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DTH In India Time For A Rethink On Content And Cost

Monday, February 1st, 2010
04
Despite several efforts made by direct-to-home (DTH) operators in India, the industry has not picked up the desired momentum. Cost remains as the major concern preventing mass adoption of DTH services in India. Unless DTH providers revise their content and cost strategy to make the service appealing to middle-income households, they are not likely to gain from the market and put an end to the monopoly of cable operators.

 

Dec. 22, 2005 is a significant date in the history of the Indian television industry. On this date, with the launch of INSA T- 4A, India set an important milestone in the direct-to-home (DTH) revolution. With 12 Ku-band transponders, INSA T-4A became the first Indian satellite to meet the requirements of DTH television services.

India is one of the largest television markets in the world. The number of television households in India is approaching 130 million, with approximately 80 million having access to cable and satellite connections. It is worth noting that the television households in India comprise only about 60 percent of the total households in the country. Currently, 10 percent of the total TV households have access to DTH services. This represents only a meager portion of the total TV viewers and, hence, indicates there is huge potential for DTH services.

Why DTH becomes attractive

Television broadcasting is probably the strongest customer- driven industry in India. The revolution in digital media has enhanced the TV viewing experience of customers worldwide, not just in India. The economic growth of the country further complemented this growth, with new households adopting TV as the main medium for entertainment, as well as multiplying the number of TVs in existing TV households. With the introduction of high-resolution TV technologies, people are now given the option to watch TV in a better way.

Because of the superior quality and convenience in terms of TV viewing and interactivity, DTH services are the most suitable entertainment option for TV viewers who want to spend their quality time watching quality TV programs in a quality way. Users have the control to watch programs at anytime according to their convenience. DTH service also allows them to record programs and watch them at a later time. There is more focus on regional content, which is not usually the case with a cable service. An attractive feature of DTH is the DVD-quality picture and CD-quality sound with stereophonic effects. Unlike cable services, DTH services have less frequent channel blackouts.

Apart from offering high-quality content and advanced technology, DTH service is also becoming a viable option for many Indian households. Due to accelerated deployments, setup costs and service delivery are becoming cheaper. Further, the reduction in the cost of set-top boxes has made DTH a cost-friendly option to them. With the mandated conditional access system (CAS ) on cable networks, cable services are becoming more expensive. This would give an extra advantage to DTH. DTH services also avoid the intervention of a middleman like a cable operator. DTH operators deal with the end user directly, so it eliminates unnecessary intervention and malpractice by agents.

Current DTH Market Scenario in India

Since its commercial launch in 2003, DTH has remained upbeat without any signs of slowing down. Despite recession, the DTH market in India has been highly dynamic with a lot of investments made over the past several months. According to Tony D’silva, chief operating officer of Sun Direct, the growth is surpassing all the calculations and forecasts and proving the trade pundits wrong. “The services are received well by the customers because of its mass customization appeal,” he said.

DTH service in India has surpassed 12 million customers, with the number tripling in 2008 over the previous year. According to new research from RN COS , 1 “Indian DTH Market Forecast to 2012,” the industry is expected to add nearly 500,000 subscribers per month during 2009, with the number of DTH subscribers forecasted to grow at a CAGR of around 30 percent during 2009-2012. “With over 130 million TV homes, India offers large room for growth in DTH services as the technology can be used to offer DTH services in remote locations, where setting up of cable networks seems impossible or is highly expensive,” say researchers at RN COS . “It is forecasted that DTH will capture over 21 percent of TV homes in India by 2012, up from around 10 percent now.”

Currently the market is ruled by five key players: Dish TV – Essel Group, Tata Sky, Sun Direct, Reliance Big TV, Airtel Digital and Videocon D2H. Dish TV and Sun Direct account for a major share of the current DTH market in India. According to Dish TV officials, the company holds a more than 40 percent share of the market with over 5.6 million subscribers. Sun Direct currently carries about 4.8 million customers. Sun TV plans to increase it to 5.5 million-6 million subscribers by the end of the current fiscal year. Other key players such as TATA Sky, Big TV and Airtel DTH are far behind their rivals.

Challenges

Cost

Despite the promising growth figures, the DTH industry in India faces several challenges. The enormous size of the market gives them equally huge challenges. Firstly, the companies are spending hugely on advertisements and awareness campaigns to make people aware of the benefits of the service. Early providers like Dish TV and Tata Sky have invested hugely on this, whereas latecomers like Sun Direct, Airtel and Videocon have gained from this opportunity as they didn’t have to focus more on creating awareness. Rather, they spend on advertisements to pull the first-time subscribers towards them.

Says D’silva of Sun Direct, “We initially launched the services in the four southern states where we had a strong brand recall, and by the time we moved into the rest of India’s markets, our competitors, who made the early move, had already spent money and time raising awareness about DTH services. We spent time on studying the customer and designing packages as per their taste.”

