Rubbishing reports of the company shutting down its DVD rentals business, Mudit Khosla, CEO of SeventyMM informed MediaNama that the company will continue supporting existing customers and will allow subscription renewals as well. He said that the company had temporarily suspended phone support for DVD rentals customers, since its helpline was experiencing high call volumes from ecommerce customers. The support line was instructing rentals customers to contact via e-mail, but will be restored after 15th February.

However, he did confirm that the service was no longer open for new subscribers. When we asked if the company had defined a time period until which it will support the rentals business, he responded that there was no deadline, and the company would continue with the rentals operations along side the ecommerce business.

We find this a bit unusual, since BIGFlix, a similar service from Reliance ADAG Group had also suspended existing physical subscriptions after shutting down its rentals business and had switched to a completely online model. It had said that the streaming model offered a better and more clearer path to profitability. While BIGFlix also had physical DVD libraries, SeventyMM only operates through a ground force. If you’re not looking to grow the business, why put it into limbo? Why not exit it completely and cut your losses?

Khosla also pointed towards the absence of major factors that support online movie rentals and streaming, including broadband infrastructure, streaming rights and devices such as internet enabled set top boxes have prevented the company from being convinced about offering a service on the lines of Netflix in the Indian market. He said that the company would be open to relaunching a streaming based Video subscription service, as soon as these problems are addressed.

Nikhil adds: Given that the company had raised $21.4 million in funding by 2008, and has been around for almost six years, it’s surprising they didn’t realize this earlier. The e-commerce model might appear to be more lucrative right now, but that space is now too crowded, and too high stakes a game. SeventyMM might require funding again.

The Switch to Ecommerce

The company had diversified into ecommerce in August 2010. According to Khosla, SeventyMM decided to switch to ecommerce after realizing that the DVD rentals business did not offer growth, in terms of subscriber addition, at a break neck pace, and there were factors that prevented the introduction of a US-like video on demand streaming model. The company decided in favour of putting rentals on a backburner and ventured into ecommerce focusing on films and celebrity merchandise.

– Differentiation: We asked how the company would differentiate itself from other players in the ecommerce segment, to which Khosla responded that SeventyMM intends to focus only on celebrity merchandise and on products endorsed by celebrities. He feels that there’s space for many players in the ecommerce space, similar to retail stores in the offline world, and said that support and service were the only major things that need to be addressed to become a successful player in the space.

– User base: Khosla refused to comment on specifics in terms of the number of monthly customers and average transactions after the switch to ecommerce, but said that the response has been “overwhelming”.

– ecommerce infrastructure:  Barring a few products which are sourced from merchants, the company largely holds its own inventory with warehouses in Delhi, Mumbai and Bangalore. Logistics & customer support is also in house, informed Khosla. He said that the funds raised in the last round were being utilized in the company’s foray into ecommerce and that it was not looking to raise fresh funding, at this point in time.

– Product portfolio: Khosla said that the company was concentrating mainly on celebrity merchandise related to Bollywood and does not intend to get into Sports merchandise, as was reported by another online publication. Although he did not offer details related to margins, he said that these products offered better margins compared to electronics or appliances or books. But we wonder if there is a big market for celebrity merchandise.

– Content: SeventyMM has also introduced a Celebrity Buzz section which features celebrity gossip. Khosla informs that the company intends to revamp the section in the next two weeks, to stream line content and related products. The company has set-up an inhouse content team to create customized content, and expects it to pull users interested in celebrity lifestyle. (Ed: to us, that appears to be a means of lowering traffic acquisition costs by using content to attract readers and potential buyers)