Future of entertainment and gaming in India

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I follow the world of content closely. I like studying how the business landscape and consumer behaviors are evolving for media, whether movies, shows, music, or user-generated content. I grew up gaming and sadly gave up before esports became cool culturally. Today’s chat is with the distal entertainment company Pocket Aces’s cofounder, Anirudh, who has spent the past 8 years at the intersection of entertainment and gaming. Pocket Aces reaches 50 million people weekly and creates content for streaming platforms and its own channels under a portfolio of brands. One of their most popular shows is Little Things, the longest-running Indian show on Netflix. Anirudh now runs Loco, a esports streaming platform spun off by Pocket Aces

In this chat, Anirudh and I talked about:

• Evolution of the storytelling landscape in India

• Inflection points in the Indian consumer entertainment journey

• Creating content for social media and the younger generation

• Multi-brand strategy

• Balancing content for streaming players versus owned platforms

• Foray into gaming with the acquisition of an app similar to HQ Trivia

• Spinning off an esports streaming platform

• Exclusive content for esports

• Evolving nature of gaming

• Regulatory clarity and misconceptions about gaming

Sar: You cofounded Pocket Aces in 2014 in Mumbai. Can you talk about the early days? What did you believe was missing in the storytelling landscape in India at the time? What were the early learnings and inflection points?

Anirudh: We started Pocket Aces to become a film studio that made Indian films that could travel globally. Indian films had a strong cultural footprint globally, but the economic footprint was tiny. The entire Hindi film industry was $1bn in size at the time. Lord of the Rings did more business than that by itself. We needed to remove this gap between our films’ cultural and economic impact.

Like every startup thesis, our hypotheses about Indian films soon met market reality. We realised that the structure of a traditional film was the opposite of a startup’s structure – it was a high fixed-cost product with low iterative potential for the creators, making the film product less amenable to innovation.

Our first inflection point arrived in 2015 - this was when the first cohort of users started using the phone as their primary source of entertainment. These users moved away from the shared viewing experience of television and embraced personalised and snackable viewing on their phones. We utilised the classic “drunk walk” mental model, which involved trying things till we found PMF or, as I like to call it for content companies, content-distribution fit.

That PMF happened with FilterCopy, which we started as an experimental channel. Looking back, it is clear that FilterCopy’s content production process had the right economic and velocity mix for a startup. We adopted a philosophy that allowed us to produce content quickly and at a low fixed cost. We always provided viewers with fresh content (or “freshly brewed content,” as we called it then) so we were on top of people’s feeds. The quick, iterative production meant we got data back fast and realised what we needed to produce next or where we needed to improve. Low fixed cost meant that the cost of failure and learning was low. This enabled us to nail the right content themes and find the best creative talent in a data-driven versus purely gut-driven manner. This would prove to be path-breaking for the industry.

 Initial successes helped tremendously. The first video we ever made went mega-viral; I’m talking 200k+ shares, which gave us confidence that we could do this. Post that, we had a lot of failures, but with the low cost of failure, we kept producing content, chiselling our content strategy as we went along. By the end of 2015, we started seeing consistent success. We also developed a distribution strategy. We had figured out that Facebook will prioritise video on its newsfeed and almost all the virality of a YT video came from link sharing on Facebook and/or WhatsApp. With this in mind, we built our franchise on Facebook, which helped us breakthrough. Our videos got massive distribution on Facebook, and soon people searched for us on YT, which helped build our YT presence.

Once our YT franchise started gathering momentum, another big inflection point for us was our show, “Little Things,” which became a rage all over India. The idea came from our short videos being shared heavily organically (200k+ shares on each video), so we knew there was resonance with the themes and love for the actors. This is the show that Netflix approached us for, and it has since become one of the longest-running Netflix originals in India.

Sar: Talk about the various content brands housed under Pocket Aces.

Anirudh: Pocket Aces has three divisions:

- D2C Content, where we create content brands owned and operated by us. This allows us to create content for different genres and interests. FilterCopy is our most popular brand. We also have Dice Media, focused on longer-form content; Gobble focused on food, travel, and lifestyle; Nutshell, focused on infotainment

- OTT Content, where we create original shows for Netflix, Disney+ Hotstar, Amazon, etc. We have 12 shows lined up for next year.

- Influencer Management, where we manage one of the largest rosters of digital influencers in India by reach and revenue.

Loco was the fourth division, which grew extremely fast, so we spun it off as a separate company. This is where I have spent most of my time since 2018.

Sar: How did you end up capturing the attention of younger generations?

