Daybreak - The US is ready to pay for NSFW Hindi audio content, but India isn’t

Episode Date: April 23, 2024

When you think of the average unicorn-status startup, PocketFM — a homegrown audio streaming platform — is somewhat of an anomaly. Its main claim to fame? Very dramatic, borderline NSFW Hindi fiction audio series’. Its content can best be described as ‘masala’ entertainment. And yet, millions of listeners tune in every day to listen to stories like ‘I love you monster’, or ‘Karan Arjun reloaded’, or ‘Millionaire Ghar Jamaai’. While all this may not be your cup of tea, it has really worked for PocketFM. So much so that the company is now just inches away from a $1 billion valuation. Ever since it was launched in 2018, PocketFM has taken some pretty risky business decisions. Like in late 2021, when it decided to enter the US market. But even though most of its big, bold bets paid off overseas, there is one thing PocketFM has been struggling to do. And you’ll surprised to hear this: Despite such an enviable user base, and investors buzzing around it, in India, PocketFM is struggling to get users to actually pay for its content.Tune in. Daybreak is produced from the newsroom of The Ken, India’s first subscriber-only business news platform. Subscribe for more exclusive, deeply-reported, and analytical business stories.

Hi, this is Rohan Dharma Kumar. If you've heard any of the Ken's podcasts, you've probably heard me, my interruptions, my analogies, and my contrarian takes on most topics. And you might rightly be wondering why am I interrupting this episode too. It's for a special announcement. For the last few months, I and Sita Raman Ganeshan, my colleague and the Ken's deputy editor, have been working on an ambitious new podcast. It's called Intermission.

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When you think of the average unicorn status startup, Pocket FM, a homegrown audio streaming platform, is somewhat of an anomaly. Its main claim to fame? Very dramatic, borderline NSFW Hindi fiction audio series. Its content can best be described as masala entertainment. It's the sort of stuff you'd only listen to with your earphones on, if you know what I mean. And yet, millions of listeners tune in every day to listen to stories like,

I love you monster or Karan Arjun Reloaded, or my personal favorite, millionaire gharjamae. While all of this may not be your cup of tea, it's really worked for Pocket FM, so much so that the company is now just inches away from a billion dollar valuation. Ever since it was launched in 2018, Pocketfm has taken some pretty risky business decisions, like in late 2021 when it decided to enter the US market. Now, you're probably wondering, is there even an audience for this sort of content abroad? Well, the answer to that question is yes. Hindi-speaking Indian American communities were lapping it right up.

In fact, the company did so well, they decided to expand their catalog. to cater to Hispanics and African Americans. But even though most of its big, bold bets paid off overseas, there is one thing Pocket FM has been struggling to do. And you may be surprised to hear this. Despite such an enviable user base and investors buzzing around it, in India, PocketFM is struggling to get users to actually pay for its content. Welcome to Daybreak, a business podcast from the Ken.

I'm your new host, Rahal Philippos, and I will be joining Snigda every week to bring you one business story that is worth understanding and worth your time. Today is Tuesday, the 23rd of April. Monetizing audio content is hard. Trust me, I'd know I produce podcasts for a living. Especially in a country like India, where the average consumer is still getting used to the idea of paying for content.

But like with most things, Pocket FM's approach is somewhat non-standard. The company very quickly realized that its monthly and annual subscription models just wouldn't cut it in India. And so in 2021, it decided to switch to micro-payments. What this means is that users aren't just buying a year-long subscription to listen to audio stories. Instead, they purchase in-app coins, which they can then use to listen to more content. It's called a freemium model. Pocket FM listeners can listen to a few episodes of an audio story for, but after that they have to buy coins to hear the remainder of the series.

They could also get coins by viewing ads or performing certain tasks on partner websites. It's sort of like when you play Candy Crush or Ludo on your mobile phone. You're encouraged to buy coins with real money to play more gains. If you don't pay, you have to sit through an ad or perform a task like Wheel of Fortune to progress further. While working on this episode, I listen to a few audio series on Pocket FM. and let me just say they know what they're doing. Pocket FM's content is written in a way that encourages micro-payments. Consider one of the most popular series on the platform.

It's called Insta Millionaire. It's the story of a broke young man named Lakshman Lal Agarwal, aka Lucky, who's had a pretty tough life so far. He works at a medical shop to be able to pay his college fees and take his girlfriend Dimple out on dates. Just to give you a sense of what it sounds, Like, let me play you a short clip from Pocket Fm's YouTube channel. One day, one day, a time be able.

When I'm justma-lager and I'll sit down. And behind Dimple's back I'll. Look, when he'll my comor in my hand cussigy and I'll take a bit of a motorcycle to India Gate's close. So, Sare Delhi's heart, we'll look and work. Bairnol be work. Spoiler alert, Dimple dumps him within the first

10 minutes of the first episode. But moments after his heart is broken into a million pieces, he gets a mysterious text message informing him that he's actually the heir to the very wealthy Agarwal family. Turns out, his rich relatives were testing him to see if he was worthy of his inheritance. They called it the Garibi Abhyaas Parikshah. I'm not making this up. This audio series has nearly a billion plays.

