In September, Intel Capital funded Verismo Networks, launched Mela, a global multi-platform consumer entertainment service with premium South Asian video content. Sab Kanaujia, previously VP (Digital) at NBC Universal, who was involved with the launch of Hulu, joined the company has President (Entertainment Services). Mela isn’t the first digital video venture trying to tap the South Asian market – many have launched and either failed and shut down, changed their target market or have just not been able to scale. Excerpts from a recent interview with Kanaujia: 

MediaNama: What is Mela doing differently from what so many other sites have done – like Tinselvision had done. Where do you think you’ll succeed where they failed?

Kanaujia: The idea is not new. Hulu, Netflix is the same idea, and the market is already there. That is pretty clear…

MediaNama: That’s exactly what I’m wondering – is there a market?
Kanaujia: There is a market. There are two things that you can measure a market by Ernst & Young estimated that the Indian content industry loses $4Bn on piracy, and $1Bn in the US itself. Even today, the vast majority of people, if they want to watch a movie, they walk into their local grocery store and pick up a pirated movie for $2-3. In New York and the Bay Area, there are some theatres which do release new movies, but there are only few theatres and they only release 10-20% of the movies made in India. The traditional distribution for niche content – it’s not mainstream in the US – is very limited for them. It’s like me paying $400 a year to watch Cricket. I buy all these series individually. There are soccer fans from Europe who pay on a pay per view basis.

Given that traditional distribution only caters to mainstream content because we have a finite number of movie theaters and TV channels. As a result, the niche content doesn’t get its distribution properly.

MediaNama: But the thing is that there have been attempts to provide niche content – look at Jaman, Jump TV, Tinselvision. Where did they fail?
Kanaujia: If you look at every one of them, there is a common thread. The flaw was in execution and in some cases they were slightly early, but mainly it was execution. Then you see that none of those guys had any media background. For Jaman, the founder is a very smart guy, but he’s an engineer. A majority of their funding was put in building their technology platform. In today’s day and age, the technology is mature.

You don’t have to build anything. You have companies and multiple platform providers, like Brightcove and Ooyala, and half a dozen content management systems. A pay per view model which they were using does not work, unless it is for new movies. We are doing pay per view, but only for new movies where people will pay $3-5 a new movie, because it is like buying a movie ticket. By old I mean 2-3-4-5 months after theatrical distribution. It doesn’t work because the consumer thinks that you can go and pay $2-3 for a pirated DVD and own it.

What is really working there, which Netflix has shown is unlimited on-demand consumption. You create the largest library, and let consumers decide what they want to watch where and when. You have seen their experience. Do you think it compares to what Hulu and Netflix are doing?

MediaNama: I don’t know because we don’t get Hulu and Netflix here (in India). What are you going to do differently?
Kanaujia: The thing is that if you have to go after niche distribution – we are only focusing on outside of South Asia because we want to go where distribution has really suffered from providing consumers what they want.

People are stealing because that’s the only way they can watch. Where you have ubiquitous broadband, purchasing power, and where you have consumer behavior established for paying for premium content. Where you have those three conditions met and there is big enough an audience size, there is a market for it. Nobody has created a global Hulu or Netflix for South Asian content. They either focus too narrowly on one market, or didn’t get the model right or the experience wasn’t there. The common theme was that most of the team didn’t have the media experience.

MediaNama: So what do you bring in with the media experience?
Kanaujia: You have to have the venture funding so that you can go the distance. This is not a hockey-stick play. It’s a scale play, and you need to make sure of your longer term vision, and get your execution right in terms of the right experience, marketing and distribution. We have started with a US and Canada launch, which we did early in the first week of October, and we are looking to launch in Australia. By the end of the year or January, we will launch in UK. Our brand is called Mela, but we haven’t launched a content consumption site. We will be doing that. What we first focused on was providing a high quality experience on your TV. TV is still the preferred screen for long-form.

We will have a multi-platform launch, and our parent company Verismo Networks is a white labeled set top box company. We got a head start to launch the Mela box, But we are not looking at it from a box perspective. It is about the existing hardware that consumers have, so they don’t have buy additional hardware. Given that we have a set top box, it really provides a competitive advantage. It really provides us a competitive advantage, and we can have you up and running on a TV with a great experience. We can get you up and running. What we bring is that there are different pieces of the puzzle, and we bring all of that together.

We have the set top box, the funding, the right management, and we are licensing in an aggressive manner. When we launched, we launched with 45 live channels and over 500 movies, and within have 1000 movies at our disposal.

