Can IMDb be Amazon’s white knight? ⚔️

In India, the Prime Video strategy is evolving

This is edition 303 of Beyond The First Order, a premium daily newsletter that demystifies the hidden models, incentives and consequences of the most significant events across India and Southeast Asia

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Good morning,

It’s almost the weekend. Do you have plans to binge-watch TV shows or movies? Soon, you could have an even greater plethora of choice as Amazon doubles down on IMDb in India.

“Can I invest in shares of Unicorn X or Y?” is a question I’ve often been asked. Increasingly, it’s getting easier for investors to jump in on the unlisted shares market and even ride the IPO wave. 

Like mom-and-pop investors, India’s central bank, too, wants higher returns. It looks like it’s planning to outsource a part of its money management function to the pros.

And over in Indonesia, what happens when fast food meets boy-band mania? You’ll have to scroll through to find out.

Amazon’s IMDb wants to go big in India

Earlier in February, Amazon quietly hired a former executive at streaming platform Disney+Hotstar for a newly created, yet all-important role: IMDb India head. Assigned to lead the country expansion plans of the internet’s beloved movie database, Yaminie Patodia is now hiring for two direct reports—they are expected to take charge of the content partnership and marketing fronts.

Little is disclosed about IMDb’s financials. Yet, it is an important slice of Amazon’s ad business, which clocked nearly US$7 billion in the latest quarter. The world’s most popular source for film, TV and celebrity content attracts more than 250 million unique visitors to its platform every month. So, the business decision to create an India-specific vertical, where it reaches 20 million unique monthly visitors, can only mean one thing—Amazon thinks the time is ripe for its prized asset to double down on the Indian market. 

Going by its usual playbook and LinkedIn job descriptions, one could expect IMDb India to go after things like growing site traffic, forming partnerships with filmmakers, hiring staff writers, and expanding its contributor pool. Down the road, we could also expect the Indian version of IMDb TV, Amazon’s ad-supported streaming service that’s now operational in the United States.

Why does this matter in Amazon’s larger scheme of things?

Part of that answer lies in the original reason why Amazon snapped up IMDb back in 1998. The deal took place when the US firm was still an online bookstore and just starting to diversify into selling DVDs and videotapes. It believed the movie database would be a good fit as an advertising resource. And IMDb continues to bring big ad dollars to Amazon, while also raking in subscription money from IMDb Pro, its premium platform for entertainment professionals. 

But there’s something else, too.

According to a company source, IMDb is an integral part of Prime Video’s content strategy. In addition to the streaming platform’s own viewership data, Amazon extensively analyses what is being searched for and trending on IMDB, which in turn influences its content decisions for its Originals. 

“It helps us gauge the amount of interest potential versus the amount of representation we have on our platform,” the source says. 

The IMDb expansion points squarely to Amazon’s big ambitions in the video space in its top-priority region. As we reported this week, the company is putting the finishing touches to the India version of its Channels service, a marketplace for streaming platforms within Prime Video. Users can purchase add-on subscriptions to third-party players on top of their Prime package, and access it all in one place. Channels is Amazon’s bet to amass viewership data from third-party platforms in a country as diverse as India. 

Despite all these tricks up its sleeve, Prime Video has been ceding market share in the United States. Can the IMDb + Channels strategy really change its fortunes in India, where competition is heating up? 

Everyone can’t be a VC, but one can try

A few years ago, I had the chance to buy unlisted shares of One97 Communications, the parent company of fintech Paytm*. I passed. It was priced at Rs 3,000 (US$41). 

A week ago, the company announced its plan to go public in India. And now, everyone wants a piece of the unlisted shares pie. As per a report in Economic Times, in a week following the IPO announcement, the shares that are traded in an unofficial grey market jumped over 70% to Rs 18,500 (US$253) per share. It could even be higher.

Should I be cursing myself?

Anyway, the expectation is that there will be a big IPO pop on the day it finally lists. And, of course, everyone wants the thrill of feeling special and buying shares before the larger public can. Especially since the market for IPOs in India is hot right now, with new-age companies like Zomato and Nykaa also planning to list this year. 

Naturally, this means that for investment service companies, it’s a great time to sell their ‘new’ ideas. Here’s a screenshot from an email Rohin received last month from a financial services company, trying to sell him the proposition of creating wealth through unlisted shares. 

The same company’s mutual fund arm is also rejigging one of its schemes to attract investors in this wealth creation journey through IPOs.

IPO market has been a breeding ground for potential multi-baggers. Since 2018… 22 small-cap businesses have turned into midcaps and 4 have turned into large-caps. 8 mid-cap businesses have turned into large-caps. IPO market has seen new age businesses getting listed across various sectors in which many investors have been waiting to invest for years.

Edelweiss Maiden Opportunities Fund - Series 1 was launched in Feb 2018 as a closed-ended fund to capture such opportunities in recently listed and upcoming IPOs. The fund has now completed more than 3 years and approaching its maturity on 28th June 2021. The fund has returned 14.3% vs. 11.2% Nifty 500 (BM). The fund is now being converted into an open-ended fund so that you can continue to stay invested in the fund and reap benefits from robust IPO market activity in coming years.

The main part of the sales pitch for the fund, now rechristened to ‘Edelweiss Recently Listed IPO Fund’ is this. 

