DTH on the Upswing

January 18, 2010

Source: Col. K.K. Sharma

India represents the second largest market for television in the World, second only to China. Having the population of 220 million households we already have TV penetration of 135 million. With cable TV occupying the majority of these, 85 million HH, a market of 50 million households is readily available for the exploitation by DTH which at present has only 15 million of these. IPTV and Mobile TV, the other competing technologies have not yet got a foothold in the country.

With the Commonwealth Games in sight next year, the television market is again expected to change drastically. It is the technology that will revolutionize the new television experience as was done in 1982 during the Asian Games when color televisions entered the country. The technologies to watch now are High Definition Television (HDTV), on-demand and Interactive Television and time shift television. With the cable television still struggling to digitalize, DTH is gaining a very strong foothold into the market. Already the players have planned launch of HDTV. Interactive Television and DVR are already there in the Indian market. DTH has an inherent advantage of delivering the latest technologies and increase it’s ARPU (Average Revenue per Unit) since it is digital and addressable with conditional access (CAS). This enables the operators to provide accountability and reasonable choice to the consumers. Another major advantage of DTH is that with a small 60-90cm dish we can view all 200 odd channels anywhere in the country, even in the remote areas.

MARKETS
The DTH market in India is relatively nascent but is getting crowded very quickly. TataSky started the real competition in 2006 followed by the entry of two big competitors like Airtel and Reliance. Sun Direct which was so far concentrating in the South has suddenly leapt in to the North with full steam and doubled its subscribers in a few months. Now we have 15 million DTH subscribers increasing at the rate varying between 700000 to one million every month.

Only 1% of the Indian C&S market is CAS enabled and addressable, that too in the posh localities of the metros. Bringing addressability to the rest of the country has been kept pending for a long time which has given an advantage to the DTH players to spread their tentacles fast. In spite of this, the progress made by the DTH operators in acquiring new customers is mostly due to seeding the market with free or highly subsidized set-top boxes incurring heavy losses. According to Rajesh Jain, Executive Director, Corporate Finance, KPMG, "the structure of the industry is such that, at the moment the players lose Rs 1600- 2300 for every additional subscriber signed on." But this strategy may pay them well in the long run when they reach the critical mass soon. According to experts, it may take the players at least 5-6 years of operation to break-even.

According to Salil Kapoor, COO of Dish TV, the growth in DTH markets is to be seen in context of the growth of the C&S markets as well as the TV households in the country, both of which have grown by over 30% in the last year. He attributes success of DTH to following factors:-

DTH provides a superior alternative to Analog Cable.

The DTH industry will grow by 10-12 million subscribers in 2009.

There is a huge head room for growth of DTH in rural and cable frustrated areas.

TV viewing is the basic source of information & entertainment in India and it is proven by various studies that during recession people tend to stay more at home and watch TV. India adds 14 million TV homes every year; therefore, with such a robust growth any industry associated with TV industry will continue to grow.

DTH also addresses the need of the viewers living away from their native place and outside their language area by providing a depth and width of regional language content.

DTH subscription is today being driven by extreme subsidy on STBs as well as low subscriptions ranging from Rs 100 to 300.

INTERNATIONAL TRENDS
The players are still going strong in spite of the recession because they have deep pockets and own quite a lot of content. This is unlike how the DTH markets flourished in other developing countries. In the US, cable television is still the dominating player. There are only 2 players in the DTH field having about 30% of the total C&S market and they have been in operation since 1995. European market is mostly DTH but cable holds a strong position due to the triple play technologies provided by the telecom operators. In the UK, there are more DTH households than cable. IPTV is making fast inroads and thus DTH has many competitors in the digital realm.

In the more developed markets DTH is popular because of exclusive content, adult and sports. Also, it thrives on interactive services, DVRs and the content on-demand. India is yet to develop a market for these advanced services. Going forward, the DTH market in India holds high potential for growth.

PLAYERS
Starting in 2003 with Dish TV from the Essel Group as a first operator we have six operators in the pay television arena today. The pay DTH operators include Dish TV from Essel Group, Tata Sky (80:20 Joint Venture of Tata and STAR), Big TV (Reliance), Bharti’s Digital TV, Sun Direct from the Sun Group and the last one D2H from Videocon which made a soft launch in the last month.

The present times are great for the Indian DTH players who have been adding almost a million subscribers every month. IPL cricket matches and the general elections are a big driving force for the DTH now. Also schools are closing for the summer vacations and the DTH operators want to cash in on the opportunity of providing value-added services of movie-on-demand, interactive games, interactive education etc. Availability of low-cost home theatre systems and LCD TV’s has made DTH more popular among the youth enabling them to see the movies and programs of their choice, experiencing the DVD like sound and video quality of DTH in their drawing / bedrooms in the summer months rather than heading for the multiplexes.