Anirudh: Consumers watched content on their phones and shared content on social networks. Most traditional media companies had not put a lot of thought into how they could leverage these distribution channels. Our playbook utilised three things:

1. Create content at a cost point that incumbents couldn't match;

2. Release content at a speed that incumbents couldn't dream of;

3. Conceptualise content grammar that matched the distribution for that content.

That drove us to tailor content for video distribution patterns on that platform. This could be a 3-minute sketch on FilterCopy on YouTube, a 15-second meme on FilterCopy on Instagram, or a snappy food or travel piece on Gobble on Snap. Being present in all digital places where young people hang out helped us amass distribution and become culture makers for today's generation.

The incumbent media companies were busy catering to an older demo, which was TV-first – so the issues they spoke about and the characters they represented were out of sync with what we were seeing in our age groups. People saw themselves or people they knew in our characters. The themes we picked resonated with viewers. That helped it go viral, giving us the wedge needed to set us up for experiments with new content genres.

Sar: Did you always want to own distribution channels from the early days?

Anirudh: Yes – we always thought about distribution from day 0. The concept of content-distribution fit was critical. How does something go viral? What things do people say/write online when something goes viral? What is the share velocity on a piece of content? What is the half-life? We studied all of this in great detail.

Over time we built distribution on different platforms so that we were not overly leveraged toward one platform. We built our platform, Loco, which we’ll speak about later, and started Clout, now one of India’s largest influencer management companies. These initiatives allowed us to help other creators, who have blown us away with new content formats and their intuitive understanding of popular culture!

Sar: Traditional movie studios are constantly triaging what to put on their streaming services versus in theatres. How does Pocket Aces think about distribution through its channels versus streaming services?

Anirudh: We use our O&O (Owned & Operated) channels for short-form content. Our network has over 35 million subscribers, and we get over 700 million video views. The streaming services allow us to tell stories that need a bigger canvas, longer episodes (a 45-minute episode vs. a 5-minute video), and series length (multiple seasons). A murder mystery or a period piece may not be a great property for many advertisers but may be a slam dunk for an OTT service and its subscribers.

When we think of creative ideas, we think of the right grammar for it, the right way to tell it in - so is it closed-ended vs. open-ended, can it do multiple seasons, etc.? We use the short-form O&O network to help test storylines, actors, etc., helping create a more robust long-form offering. This is a big reason why we have one of the highest renewal rates in the OTT industry today.

Sar: What was the rationale behind buying Loco in 2018? It was a live trivia app, like HQ Trivia in the US, at the time.

Anirudh: In 2018, Pocket Aces already had a huge reach via our D2C/O&O channels, and that business was scaling well. We thought about how Indian consumers’ entertainment preferences would evolve in the next five years.

We knew mobile internet would get cheaper. Distribution would improve (or the cost of distribution would decrease) significantly. This happened faster than we had imagined. Thanks to Jio, per GB costs fell by as much as 100x. We had a hypothesis of consumer behavior: in the world of weak phones and 4G - everyone watched. In a world where everyone has powerful phones and 5G - everyone will play.

In 2018, we acquired Showtime, which we rebranded and relaunched as Loco. It became a runaway hit. We got close to 1mm concurrent users on a single stream, which was a crazy achievement considering the size of our team at the time. This was before the 1mm+ IPL streams on Hotstar arrived. Our latency was better because people had to play a game vs. consume content, which can tolerate a bit more latency. At 10 pm every night, you could walk into any bar or restaurant in India, and you'd see people playing the Loco quiz.

Sar: Talk about the early days of the integration of Loco.

Anirudh: I think the integration was easier because we spent significant time getting aligned before the transaction concluded. We had started building an interactive trivia app internally but heard about the Showtime team from one of our investors. Even though the scale of the app was very small, we liked what we saw from a product POV. As a former banker, I was acutely aware that most M&A doesn’t work.

What gave us confidence was that our product vision matched that of the Showtime team and that all the individuals gelled well during our multiple interactions. Pocket Aces offered immediate value to Showtime because it would accelerate their go-to-market by several months apart from elevating their content offering. Showtime gave us the tech capability we wanted to build, helping us accelerate the buildout. It was an experience that most of the early team would never forget.

This acquisition also helped us set a playbook for other transactions. We have made two other acquisitions/acquihires, and most of those founders continue to form the core team at Loco. It helps to have founder DNA in every position. It makes running the company 10x more satisfying.

Sar: Pocket Aces spun off Loco as an esports streaming company. How do you think about gaming and the role Loco plays?

