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   W14490 E-COMICS: FORECASTING DEMAND Mala Srivastava and Gaurav Thapar wrote this case solely to provide material for class discussion. The authors do not intend to illustrate either effective or ineffective handling of a managerial situation. The authors may have disguised certain names and other identifying information to protect confidentiality. This publication may not be transmitted, photocopied, digitized or otherwise reproduced in any form or by any means without the permission of the copyright holder. Reproduction of this material is not covered under authorization by any reproduction rights organization. To order copies or request permission to reproduce materials, contact Ivey Publishing, Ivey Business School, Western University, London, Ontario, Canada, N6G 0N1; (t) 519.661.3208; (e) cases@ivey.ca; www.iveycases.com. Copyright © 2014, Richard Ivey School of Business Foundation Version: 2014-09-24 Tarun Verma was a management graduate from a leading business school in India. In December 2012, after spending a few years in the corporate world, he decided to partner with a friend to start his own venture of developing mobile applications (apps) that supported interactive comic content. He named it Todtales and based it in Mumbai, the financial capital of India. As a start-up, Todtales had a novel technology that made comics interactive. Although this technology could not be patented, the entrepreneurial team (see Exhibit 1) decided to adopt a strong selling  proposition by positioning their “e-comics” as educational tools with sound, karaoke, interactive games and augmented reality. Verma was convinced that “Children learn more when they’re having fun! With an educational entertainment app, we combine innovation and multiple play patterns to delight children and expand their learning horizons. Our comics provide exciting experiences as part of each child’s journey to reach his or her full potential.” Verma’s team raised the initial seed funding from personal resources and an angel investor. In 2012, the  prototype was ready for demonstration and received positive response from parents during a focus group study undertaken by the research team. With the hope of going commercial by the end of 2014, Verma knew that he should start the next stage of development by December 2013. This included improvement in the prototype apps and an inventory of interactive content and devices that would be attractive to young children (see Exhibit 2). All this needed an investment of US$12 million. The entrepreneurial team had  pooled together their personal savings, which amounted to US$8 million. Verma was meeting their new investor and needed a quick and credible answer to the question of the potential of his idea before deciding how forcefully to push the e-comics project. He first needed to complete a study of and forecast for the future of the overall Indian comics market. He was hoping to raise US$5 million from the potential investors in exchange for 3 to 5 per cent equity. Do Not opy or Post This document is authorized for educator review use only by Angeline Fernando, Other (University not listed) until Nov 2019. Copying or posting is an infringement of copyright. Permissions@hbsp.harvard.edu or 617.783.7860  Page 2 9B14A028   THE INDIAN COMICS INDUSTRY Comics are a transient form of communication 1  that are staged in the form of small box-like frames containing art and text; they have action and motions similar to that of cinema and are visually stimulating. In general, the time required to read a comic is short. In the English language, comics in magazines from established international publishers first appeared in the 1920s. The Times of India , an English-language daily newspaper, was the first to launch the comic strip in India in the mid-1960s. In the initial years, the form was influenced by popular Western characters. Later, several indigenous comics were launched. The availability of content in the vernacular language with local content encouraged publishers to publish multiple monthly issues of their comics. However, the comics industry took a hit in the late 1990s when cable television, the Internet and other modes of entertainment invaded households in India. The concept behind e-comics was the same as that for digital books or magazines: content could be  purchased and downloaded from commercial websites and read on a personal computer (PC) or any  portable device, such as an iPad or a tablet (a device conceptually like an iPod but for visual art and/or text instead of music). Following the international trend, Indian comics publishers started offering e-comics to their customers by 2001. Right from their inception, comics had targeted children aged five to 12 for both entertainment and development of reading habits. With the advent of television, cable and the Internet, reading as a leisure activity had seen a significant decline among growing children. Audio-visual media offerings have an immediate, often visceral effect and tend to be more engaging than traditional print-based media. In the late 1990s, when the first such children’s media began appearing as an attraction, comics publishers were caught on the back foot and failed to meet the new challenge due to a lack of innovation. The industry prediction was that comics would become increasingly digitalized and would compete with content from cartoon television channels and other interactive media. In 2013, India hosted its first-ever comics convention. 2  The Indian comics industry was worth US$500 million 3 and had been seeing a 5 per cent year-on-year growth with the average price of comics ranging from US$1.00 to US$1.50. PRODUCT OFFER The Todtales product was an innovative app that could be downloaded on any operating system. However, this technology could not be patented. The company was faced with two possibilities for the offering:    They could bundle the app with a low-cost tablet loaded with the free content and price the product accordingly.    The app could be downloaded with some content accessible for free and additional content available on either a subscription or pay-as-you-use basis. 1  www.questia.com/library/1G1-121875451/what-are-the-comics, accessed November 16, 2013. 2  www.ibnlive.in.com/news/india-to-host-its-first-ever-comic-con/140350-40-100.html, accessed November 9, 2013. 