Desi Hits Eyes Funding For India Foray; Can It Score A Hit

The US-based Desi Hits Inc--the owner of Desihits.com, which has evolved from a podcast (2006) to streaming radio show to desi Brit music website to a multi-platform lifestyle and fashion brand—is now turning to India, expecting to score a hit. The firm, which is now seeking to raise a Series C round of $8-10 million, is moving its headquarters from New York to Mumbai, hoping the strategic shift would give it the much needed growth.

Desi Hits, according to industry watchers, is yet to score a hit in the US market itself, where it has only 1.5 million unique visitors a month. Since almost 50% of the website's traffic comes from India, the move to shift its focus to the emerging market seems like a good step, however monetisation challenges will be higher.

"We are zoning in on India as it is a growth market for us where we can effectively scale. We are here to raise our Series C round of funding, around $8-10 million. We currently have around 10 employees and are planning to build out fast. We will also be shifting our head office to Mumbai by February," Desi Hits founder Anjula Acharia-Bath told VCCircle in an interview during her recent trip to India.

Desi Hits raised $1 million in November 2006 in Series-A round led by venture capital firm Draper Fisher Jurvetson. A year later, it raised $5 million in Series-B round with DE Shaw Group leading the round which saw participation from DPJ and Trident Capital. Jimmy Iovine, Chairman of Interscope/Geffen/A&M Records, a label group in the Universal Music Group, is also an investor. In June 2009, Desihits roped in Devraj Sanyal, ex-CEO of Percept D'Mark.

What Desi Hits Does Desihits.com offers western music, videos and fashion news and caters to an eclectic and disparate audience in US, UK and India. According to Bath, the lack of original content that targeted the diaspora and the soaring costs of content deals led Desihits to developing its own content.

"We wanted to address the rising demand for content from a diverse audience, which was bilingual, eclectic, who wanted to know more about small and big brands. We saw a following for international music. There was a natural pull from India too - almost 50% of our traffic is now from India. The rest of our audience is from UK, US and UAE - we target global 'desis'. We are right now in the middle of the perfect storm of content "there is a lot of Indian content that has global demand and vice versa," she said.

As a 'desi' Brit music and pop culture site launched in the UK, targeting the British Indian community and primarily showcasing R&B and Punjabi/Bhangra music, Desihits expanded to the US audience, added hip-hop and is now looking at developing content 'beyond Bollywood' for Indian users.

Bath says this generation has "similarities with their diaspora cousins" and enjoy both Indian and international content, but also that there is a large potential for global content created keeping the Indian audience in mind. Bath points out that much of the western/international content in India today is regurgitated from the US and the industry is getting ready to change this.

"Traditionally VCs have focused on distribution and not so much on the content, or they thought user generated content would be enough, but realized it is hard to monetize. I think that school of thought has changed, it had to," she said. Bath intends to curate some user generated content but will focus on generating branded content.

Challenges Desihits will have to brace itself for heated competition from established entertainment category sites such as Bollywood Hungama, Radio Sargam, Smashits and Dhingana. TV channels such as MTV and Channel V are also in this space. "There is a proliferation of similar sites in the music category, which will lead to a high supply-low demand scenario - Desihits needs to get a strong USP within the category if it wants to make a dent in the market and not just be an also-ran," said Sunil Punjabi, co-founder and Vice-President - Publishing Business, Networkplay Media.

"There is a dearth of original video content currently in India. Desihits' challenge will be to build up on scale and quickly as there are enough entertainment category sites in India whose content might not be good, but have 10 times more users than Desihits. Sites like Dishant, Musicplug and Bollywood Hungama are three times the size of Desihits audience. Songs.pk is also ten times Desihits' size in India but the legality of their content is suspect. These sites are not able to monetise their content very well with advertising and the ad rates are very low. Advertisers will invariably slot the website in the same bucket as the other sites mentioned above and expect similar rates," offered Shantanu Sirohi, COO, Interactive Avenues.

Monetisation The big challenge for music sites today continues to be monetisation. The company claims traffic of 1.5 million unique visitors and 375,000 listeners per show. Sirohi does a quick calculation of CPM metrics for Desihits.com from comScore data. According to marketing research firm comScore, Desihits has 600,000 users and 4 million monthly page views globally while its India traffic is 200,000 users and about 1 million page views per month.

"Even if they have 100% sellout of video pre-rolls at 400 CPM, their India traffic will yield them at maximum Rs 4 lakh in monthly ad revenue. A realistic figure is actually closer to Rs 1.5-2 lakh per month. Desihits' success or failure in India shall depend entirely on syndication/brand sponsorships and how fast they can grow to a substantial user base of 2 million unique users per month," he said. In a market where performance-driven advertising is the only language that advertisors understand, Desihits might have to re-think its strategy. "The US and UK markets are more evolved markets and understand the branding language on the Internet. Desihits will have to either open the inventory to performance advertising, which is less desirable and more short-term since the onus of performance rests firmly on just the inventory capability or it can provide a hybrid model - attract brand money and the performance of the campaign is also not affected," advised Punjabi.

Desihits might not have a choice but to depend on its supplementary revenue streams - branded content, sponsorships and syndications. It syndicates content to print magazines such as Anokhi and Rolling Stone Magazine in India and video content to TV channels in India and is in talks with one broadcaster, according to Bath.

Branded Content With the backing of Sean Finnegan, ex-COO and President of Starcom Mediavest who joined as an independent investor two months ago, the company has advanced on its strategy of branded content, a new concept where brands are included within a video production. It has created branded content with Kingfisher and State Farm Insurance so far, according to Bath.

However, advertisers say branded content may cause unnecessary delays. "Branded content is very nascent (to the point of being almost non-existent) in India today. The idea of providing branded content is a good one provided it is properly implemented and one is ready to wait as the gestation period of any new offering is fairly long," said Punjabi.

Desihits has global partnerships with record labels Sony, Warner, Universal Music. Bath explains the deal with Universal Music is also a talent management deal. "In August we entered into a distribution deal with Universal Music and will be signing up talent on their behalf across the globe to create unique content," she said.

Bath claims to have already signed on one artist and is in the process of finalizing three more from India. Media experts warn that global record label partnerships might not necessarily be smooth for its foray into India, where music labels are far more aggressive and territorial.

Its best bet for breaking into the Indian market might be through the mobile medium - Desihits only has a Symbian-based mobile application so far but is building applications for Android-based phones now. It has also partnered with video-on-demand provider Jigsee to stream ad-supported music videos on mobiles. Will this revenue stream prove a hit?