DTH

The DTH Opportunity

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It came somewhat like manna to travellers lost in the desert. The Union Cabinet's decision on 2 November 2000 to lift the four-year ban on DTH has been long- awaited by Indian and foreign broadcasters. And now that it has come, it should open up the floodgates with a slew of them taking a shot at it.



Among those who could make attempts include: Star TV, Zee TV, C. Sivasankaran, Reliance, HFCL, Lalit Modi's Modi Entertainment Group, Sun TV. One cannot exclude tyros attempting to enter the DTH fray. One does not know if all of them will survive.



A lot of thought has gone into the drafting of the notification. It appears as if the government is taking clear steps to prevent the emergence of television monopolies. That is why it has placed a 20 per cent restriction on foreign direct investment, with the total foreign investment being permitted being 49 per cent. Additionally, it has stated broadcasters and cable TV operators - without further explaining whether these players should be operating in India or overseas - will be permitted to hold only 20 per cent in a DTH platform. Now is this 20 per cent the limit for several broadcasting investors in a single DTH venture; or is it the cap that each can have in a DTH venture? Will we see Sony, Star and Zee holding 60 per cent in a DTH operation or will they be permitted to hold just 6.33 per cent each - totting up to 20 per cent? This is an issue that will need clarification.



If one takes these clauses at face value then Star TV, Zee TV, Sun TV, Eenadu, Sony will simply have to be satisfied with a minority stake each in a platform. It would not be surprising if three of them choose to come together for a new DTH operational company. The other option they will have is to become innovative in the equity holding pattern and incorporation of the DTH firm. With penalties of Rs 500 million one wonders whether they will take the risk? Hence it is more likely that unusual alliances are going to be formed, which one never thought possible in the past.



The government has also made it mandatory for the DTH operator to uplink from within Indian shores within 12 months to any satellite, be it foreign or Indian. Preferential treatment will be given to those uplinking to Indian birds, the notification says. An open architecture has been mandated with the set top box working with the smart cards and encryption technologies that the various operators choose to use. This is a big plus for consumers as they will be able to switch between services easily or subscribe to more than one.



Licence fees of Rs 100 million and a bank guarantee of Rs 400 million are not all that high at all. What could prove high is the 10 per cent revenue share that DTH operators will have to dole out to government each year. Sure the operator will build this into its subscription fees; but should targets of subscription be failed to be met; things could get quite tough.Remember, there will be fierce competition between the various services with each of them trying to woo subscribers with freebies and price-off offers. If such a scenario arises, 10 per cent could be the company's margin which would mean that the DTH company will end up making losses. It's quite likely the DTH company will make losses anyway for the first two-to-three years because the market will have to be created. And there's already a relatively cheaper option available in cable TV which is priced at Rs 150-200.



Of course, the government has protected the state-owned broadcaster Prasar Bharati by mandating carriage of all its channels at the most favourable terms provided to an occupant of the platform.



The I&B ministry's programming and advertising code will have to be followed to a T, the notification states. The problem is that a watchdog and adjudicator have yet to be set up. And if the government is banking on the convergence authority to keep tabs on content, it will have to move fast and enact convergence regulation.



How many platforms can coexist in India? Indications are that just one or two and if one stretches one's imagination, three. There's just not enough content in terms of programming going around. Not many channels are going to take the option of getting exclusively onto DTH, after all cable TV offers them their lifeblood revenue, either in the form of subscription or advertising. They have stuck it out for so long; bleeding in the Indian market for seven years to build up a cable TV business. They will not throw it away for DTH. What one will see is the development of new channels with diverse programmes - both old and new shows - being packaged innovatively for the DTH platform. Other niche channels will also be developed.



One advantage is that set top boxes have become cheaper over the past three years and are priced at anywhere between Rs 5,000 and Rs 10,000 (it could be lower should the DTH provider gives a higher subsidy). Three years ago, the sticker price was a hefty Rs 20,000-25,000. Monthly subscription packages could range from Rs 200 going up to Rs 350.



The DTH market on the upside is about two to three million strong, with 350,00 of them likely to come on board in year one. This could go up to 700,000 in year two and finally to a million in year three. The two million could take up to six to seven years to achieve. Or even longer. One can't forget: cable TV will be fighting back. As will other newer options, such as broadband, which will make their appearance.

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