Operators are making attractive packages for the masses based on cost, languages and genres. To meet the holiday rush all players are hiring technical manpower for speedy installation of equipment at the customer’s end. Every DTH operator has recruited an average of 20,000 employees.

DISH TV
"The key differentiator for Dish TV is Sabse Zyaada content. Dish TV offers the largest width and depth of content with 240 channels and services, Sabse Zyaada channels across Genres/languages along with Sabse Zyaada Value at every price point. Be it Regional content, Sports, News, Movies or Kids Channel Dish TV offers Sabse Zyaada Channels on its platform as compared to Cable, Digital Cable, IPTV and other DTH players", says Salil Kapoor, COO, Dish TV.

Kapoor attributes Dish TV success to its offers of choice and superior value for money to its customers with a range of innovative value-added services backed by excellent customer service and a variety of 40 + a-la-carte packs ranging from Rs 15 to Rs 45 + tax. The cable dry and cable frustrated markets have contributed a lot to the success and popularity of the Dish TV.

Dishtv is already EBITDA-positive and will turn cash-positive in another three quarters of current fiscal.

TATA SKY
TataSky is cashing on the Nano drive these days. As a part of the exclusive offer, consumers can now avail a special 20% discount (about Rs 300) on a new connection and a discount of Rs 500 on installation on booking a Tata Nano.

Company has come up with summer bonanza for all age groups for the holiday season. There are many offerings on Actve Stories, Actve Wizkids and Showcase.

SUN DIRECT
Direct-to-home (DTH) player Sun Direct an 80:20 joint venture between the Maran family and the Astro Group of Malaysia launched its first high definition (HD) broadcasting services on DTH in India. The DTH provider is planning to spend around Rs. 150 crore in fiscal 2009-2010 for marketing its product in a bid to increase subscriber base from the existing 3.1 million to 6 million. Tony D'Silva, COO, Sun Direct said, "We believe that in the constantly changing viewership dynamics and taste, we must keep the viewer continuously happy."

Company offers free dish and set top box (STB), excluding the installation charges on new connections.

RELIANCE BIG TV
Reliance Big TV Ltd., plans to sell up to 49% to foreign private equity companies and global DTH players. US-based DTH firm Direct TV are said to be in the talks with Big TV. The company expects to lift about Rs. 8,000 crore.

The company has added 15,000 technical experts and installation professional as part of plan to increase customer’s service operations across 500 locations in the country.

VIDEOCON
The Group, which made an announcement of Rs 1, 000 crore for the DTH venture earlier, made a soft launch of its Videocon D2H services in Macau on 27 April. "The full commercial roll-out will start from May 1 and the target is to have one crore (10 million) subscribers in six years," Videocon Group Chairman Venugopal Dhoot said. Its service will be called D2H+.

AIRTEL DIGITAL TV
Bharti Airtel's direct-to-home (DTH) arm has launched its mobile DTH units for cars as a source of revenue to cash in on the election fever. Bharti is looking at integrating all their services including mobile phone, wireline phone, broadband, IPTV and DTH services and lure customers with their one bill approach for these services so that customers get maximum benefit and convenience.

VALUE ADDED SERVICES
Since there is no content exclusivity, DTH operators are identifying new revenue streams like Near Video-on-Demand (NVoD), pay-per-view (PPV), personal video recorder (PVR) and interactive offerings. Tata Sky, for example, offers multiple value added services through its Active brand, such as gaming, educational channels for kids, matrimony services and cookery shows. Airtel has a tie-up with Infosys for offering interactive and digital applications. Their other interactive services include NEWS ACTIVE, SPORTS ACTIVE, enabling to choose - Multi Camera Angles, Multiple Language Feed, Match Highlights & Statistics etc.

EPGs on DTH are a common feature since there are about 200 channels and consumers find it difficult to scan through. Some EPGs give details of programmes where as some are just simple listings.

DISTRIBUTION STRATEGIES
So far DTH has not poached upon cable’s market share but marketing by DTH operators—focusing on sound and picture quality, flexible payment structure and new interactive services is clearly targeting existing analogue cable Subscribers.

FUTURE OF DTH
HDTV has enjoyed a great success in all the markets where it was introduced such as USA and Europe. In India full HD TV has been launched by all the major players. The HDTV will find a market in the upper segment of users who have the ability and are willing to pay for such content.

Future options on DTH will include ‘Payments via DTH’, localized/targeted Ad platform, TV Commerce, streaming rental movies/ticket booking/online gaming etc.

CONCLUSION
The DTH market in India is relatively nascent but is getting crowded very quickly. The future of competition in the DTH market is not going to be in the core DTH service or the subscription cost. To attract subscribers, companies will have to distinguish themselves from the competition by providing value added services via DTH. We also hope that adult content in encrypted form will be allowed on cable and DTH which will definitely be a big boost. Tariff issues for DTH are at present being discussed by TRAI and may get resolved soon but government must do some thing about the multiple taxation and heavy license fee charged annually from the operators.