3  “How Social Media is Boosting Comic Industry,” The Times of India, http://timesofindia.indiatimes.com/, accessed November 3, 2013.   o Not opy or Post This document is authorized for educator review use only by Angeline Fernando, Other (University not listed) until Nov 2019. Copying or posting is an infringement of copyright. Permissions@hbsp.harvard.edu or 617.783.7860  Page 3 9B14A028   Interactive e-comics were expected to encourage the habit of reading. The team felt that the initial target for the product would be children between the ages of three and 12. They hoped that the interesting content would lead to “pester power” for subsequent downloads. Once the app became popular, traditional comics publishers would also be interested. The biggest challenge was to get a critical mass of  parents to download the apps on a device and allow their children to read them. The children of the twenty-first century were technologically precocious, educated and growing up in an affluent society and therefore were the ideal target group for the app. Demographic Dividend The demographic structure of the Indian population offered a positive proposition for marketers. Among the world’s countries, India had the highest population growth and also the highest number of children in the age group zero to 14 (see Exhibit 3). Children were technology savvy and took an interest in trying out new innovative products. The platform availability of Internet-enabled computing devices such as smartphones and tablets along with e-readers, which formed the supporting infrastructure for reading e- books, was adequate for the market. The Indian telecom industry forecasted one billion subscribers by 2014. Multiple factors were responsible for the growth, including the lowest tariffs in the world, intense competition among operators, cheap handsets and rising incomes. Technological Uncertainties Many alternative technologies offered different operating systems at varying price/performance points. The challenge for the team was to make an app that would be compatible with the prevailing and possible future operating systems. However, the availability of improvised content such as multimedia-enriched content and audio and video add-ons that would create a stir and attract readers could be easily sourced from information technology (IT) enabled services already available in India in a cost-effective manner. Market Uncertainties For parents, the potential benefit of e-comics depended on how their children felt about comics as well as their cost. If offered as a device preloaded with content, the higher initial cost might become a barrier to many consumers. To make e-comics more attractive to consumers, Todtales might need to offer several incentives. Another and bigger issue was that reading as a leisure activity was not popular with youngsters so that Todtales expected the initial pull to come from parents. The company was convinced that the offered apps enabled many additional features and functionalities that would enhance the learning experience and lead to pester power. Much debate surrounded the issue of whether the rapid adoption of e-comics would have to be linked to the ownership of a specific device. Leisure Time and Online Purchase Behaviour The research team at Todtales was convinced that the positioning of the app and the content as an educational-cum-entertainment offering would help in making diffusion easier, as this was an important Do Not opy or Post This document is authorized for educator review use only by Angeline Fernando, Other (University not listed) until Nov 2019. Copying or posting is an infringement of copyright. Permissions@hbsp.harvard.edu or 617.783.7860  Page 4 9B14A028   issue facing parents of young children. The team undertook a study to capture the leisure hours of children. It sampled 300 parents in Mumbai who were contacted personally and asked to answer a structured questionnaire. The respondents belonged to Sec A (a socioeconomic classification 4 ), the  proposed target segment for the product. As the financial capital of India, Mumbai was a microcosm of the country’s diversity and hence an appropriate city in which to conduct the study. The objective was to understand the leisure activity of children, especially with relation to hours spent indoors. The study found that, on average, a child spent 195 minutes daily on indoor leisure activities. The breakup of the time spent on different activities is reported in Exhibit 4. Neilson’s global shopping report, which captured the online shopping behaviour of Indian buyers, is shown in Exhibit 5. Forecasting E-comics Adoption Using the Bass Model 5   A key consideration in developing forecasts using the Bass Model is an understanding of the diffusion  process of analogous products. Several different product categories may provide suitable analogs based on the substitution of one type of technology by another. Using this logic, the market research group expected to develop the forecast for the new app by December 2014 (see Exhibit 6). CONCLUSION Verma realized that he would have to add digital content consistently to keep broadening the offer, emphasize and refine its key differentiating features and continue to strengthen its position in the markets. In the initial period, Todtales’ revenues would be coming from domestic markets, but at a later stage Verma hoped the product would be driven primarily by international markets. Verma knew that the  potential of the innovation and its success depended on the initial response to the app. This could be determined by the number of parents who would allow their children to download the app on their device. Based on the diffusion pattern of the app, Verma hoped to convince prospective investors of the possible high return on investment (ROI) his start-up offered. 4  The SEC Classification classifies Indian consumers based on education of the chief earner and the number of consumer durables owned by the family. The upper most segment of the consuming class is SEC A1. www.mruc.net/new-demographic-map-of-india.pdf, accessed June 14, 2014. 5  http://bassbasement.org/BassModel/Default.aspx, accessed June 14, 2014. o Not opy or Post This document is authorized for educator review use only by Angeline Fernando, Other (University not listed) until Nov 2019. Copying or posting is an infringement of copyright. Permissions@hbsp.harvard.edu or 617.783.7860
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