After beating Samsung in smartphones, Xiaomi now wants to generate revenue from internet services.
The Chinese firm, counted amongst the top five most valuable technology startups, wants to generate revenue and profit from streaming of movies and videos, music, digital payment and applications, and will invest a significant proportion of the recent Rs 3,500 crore fund infusion to expand into services, Xiaomi India managing director Manu Kumar Jain 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,” he said. “It is the internet services which will make money for us.”
Jain said Xiaomi globally has three financial pillars – devices, retail and services — and the last one are yet to be monetised in India. “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,” he said.
The company wants to monetise streaming content from Mi Video and Mi Music, file transfer tool Mi Drop that has already hit 100 million downloads. Xiaomi has just launched Unified Payments Interface (UPI)–based payment application Mi-Pay, and will soon commercialise Mi Credit, which is a marketplace from where consumers can get access to instant loan from partners like KreditBee and ZestMoney.
“The Mi Credit platform is currently on the pilot where finance is offered by partners since we don’t have a non-banking finance company (NBFC) licence,” Jain said. “We are evaluating whether we will apply for NBFC licence, and if we do it we would ourselves offer credit. But it would take time.”
He said a significant portion of the Rs 3,500-crore fund infusion from the parent into Xiaomi India, which ET first reported last month, will be invested to build the digital content and services business. “We are keen to invest in Indian companies and startups in this space to get them into the Xiaomi ecosystem,” Jain said.
He, however, declined to share what percentage of revenue it expects to generate from services or any financials since the parent company is a listed entity.
The company will also use the fund infusion from the parent for offline expansion, open exclusive stores, localised R&D for India for devices, internet services and software, warehouses, service centres and to invest into manufacturing which will be done by partners, Jain said.
Xiaomi overtook Samsung to become the market leader in the Indian smartphone market in the October-December 2017 and has held on to its top position since then. Jain claimed the company is also a leader in smart television, smart wearable band and power banks in India.
Xiaomi Technology India’s sales in 2017-18 grew by 175% to Rs 23,060 crore, while its net profit too went up 79% to Rs 293 crore.
Xiaomi has over 40 million users per month in India consuming Mi Music and Video which are right now mostly free. The company has recently started a paid subscription plan for music.
Players such as Amazon Prime, Netflix and Reliance Jio are investing to create a local content library including original productions, while Spotify last month entered the country with aggressive plans.
According to the latest report by Boston Consulting Group, the $500-million video streaming market in India is set to touch $5 billion by 2023 with some 650 million users. The overall internet services sector in India is currently valued at US$ 33.8 billion and by the year 2022, it will more than double, as per the Internet and Mobile Association of India.