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At the start of this month, we had an opportunity to interact with Nickhil Jakatdar, founder and CEO of Vuclip, to ask him about the video industry, Vuclip’s plans etc. This is the first interview in a two-part series. (Read part 2 here) We’re starting off with a not so little story, which will also be split into two parts:

Having seen his dad become an entrepreneur, Jakatdar tells me that he had no dreams or interest in becoming one. Things have changed to an extreme for him since then, given that he went on to found and sell 3 companies before he started Vuclip, but also not before postponing retirement twice (he gave up the 3rd time). Vuclip was mobile, video, consumer and emerging markets (this was his decision), about which, in his own words, he knew nothing.

In 2007, he recalls that nobody was betting on these four, and starting Vuclip worked in their favour. “The only way startups can win against big companies is when the market is still not clearly defined,” he explains. “If it is, big companies can outmuscle you way better, so you have to do it when people are not sure. In case it doesn’t materialise, you fail. But if it works, you have a chance to build up your assets and intellectual property (IP),” Jakatdar says, adding that that’s how he bet on Vuclip. And it worked for him.

Starting off with short form content, Jakatdar says that many people from emerging markets were using Vuclip because there wasn’t any other meaningful alternative. Once it took off, the company had to consider the business model, and started integrating into carrier billing pipes, “because that is still a mass market way to pay,” Jakatdar says. With content distribution deals, Vuclip then went on to opening in new markets like Indonesia and Malaysia, Thailand, Egypt, UAE, Nigeria, Kenya, but they continued to distribute on their own.

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MediaNama: How do you see your relationship with carriers from 5 years ago and today? Because things have changed rapidly in the last 5 years…

Nickhil Jakatdar: Yes, things have changed a lot, that’s absolutely a fact, but equally important, the carriers have understood that it has changed. Five years ago, carriers controlled the journey of the consumer via their portals like Airtel Live and Idea Fresh. Then, they were led to a walled garden within a walled garden, wherever the carrier wanted them to go. Today, consumers go straight on deck to whatever site they want.

Some carriers are ahead of the curve because they see the right thing and try and build assets that they want to leverage, others have not got the memo as yet. The ones who get it are much easier to deal with because they also want to be with the times and the ones who don’t, it’s a lot more painful. Indian carriers, because of the intense competition, are typically further ahead of the curve.

We used to count on carriers for things like distribution but we don’t want to be too reliant on anybody. We don’t use their video platforms or content deals, we use our own. Because we’re doing it across so many countries, we have economies of scale that no single carrier will have.

Our relationship today is of a different nature, and has changed in a much more evolved way because today their number one criterion is, ‘hey can you help drive data plans for us’. Data is their biggest driver and nothing drives data better than video. If consumers like the product, it works for both, the carriers, as well as us.

MediaNama: You said in one of your interviews that most of Vuclip’s user base in smaller cities and towns. Is that still the case currently? How is the user profile in towns different from that in the cities?

Nickhil Jakatdar: I think that is changing now. The rural user base continues to grow, because I think, for them, this is their biggest form of entertainment. With the growing Android penetration, the Tier II & III cities do more of the short form content consumption, because they’re sensitive to data plans. As Android devices have come in, WiFi has become more accessible. The long form content consumption happens more from the bigger cities.

Every so often, we run these online surveys of our own user base and call it the ‘Global Video Insights’ report where we publish some of the insights from the survey. Across the board, its 18-35, not 18-25 but the 18-35 age group. In smaller towns, users tend to come on the lower end (sub $50-100) Android phones and they use this absolutely during prime time. Their affordability is lower, their data plans are more around 100MB. Most people cannot afford video on volume based charging, it’s too expensive. Now these smaller data plans are becoming prevalent and that’s what they seem to be using. Here, 80-85% are men, only 15-20% are women.

City users watch a lot more on the app whereas rural guys watch more on the browser, because downloading an app is still a friction point for people there, an app itself is 10MB. They don’t want to use up their data for downloading an app and a browser serves well for short form content.