Sun DTH has succeeded in meeting customer expectations mainly because of the regional appeal of the content. The service also includes an affordable package to suit every category of viewer. “We have packages that start at Rs.99 to high end HD set-top boxes to cater to the niche,” says D’silva. “The most important offering that we consider is the value for money proposition, i.e; the innovative packaging, pricing and bundling of channels and the strength of our distribution network.” To an extent, Sun DTH has created a revolution among middle-class TV households.

However, there’s a widespread concern that DTH services are not affordable to middle-income families in India. To an extent, it is true. Currently, a subscriber who is paying Rs.100- 150 per month for cable service, is able to watch 150-200 channels. There is no extra cost involved in the service. On the other hand, for a basic DTH service, they will have to pay setup charges, equipment cost, plus monthly charges of a minimum Rs.100 (as per the current market offerings). The basic DTH package does not include many of the popular TV channels, so shifting to DTH would mean sacrificing the numerous options available on cable TV. To subscribe to their favorite sports channels or movie channels on DTH, they will have to pay an extra amount each month. In such a scenario, DTH providers are not likely to gain unless they work out a new content strategy that appeals to the average Indian households.

IPTV – A vill ain?

Internet Protocol TV is emerging as a new entertainment option for the tech-savvy Indian TV viewers. With broadband penetration reaching 7 million, India offers a niche market for IP TV services, though not highly prospective in rural areas. Both DTH and IP TV are relatively new to Indians, but IP TV is comparatively cheaper for a customer who is already a broadband subscriber from the same service provider. Because the service is offered as a combined package along with broadband and/or landline, the company gains on operational expenses and they are able to offer the service for a lesser price.

Government Regulations

There are a large number of untapped households that do not have access to cable services due to the non-viability of cable because of geographic circumstances. In such areas government recommends DTH service. The government has set certain guidelines for DTH services. It mandates that only Indian satellites be used for the service. The government has introduced a 49 percent cap on foreign investment and imposed a heavy licensing fee along with revenue sharing clauses. The service strictly bans adult content. Among other things, the government also recommends open architecture set-top boxes. All of these clauses will have a direct impact on the profitability of DTH companies and, hence, on the countrywide rollout of DTH.

Off ers! Bonanza!

DTH providers are trying to grab the potential market through attractive introductory offers and discounts. Companies like Sun TV offer a free dish and STBs and convenient packages for installation and activation charges. Annual subscription packages with multiple benefits lure many customers to adopting DTH services from providers like Tata Sky. These are a few examples illustrating the tough competition prevailing in the DTH segment. The initial results, however, reveal that the market is likely to be divided among these key players who have already established their presence in the market by grabbing a significant number of customers.

D’silva says the DTH market in India has surpassed all calculations and forecasts, proving the trade pundits wrong. About the offerings from Sun DTH, he said, “We have done tremendously well and have redefined everything in the DTH industry by adopting state of the art MPEG 4 technologies, affordable pricing and attractive packaging, offering customer premises equipments free and now launching HD services. We are the fastest growing DTH player in India and out of every 10 new connections, four are Sun Direct.”

Key Trends

Value added services

Major DTH providers are offering value added services (VAS ) as an innovative strategy to lure customers. Popular VAS offered by DTH include on-demand movies, matrimonial services, job search, travel planning, mobile services, TV banking, astrology and many more. Dish TV is the popular value added services provider for mobile services. The company partnered with Indiatimes.com to offer mobile services under the name ‘Mobile Active.’ The service allows users to preview ring tones, wallpapers, text alerts and contests on their TV and download it on their mobiles.

Partnerships with movie/video distribution companies

A major share of Indian entertainment content comes from Bollywood and regional films. Hollywood movies create another big opportunity to make revenue. Eyeing this opportunity, DTH providers are entering into partnerships with movie/video distribution companies. Recently, Reliance forged alliances with UTV Communications and Star India to acquire the rights to two Hindi films. Last month, the company also forged a strategic marketing alliance with Fox Star Studios for the India release of ‘Avatar.’ Such partnerships are integral to a healthy competition among DTH players. In the future, major partnerships are expected with major publishers as well as TV content providers.

High -Definition Services

Technology has no limits. With a large number of options available to view channels across the world on the new highend television sets, now the focus will be to add quality to TV viewing. High-definition is the latest mantra in TV entertainment. DTH providers have started offering HD services in India. Recently, Sun TV launched the first HD DTH service in India. Samsung Electronics telecommunications systems division manufactures the HD set top boxes for Sun Direct. Sun TV is expecting to add over 45,000 subscribers to this service by March 2010. According to company officials, the average annual cost to a subscriber at present stands at around Rs.2,500.

Looking Beyond

DTH in India has many miles to go. Although there are several issues regarding content and quality of service offered by the cable service providers, most of the TV households in India still prefer cable service to DTH. In such a scenario, DTH operators have no option but to offer the service at the lowest cost possible to pull customers towards them. This would encourage mass subscription and result in increased ARP U. Currently, the market is dynamic with a lot of introductory bonanzas and free offers from companies like Sun TV. If other DTH players are ready to compromise a little of their profits and offer simpler packages targeting the average Indian households, the industry will become more competitive and achieve its goals.

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