Why did Xiaomi bet a wad of cash on an Indian digital company?

One committed Xiaomi fan. Image credit: Xiaomi’s official Weibo.

Xiaomi just said it made its first Indian investment, leading a US$25-million round in India’s Hungama Digital Media Entertainment, an online provider of music and videos.

This is the first such investment the world’s fifth-largest smartphone maker has made outside China, but if one looks closer, it is amply evident why.

In January, Xiaomi revealed that it sold 70 million smartphones in 2015, a number below even their most modest predictions.

So all’s not well in the home market, especially as the company’s market share gap with leaders Samsung and Apple are pretty big.

And where do smartphone companies look when they want to spur growth? India, of course, with its promise of a billion new potential customers, and its impending data boom.

Analysts aren’t expecting double-digit growth numbers in the global smartphone market anymore, and China and the United States are expected to be flat. India, however, is expected to post a sales rise of 29 percent in 2016, as per Gartner.

Data mad

Photo credit: Howstuffworks Tech

As more Indians move to smartphones, people are watching more movies online, connecting on chat services, and using apps that need fast internet connections. The data demand has risen so much so, even companies like Skype have made the country their “top priority.”

Wanting to be ahead of the pack, Xiaomi is also doing just that.

“We are investing in Hungama, not only to start integrating content into our smartphones, but also to grow together with them and deepen our understanding of the content sector in India,” Xiaomi’s head of international operations Hugo Barra said.

Hungama says it has more than 8,000 Bollywood, Hollywood, and Indian regional language movies in its library, with over 65 million monthly users.

The broader adoption of faster 4G mobile networks in India is expected to fuel demand for digital content.

Little wonder then, Xiaomi decided to look at an Indian digital data company when it opened its investment wallet.

“India is adding eight million new consumers to the internet each month with 90 percent digital consumption being driven by mobile,” said Neeraj Roy, founder of Hungama Digital Media.

“Content will drive the next phase… as we prepare to bring premium
and original digital entertainment to a 100 million Indians before the end of this year.”