And although the plot is a little cliched, I have to admit the series was pretty gripping. If there's one thing this platform does well, it is cliffhangered endings. The last free episode of Insta Millionaire, for instance, ends with lucky meeting a romantic prospect named Koyle. But to listen further, I would have had to purchase 11 in-app coins. I didn't end up taking the bait, but turns out many listeners do. A former senior content executive says that it often gets to a point where customers don't even realize how much money they're paying. The price of coins increases as a user makes repeated purchases. So, if someone shells out, say, rupees 49 for 250 coins in their first purchase,

the next time around, they're likely to get only 100 coins at that price. And for a while, this model worked for Pocket FM. In fact, former Pocket FM executives told the case, that the average revenue per user, or ARPU, rose to about $1,800. Now, considering Indian users don't like paying for content, especially audio, that's pretty impressive. But pushing it beyond that point was tough. It was back in 2020, about two years after Pocket FM was founded that it really came into its own. This was largely thanks to the pandemic-induced podcasting boom. The app's monthly active users hit about 10,000.

10 million that year. As its popularity grew, investors began flocking to the audio platform. Pocket FM's funding to date stands close to $200 million. And right now, it's reportedly in talks for a fresh fundraise. If that works out, Pocket FM will be a part of the Unicorn Club. But up until this point, it hasn't been an easy ride for Pocket FM. After the pandemic, people just weren't listening to audio content as much as they were. before. More importantly, the bottom line remained. The average Indian consumer does not like paying for content. So pretty early on, Pocket FM had to figure out some alternate sources for revenue. More on that in the next segment. By 2022, Pocket FM realized it had a problem. Former employees say

there were millions of people tuning in during the pandemic, but most of them were not making purchases on the platform. It was struggling to push the average revenue per user in India, and the company wasn't having much luck with advertisers either. But around the same time, Pocket FM was organically gaining popularity among the Hindi-speaking population in the Middle East and other South Asian countries. It started to see an opportunity here. So the not-so-obvious next step was to take its business to the US. Why you were? Why you were? You're going to be. You're ask? Well, because the US market is more favourable to subscription-based businesses. It is, after all, one of the largest podcast markets in the world. So by September 2021,

it launched its Android and iOS apps there. Within months, it was clear that it had made the right decision. By early 2022, some of its top users in the US was spending nearly two hours a day listening to its content. To put that in context, its top Indian listeners was spending about an hour and a half on average on the app. Then the company introduced audiobooks of some popular titles like Rich Dad Poor Dad and Atomic Habits. It also introduced English translations of some of its more popular Hindi audio stories.

And these stories turned out to be a hit. Apart from the obvious Indian American audience, people from other minority communities like Hispanics and African Americans were also tuning in. Former Pocket FM employees say this is when the app started raking in the bugs. Two things really worked for the company. Pricing and content. Its closest competition in the US was the Amazon-owned audiobook platform, Audible. But its subscriptions were about four times higher than that of PocketFM.

And like another Pocket FM employee told the Ken, titillating content will always have. have an audience. Today, about 70% of Pocketfm's revenue comes from the US and other overseas markets. But the US still doesn't have a sizable user base like India does. The company also recognises that it's up against giants like Apple, Spotify and audible there, which is why capturing a large share of the US market in a sustainable way is going to be tough, especially now. After a few good years during the pandemic, the audio industry is slowing down again. Companies like Spotify have actively been scaling down their audio businesses. And so, Pocket FM can't afford to look past India, which is still home to most of its users.

Stay tuned for more on PocketFM's India strategy. Pocket FM's success in the US couldn't have come at a better time. Its business in India was struggling, so the company started exploring new growth avenues. For starters, it launched content in regional languages. But former employees said that listeners just preferred hearing stories in Hindi. Pocket FM employees say that the average time spent listening to audio stories in languages like Malayalam, Tamil and Odia, was 30% lower than Hindi. And that wasn't all. The content didn't seem to be having the same impact in regional languages. For instance, a former Pocket FM producer said that some Canada listeners were initially put off by the sexual nature of the content.

Which is why by 2022, the company decided to scale down regional content and focus on what works. Hindi audio stories. The company also tried to crack alternate income sources through partnerships and advertising. But it turns out, not many brands want to be associated with PocketFM's often erotic content. But they did manage to get some ads on the platform via ad networks like Google Ads. Apart from that, what worked for them to some extent was partnerships. PocketFM had an arrangement with some companies where they earned a commission every time a user watched an ad or downloaded certain apps to earn coins. They've had some of their most successful tie-ups with online.

and pharmacies like Tata 1MG and FarmEasy. But on the whole, neither ads nor partnerships led to sizable returns. In fact, in November last year, the company decided to disband its ad sales and agency relationship team entirely. But in PocketFM's journey to Unicorn's status, tough decisions like these have to be made. A spokesperson of the company said it will continue to focus on international expansion going forward. It's also been working over time to expand its U.S. business. But if Pocket FM wants to play the long game, it knows it can't lose focus of its India market. As of now,

it's managed to amass an impressive audience. But if it wants its India listeners to pay for content, it'll have to offer more than just cliffhanger endings. Daybreak is produced from the newsroom of the Ken, India's first subscriber-focused business news platform. What you're listening to is just a small sample of our subscriber-only offerings. A full subscription unlocks daily long-form feature stories, newsletters and podcast extras. Head to the ken.com and click on the red subscribe button on the top of the website. Today's episode was hosted by Rahil Filippo's, produced by me Snigda Sharma and edited by Rajiv Sien.