Xiaomi Will Challenge Netflix, Amazon Prime In India; Crores Will Be Spent On Producing Content
Xoaomi has three business verticles: Devices, Retail and Services.
When it comes to India, then Xiaomi has been focussing on devices and retail-centric business model, but now, the time has come for a major transformation.
Very soon, Xiaomi will kickstart their streaming services in India, and this means, Xiaomi will be directly pitched against the likes of Netflix, Amazon Prime, and Hotstar.
Will Xiaomi be able to make a mark here?
Xiaomi’s Streaming Services: Multi-Crore Budget Allocated
Xiaomi has some major plans to use content as a monetization platform, and the first step will be an online video streaming service, just like what Netflix and Prime do.
Recently, Xiaomi had committed an investment of Rs 3500 crore in India, for boosting their operations. A major sum out of this budget shall be allocated for content production, as Xiaomi will launch their own TV shows, exclusive web series and home-made movies.
Exact details haven’t yet emerged as to when will this start, or whether they are in talks with any production houses or not.
Once this happens, then Xiaomi will become a major force to reckon with, when it comes to online streaming and entertainment on demand service.
What Is The Need For Streaming Services By Xiaomi?
The main reason is profitability, and margin.
When Xiaomi sells their handsets, TVs and other hardware products, then there is a wafer-thin margin of 1%, on an average. Even if they try hard, and reduce production costs, and supply chain, and increase the price, the margin cannot be stretched beyond 5%.
This is the reason Xiaomi will be now aggresive towards online-based services such as video streaming and music streaming, to increase their margins, and their income.
This has been confirmed by Xiaomi India managing director Manu Kumar Jain, as in a recent interview, he said, “Xiaomi globally made less than 1% profit margin from hardware or device sales in 2018, and we have stated that will never make more than 5% profit margin on hardware,”, adding, “It is the internet services which will make money for us.”
The numbers prove that: During 2017-18 financial year, Xiaomi Technology India, the Indian subsidiary of Xiaomi Global had revenues of Rs 23,060 crore, out of which, they were able to churn out a profit of Rs 293 crore.
Majority of the revenues generated from hardware sale, and the margin is indeed less, despite the fact that revenues increased by 175%, and profits increased by 79%.
The real money lies in increasing the margin, and Xiaomi has understood this fact.
Jain said, “Designing and selling hardware is only half the job for us. The remaining half of the job is to engage with customers and sell internet services to grow fast,”
Xiaomi’s Diversification Plans: Videos, Music, Online Storage & More
Besides online streaming of videos, Xiaomi will also focus hard on generating income from services such as Music, data storage and digital payments.
And they have built a solid platform for the same.
Their file transfer service: Mi Drop has over 100 million downloads, and in India, 40 million users access Mi Music service, their online music streaming service which comes bundled with Hungama Music. They have recently started a paid service for their music access as well, and things will pick up soon.
Besides these Mi Pay, it’s online and mobile payment app, has already been launched in India, and a major marketing campaign is about to be unleashed to promote that.
This way, Xiaomi will compete against Paytm, PhonePe for capturing the digital payments market; will fight with Spotify, Youtube and Gaana for online music; battle Netflix, Hotstar and Amazon Prime for online streaming of videos, and even compete against the likes of Dropbox for online file storage and transfer.
We will keep you updated, as we receive more updates.