The fund carefully selects good IPOs and aims to gain from their listing and post listing gains.

The fund provides a focused exposure to such opportunities which is not possible through some other investment options.

The chance to be part of ‘something special’. And also because in a hot IPO market, share prices mostly go up. After all, who doesn’t want to wake up to the smell and sight of freshly printed money as the shares you own pop. 

But more importantly, getting allotted shares in an IPO is a lottery. You could apply to 10 different IPOs and walk away with nothing to your name. But, big institutional players have a better chance at an IPO allotment. And by extension, a better chance at making your money pop. 

Over in the US, similar things are happening. The investment platform Robinhood rolled out a feature last month:

Today [20 May], we’re starting to roll out IPO Access, a new product that will give you the opportunity to buy shares of companies at their IPO price, before trading on public exchanges. With IPO Access, you can now participate in upcoming IPOs with no account minimums.
Most IPO shares typically go to institutions or wealthier investors. With IPO Access, everyday investors at Robinhood will have the chance to get in at the IPO price.

You see, everywhere in the world, investors want to feel special.

But while more democratisation of investing seems to be the way in the US, the capital markets regulator in India could be turning out to be a prude.

The Securities and Exchange Board of India (Sebi) is considering the concept of institutional investor-only initial public offerings (IPOs) to shield small investors from presumably risky issues by new-age technology and e-commerce firms.

[...]

Investment bankers’ lobby group Association of Investment Bankers of India (AIBI) in the past had made a representation to Sebi to allow institutional investor-only IPOs — a concept prevalent in developed markets, such as the US. The regulator in the past had been averse to the idea, fearing a backlash from the public.

However, as companies that are unlikely to turn profitable in the near future look to go public, Sebi is seeing the idea in a new light, said investment bankers.

If that happens and retail investors are locked out, it’s good times for investment products like the Edelweiss Recently Listed IPO Fund.


*Paytm founder Vijay Shekhar Sharma is an investor in The Ken

Hiring: Outsourcing RBI’s forex reserve management

A week ago, reports emerged that the foreign exchange reserves managed by India’s central bank, the Reserve Bank of India (RBI), were within touching distance of US$600 billion. The reserves have enough money to cover 18 months’ worth of India’s import requirements. 

And it looks like the RBI is in no mood to stop. The premise is that who knows what could happen during a global pandemic, so it’s better to be prepared for the worst, and hope for the best. 

Of course, the RBI is aware that this buffer is beyond what ‘standard requirements’ indicate. So it wants to do something about the ‘excess’.

Here’s something The Economic Times reported yesterday:

India’s central bank is likely to engage external financial consultants to manage a part of its record $600-billion foreign exchange reserves, dusting off a playbook used nearly two decades ago when the corpus crossed the twelve-digit threshold for the first time.

Hiring external fund managers isn’t common practice in the central banking world, and the RBI has experimented with it before, but hey, one has to change with the times. 

In November (BFO#158), we’d written about how the RBI was suffering from a tiny case of FOMO and was looking to diversify its forex investments to earn higher returns. At that time, the possibility was that the RBI would buy into AAA-rated corporate dollar bonds (typically, it invests in US government-issued bonds and the like). 

Now that its reserves are the fourth-largest in the world, the RBI is following the footsteps of its larger counterparts like the European Central Bank.  On its website, the ECB states that “the objectives for the management of the ECB’s foreign reserves are, in order of importance: liquidity, security and returns.”

After all, in a ZIRP (zero interest rate policy) world, what India makes by keeping all this money in conservative assets could be really low. Even just 1%. So, now that US$600 billion takes care of liquidity and security, it’s time to hunt for returns. 

With more money comes the great responsibility to make even more money.

But a lot of this is done ad hoc or at the discretion of the RBI—quite unlike its policy on interest rate setting, which now has a formalised committee that gathers to make decisions together.

So, before the RBI goes scouting for money management talent, it may need to formalise its policy and make it transparent, as a paper from the Bank of England suggests, or risk failing:

A correct and appropriate policy framework for the official reserves is the most important element of successful reserves management; without it, even the most technically accomplished portfolio management operation will fail to be strategically successful.

Recipe for a 2021 super spreader event

  • Take large, K-Pop crazy country
  • Create a McDonald’s Happy Meal with a Korean boy-band theme
  • Add a handful of TikTok influencers
  • Cover with generous layer of advertising
  • Sprinkle promotions on delivery platforms
  • Serve with cheap labour
“More than a dozen Indonesian McDonald's outlets were temporarily shuttered Wednesday over virus fears as the chain's new BTS meal deal sparked frenzied buying from fans in the K-pop mad country.”

Left: Indonesian TikTok star Sisca Kohl and her sister show off the 40 BTS Happy Meals they ordered online

Right: Delivery drivers from Gojek, Grab, and ShopeeFood crowd McDonald’s outlets across the country for hours, leading to store closures

Correction: In yesterday’s edition, we incorrectly wrote ’employee union backed by the State Bank of India’. This has been updated to ’employee union at the State Bank of India’. We regret the error. 


That’s a wrap for today.

Hope you’re taking care of yourself, staying socially distant, masking up, and washing your hands frequently.

Write in with your thoughts and observations on how this pandemic is reshaping businesses, societies, and economies. We’ll see you on Monday.

Stay safe,
Nithin
[email protected]

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