Anirudh: At Loco, our purpose is to democratise gaming entertainment. Gaming is one of the few places where we can strive towards a meritocratic system - where you are from is not a constraint. How you look is not important. Your sex or religion doesn't matter. Your skill, your hard work, your grind - they matter! We want to ensure that a young person in a small village with minimal resources can entertain the world or get entertained with just their phone.

We are the platform where gamers can go from being noobs to becoming gaming superstars. We are the campfire for streamers - from beginners to the best; they are all here on Loco. We turbocharge fan experiences - you no longer have to be another user in the crowd. We enable you to find your gaming clan - a community where you belong, play games you care about, and support streamers you love. We are the water cooler for a virtual playground - where you gather, swap stories, analyze, critique, and support! Gaming will only get more diverse and immersive.

In 2015, the phone became the mainstay of the user's entertainment experience, and 4G paved the way for the streaming video revolution. In the 2020s, we are entering a world of powerful phones and are on the cusp of the 5G revolution - everyone will play and interact. Where will we make authentic connections and share experiences in the virtual world? What do an entertainer and entertainment look like in this world? How do we make experiential and creative tools accessible to everyone? These are some questions that Loco will tackle as entertainment transforms in the next decade.

Sar: Pocket Aces was content first, and you were trying to own distribution. Loco is distribution-first, and you do some original content. Talk about how you think about using content to grow the service. Loco is mostly a UGC network.

Anirudh: Original content helps build a platform’s credibility and becomes a pull lever for audiences. We have sponsored the most number of India’s esports tournaments, which drove viewership to all-time highs and 90x growth over 2021. Our relationships with leading tournament organisers (TOs) and in-house production ensured that we could create and support exclusive tournaments. These tournaments, including the BGMI Masters Series 2022, which we broadcasted, broke multiple records. We saw close to 100mm views, and the viewership was 10x that of television for the same event. The viewership was higher than prestigious sports properties like Australian Open tennis, multiple premier league games, and F1. It cemented that esports is now the second biggest sport in the country, behind cricket.

We have also created multiple premium original gaming properties that enabled us to create pop culture moments. That includes India's first fiction series focused on esports, India's first esports talk show, and the first non-fiction show that documents the journeys of Loco streamers. Our background as content creators gives us a strong edge when it comes to this product. Our strong talent management expertise gives us the skillset to build streamers into household brands - something most others promise but can't deliver. The understanding of content is ingrained within the DNA of the company. It doesn’t only sit with the content or marketing teams but also inside product and tech, which helps us deliver a better experience.

Sar: How do you think about the regulatory discourse around gaming?

Anirudh: I am most interested in seeing clarity on the delineation of real money games from other games (i.e., what is gambling, what is not), taxation frameworks, and the policies on various genres of games, which can replace bans and suspensions so that compliance is done ahead of time by publishers. We sit in the middle of digital broadcasting, social media, and gaming. While rules are fairly clear for the first two industries, clarity for the third will mean more investment in gaming and more games released in India, which in turn means more game categories for users to stream and view, which will drive the long-term growth of our platform.

Sar: What’s not well understood in the public discourse about gaming in India?

Anirudh: The amount of time users spend in virtual worlds is poorly understood. Young people use virtual worlds as hangout spots and games to learn about other places and cultures. Away from the big cities and towns, you will find places that don’t have the hangout spots or social “water coolers” of big cities like malls, cinemas, etc. - some may not even have playgrounds. Gaming becomes a need, not a luxury, in those places.

Gaming is cheaper than most other forms of entertainment. Call of Duty mobile or a Ludo is free to play, but Netflix costs $7-20 per month. Add in these games’ interactivity, and you can understand why gaming has become a pan-India phenomenon.

The monetization path for gaming in India is also not well understood (especially among professionals). First, advertising in India is much bigger than people think, and the shift to digital that has been postulated over the past 5 years has now occurred because of the pandemic. Advertising is always a proxy for attention; advertising dollars follow attention minutes. Second, UPI has unlocked bite-sized / sachet payments, which is critical because games (or any app for that matter) of an earlier era could not access a wide cohort of users because payment friction was too high. This opens up microtransaction-led models. As we look forward 5 years, we have two solid revenue streams that get overlooked because people often look to history but don’t consider these game-changers.

Secureframe helps companies achieve fast SOC 2, ISO 27001, PCI, HIPAA, NIST, and GDPR compliance. Click here to chat with their team. Mention “Sar” during your demo to get 20% off your first year of Secureframe. Promotion available through December 31st, 2022.

In the world of streaming content, I have also spoken to Vinay Singhal, CEO of STAGE, about dialect-based content in India.

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