If its long form content, then an app is much better because the experience can be controlled through the whole adaptability and streaming. In cities, it’s 70% male and 30% female, which is a little more balanced unlike in rural areas. In rural areas, regional language consumption is high. In cities, you have regional language consumption but it’s a lot more mainstream content consumption. I don’t necessarily mean TV shows when I say mainstream because if its available on TV, they can always go on TV. Its more of these AIB type of stuff, gossip is always popular. But movies and TV shows are definitely picking up in the urban areas.

MediaNama: So in this, do you see a rise in amount of data usage per person say, over a month? Has it been growing consistently?

Nickhil Jakatdar: Yes, it has been consistently growing. We saw content consumption MBs go up significantly. However, it didn’t all come through streaming. It came through wanting to watch a song multiple times but after getting the song, in offline sync. So the number of streaming MBs is growing, but the number of total MBs watched is growing slowly because a lot of that is through the offline sync. YouTube’s offline sync is not surprising for us at all, we’ve always had that and I think that it is a requirement. You do it in a way that protects content owners because you need to monetise it if it’s offline.

MediaNama: A lot of international players are coming in. Do you see any kind of competition from music streaming and other video streaming companies?

Nickhil Jakatdar: So we’re in video and whatever happens in music, will happen to video eventually. There’s no reason it should not and it’s a precursor. I understand why it’s happening. It’s a market. There’s a demand, which could be translated as there’s a market; but there’s a big delta between having demand and being a market which is: are people willing to pay? And right now, I don’t see that. I don’t see that willingness to pay not because maybe people are willing to pay, its because if somebody is giving me everything for free, you’re not even testing me whether I am willing to pay.

New players gain market share by giving more free stuff. The earlier guys have done all of that and decided that now it’s actually time to make some money, because they are paying out pretty big licensing fees. But by the time they’re ready to do that, somebody else is playing their game now. And its free.

So it’s going to lead to a lot of consolidation because there’s no way for so many people to coexist. Either you have to out-innovate others or you’ve to out-spend others and if it’s the latter, then the biggest guy will win. If it’s a case of out-innovating then there’s a chance for some of the smaller guys to win. The out-innovate part, at least, hasn’t happened yet. Which means at this point, its a game of out-spending. And thats a pretty dangerous game..

As for video, in this point in time, video is still a much more complex offering because video requires a lot more bandwidth. Bandwidth and networks are getting better, yes, but they’re getting better at a certain rate. The consumption is growing much faster than the growth rate of the bandwidths and networks. How are these networks gonna be able to sustain?

As the resolutions (HD, 4K etc) get better and better, you’d better provide higher resolution video. You give me a big pipe, I will find ways to fill it even faster. 3-4 years ago, every 1 minute of video would be about 500KB on average, today that same 1 minute of video is about 15-20 MB. So you’ve just increased by a factor of 30-40x. Then, people were watching 10-15 minutes of video a month, now they’re watching 150-200 minutes every month. So you’ve gone up by 400x, but the pipe has not gone up by 400x, it has gone up only by 10x-20x.

A study done by Citrix in the US says that for every 1 hour of video that is delivered, 10-20 minutes is just buffering on a 4G network! I don’t think it means anything when people go, India’s all going to be 4G. I think people will say, ‘now I want to use so much video, I’m going to buy better devices’. And that’s going to place some inordinate amount of load.

Carriers will always find a way to make money. But the margins are going to have pressure and when that pressure increases, they’re gonna start throttling, because otherwise, they’ll start losing money. This problem is not going to go away, its going to get worse, but if you can solve it there’s a huge opportunity. Even if people come in the video space, there is a chance, in my opinion, to out-innovate. It’s not gonna be a pure money game. I am sure there’ll be a lot of money poured in but I actually believe that there’s a chance to out-innovate on the platform front, on innovative ways to package content and so on.

Image Credits to the author

*Note: Responses have been edited for brevity