On the STB side, we have a retail strategy as well, which allow us to put our service in the local grocery store, wherever you are in the US. We have master distributors, who buy in bulk and supply it to retail distributors who supply it to local grocery stores. Then we’re going to launch on Roku. They have a lot of South Asians. The third is that we’re looking at is the iPad, and after that will be on Mela.

MediaNama: How does the end user pricing change with platforms?
Kanaujia: Every new platform will be free to existing subscribers. We’re not going to charge you more just because we’ve launched on iPad or Roku. High quality is another area where we are also focusing, where we have titles from studios with high definition. That serves two purposes – we want to be recognized as a provider of quality experience, and it differentiates us from pirates, because their sourced content isn’t good quality initially. We are going against the Dish Network which has been the largest player of South Asian TV programming. We feel that our pricing would be very competitive for Dish. The way we are looking at the content is that it’s not a true Hulu or Netflix because we also have live TV channels, to cater to the demographic which is older. So we have over 45 live TV channels. Our pricing for all VoD is $5 per month, which we feel is very competitive. On the TV side, we are providing standard packages at $9.99 a month, and then there are some premium channels like from the SUN network, which will be on top of that for $15 for each channel.

MediaNama: Who determines the pricing? Do you or the channel?
Kanaujia: Where we have flexibility on content contracts, we look at the market and determine competitively. We will penetrate into existing subscrbers and then we are going to expand. I think there’s a bigger opportunity for expansion. 70% of the US South Asian market doesn’t watch Indian television, which is a result of multiple things. Pricing, availaiblity, and the proper marketing. We are looking at all the piece which we feel we can execute on.

MediaNama: Is there an instance in negotiations where you would say no to a channel if they want the pricing to be too high? How does this work?
Kanaujia: Not today. Our strategy is straightformward – we want to be the largest aggregation of South Asian content worldwide. Today, given that we’re an upstart, our goal is to get all the content we can get. And you are right. Without naming names, there are certain partners who basically want to establish a floor pricing which aggressive, but the market will not bear it. Where we have flexibility, we will reduce the pricing from our side, and the market will tell us.

MediaNama: But you get on a slippery slope, right? If the pricing is too high, the channel doesn’t work. If the channel doesn’t work, they’ll say your platform isn’t working for them. How do you deal with that?
Kanaujia: We have to work with content partners. There have been enough times where the content owners have really looked at it. There’s one who we don’t have a deal with, but they had traditional distribution in the US for mumber of years. they feel that they’ve only touched 30% in the market that will be willing to consume content, and they agree that pricing and marketing has been one of the main reasons.

We’re trying to be a South Asian programming company. There are companies like Dish Network, Hulu and Netflix. They are all distributing South Asian content, but that is not their bread and butter. They will never prioritize that over mainstream American programming. They will not market in that focused a manner.

MediaNama: Would you (be willing to) plug Mela into Netflix?
Kanaujia: No, not at this time, because Netflix will be a competitor for us. If you look Bollywood title on Netflix for streaming – they have less than 15 movies for streaming. We will have 1500 within a month, and these are hit movies. If you want to stream Bollywood movies and we provide you that breadth, the answer is simple. People are putting together their own bundle. Netflix and Hulu can try to be everything for everyone, but all big companies try to leverage their size to get into adjacent spheres, but focus is a key part of it. The market is big enough to be pure play. The content is going to be unique.

MediaNama: How are you planning to market, and how does the costing work for you depending on the platform that you go on?
Kanaujia: On our own platform, we basically are not charging the customer for the box. Verismo has a box business which is healthy, and we are about content. Our focus is on providing quality content building the largest aggregation and getting into their living room. We launched right now on our box, because that’s the fastest we could do. The way we have priced that service is that we will be requiring a commitment for 1 year, and we are giving content worth $180 for $149. You get the HD set top box, the movie service, which is $5 per month, and one of the two main regional programming – Tamil and Telugu $10 per month for a year. Given that we’re giving the box away if you commit for the year, we cannot offer a monthly programme if you get our box.

In year two, then you can go to a-la-carte and say that I just want to watch the movie. On third party devices, we will not have the hardware cost. We are launching a movie service first on Roku, which will be $5 per month. On marketing, you have to look at a combination of celebrity marketing, around events. We’ve announced our launch at the India Day Parade at Manhattan, with 4 events over a two day weekend. We got Abhay Deol to be our brand ambassador, and we did a private screening of his movie Zindagi Na Milegi Dobara. Consumers subscribed to our service.