get it back? The police are often inept and/or corrupt and the court system is notoriously slow moving. The only rational thing to do is to minimize your risk by dealing only with people in your social network. Today's teenagers are comfortable moving their social networks online, but this generally tends to reflect their physical networks. The same issue of trust, just in a different medium.

• Internet Connectivity is Cumbersome. Beyond a small number of tech-savvy users in large cities, the internet has largely not touched people's lives in a meaningful manner. Even when people sign up for email accounts, they don't check them on a regular basis (and certainly not at the frequency that has become the norm in the US). Setting up and managing a broadband connection can still be cumbersome. Customer service at providers like BSNL and VSNL are universally acknowledged to be terrible. Even providers such as Airtel are getting poor reviews in this department. This has resulted in a cottage industry of "computer service" technicians who often do nothing more than apply the latest Windows patch. Still, they are needed to provide peace of mind to the non tech-savvy. Pricing plans are still archaic in terms of pricing by bandwidth usage (as if people actually know their expected bandwidth usage!) This entire process has to become a lot more streamlined before we can expect wider adoption.
  

I Got Blog Tagged

In case you're not familiar with this concept, the way it works is that when another blogger tags you, you're supposed to post five things about yourself that other people might not necessarily know, and then tag five other people in turn. I just got blog tagged by my old buddy Ashesh Badani (stay off the kerosene Ashesh!). Here goes:

• I once got out of a speeding ticket because the car I was driving was so old that the cop couldn't believe I was actually speeding and figured his equipment must have malfunctioned.
  
• I once ate a guinea pig. Really. It's a delicacy in Peru, and quite tasty.
• I love African music and have a pretty good collection of CD's.
  
• When I finished my undergraduate degree, I wanted to be an academic, and enrolled in the PhD program in Computer Science at Columbia. I was ABD (all but dissertation) when I realized that academia was not for me, and got a real job :-)
• My paternal grandmother was British, which makes me a quarter British and three quarters Indian.

I am going to tag: Nikhil Roychowdhury, Mrinal Desai, Dave Beisel, Arun Natarajan and Hunter Walk.

Yahoo Panama: Initial Data

The web design and advertising firm Avenue A/Razorfish has some preliminary data about the impact of Yahoo's new Panama platform. Here are their key statistics:

• Search Impressions – Up an average of 5%
• Cost Per Click – Down an average of 6%
• Click Rate – Up an average of 10%
• Conversion Rates – Down an average of 5%
• Overall CPA – Up an average of 6%

The results look underwhelming, and could reflect either early teething problems with the platform, or just poor statistics. I'm inclined to believe it's the latter: the results reflect 33 data points, with a wide variation in performance. The jury's still out on this one.

(via Paul Kedrosky)

This Time It's Different...

I keep hearing about how this time is different. There will be no repeat of the 2001 bust. The reasoning, as I understand it, goes something like this: we learned our lesson the last time, clear evidence of a business model is a prerequisite this time around, its cheaper to start a company now, so risk is more widely spread, and so on. However, all that VC money still has to go somewhere, and I see more examples of "irrational exuberance" than before. There are two classes of companies that I think are leading indicators of an overly lax investment climate:

• Great products with no business model.
• A feature trying to pass off as a product.

(The third class - "really bad companies" - is, unfortunately, a lagging indicator; whether a company belongs in this class or not is only clear after the fact)

Just in the last 24 hours, I came across two companies that fall into these categories. There are many more where this came from:

• Virtual Ubiquity. They bill themselves as the "first real word processor for the web" and you have to love that chutzpah. Based on Flash rather than HTML, it's been getting rave reviews and it does look very cool. Check out the screenshots in the GigaOM post about them. Very cool product, but what's the business model? Paid subscriptions seem unlikely, given the number of free alternatives. An ad-based model is possible, but a tough slog given the difficulty of driving enough traffic to make it worthwhile. Interoperability with other online productivity apps will be an issue. Online suites will have an edge here, even with a smaller feature set.

• Seriosity. Allows the creation of an email "economy." Everyone is allocated a certain amount of a virtual currency, and you can attach different amounts of your "money" to emails you send to indicate its importance. It's an interesting, though overly complex, approach to the real problem of information overload. But this is not a product - it's a feature. $6MM in VC funding to date.

Will it really be different this time around?