Mobile content company Apalya Technologies has raised $7.5 Million from IndoUS Venture Partners, IDG and Qualcomm, in a Series B round of funding. This is the third round of funding for Apalya, which had raised $3 million from Qualcomm Ventures and IDG Ventures India in October 2009, and an angel round from the Mumbai Angels in 2008.

Apalya delivers television content over mobile networks to subscribers in India, by white-labelling its application for telecom operators, for a cut of the channel subscription fee paid by subscribers to telcos. It entered the market early, and when hardly anyone was looking at mobile video streaming (over slow EDGE networks), Apalya inked non-exclusive content deals with TV channels and established a distribution network with almost every telecom operator: Tata Teleservices, Virgin Mobile, Reliance Communications, MTS / Shyam Sistema, Bharti Airtel, Idea Cellular, Vodafone, Aircel, BSNL and MTNL.

Why Apalya Needs The Money

Quite simply, because the revenues from 3G video content business currently don’t justify the costs that Apalya. According to filings made by Apalya with India’s Registrar of companies, its costs went up significantly during the financial year ending March 31st 2010:

While its revenues increased by 166.64% to Rs. 3.28 crore, its expenses went up over 233% to Rs. 9.9 Crore. This is largely on account of its cost of services increasing to Rs. 5.15 crore, and personnel costs going up almost 3 times to Rs. 2.5 crore. All this, when its revenues were only Rs. 3.23 crore.

Over the comping months, Apalya will face competition from apps like Geodesic and Zee backed Play.tv (essentially, Mundu TV), which already has Zee content, which Apalya doesn’t. The advantage that Apalya has, is its existing subscriber base and relationships with channels and telcos.

However, one has to ask – with a white labelled service, whose subscribers are these – of the telecom operator, or of Apalya? If the telecom operator decides to go with, say, a Zenga instead, what will Apalya do? This is a problem that many VAS companies are likely to face, as content aggregators gain prominence, and platforms become commodity.

Apalya will have to play the game that Hungama played – pay minimum guarantees and lock in exclusive deals. Else, it’s just an app company licensing someone elses content, servicing someone elses customers.

Related:
Apalya Ties Up With Sony For Mobile TV; No Zee