's Perspectives

DTH players target 33% of cable TV market in 2 years

(Posted on 10 March 2004)

In the hilly state of Uttaranchal, which was formed after breaking up Uttar Pradesh, people these days are a happier lot as far as entertainment on television is concerned. Plagued by poor cable TV services, residents have lapped up direct-to-home (DTH) television with great gusto. In fact, Uttaranchal, along with Punjab (populated by cash-rich farmers and NRI Punjabis who have made substantial investments in real estate), is one of those states where Dish TV - the brand under which ASC Enterprises and Zee market their DTH service - is quite commonly known. "The demand from these places is quite high," points out a Zee Telefilms executive.

Direct-to-Home technology - Too much to ask for?

DTH has been a technology and mode of delivery that has been threatening to make an Indian television debut since the past several years. Since 1997 to be exact. More than seven years later, the KU-band DTH television service remains a technology/ service at a very nascent stage, which, nevertheless, has the potential of providing a viable option for consumers dissatisfied with the service dished out by cable TV operators.

There are four players in the field as of today - ASC Enterprises (a group company of the Subhash Chandra-promoted Essel Group) with Dish TV, the Tata-Star combine's Space TV, NSTPL (a group company of Dr JK Jain-promoted Jain Studios Ltd) and pubcaster Prasar Bharati. Of the four, only Dish is up and running at the moment. While Prasar Bharati's DTH service is set for an April-May take-off, Space looks likely to launch before Diwali (earlier a Christmas entry into Indian TV space was being talked of).

A slow and cumbersome regulatory process, coupled with precious time lost debating the standards for equipment like set-top boxes for a DTH service (why open architecture does not make good business sense for a DTH operator, for example, has been an issue hotly discussed with consensus yet to be reached) has in the past resulted in interested players either putting their business proposals in cold storage or having to re-work them.

I&B minister Ravi Shankar Prasad

Admits I&B minister Ravi Shankar Prasad, "The clearances (for a DTH service) do take a lot of time, but it cannot be helped as there are several sensitive issues, among them national security ones, involved, which need careful scrutiny." According to a senior executive of ASC Enterprises Ltd., the first Indian DTH licence holder, the final clearance came after rounds of discussions and clarifications spanning more than 18 months.

Zee Telefilms vice-chairman Jawahar Goel

Participating in an investors' tele-conference in mid-October 2003, almost two weeks after Dish TV launched, Zee Telefilms vice-chairman Jawahar Goel had said, "So far we have installed 15,000 DTH subscribers, mainly in the non-cable service area, in the north-east (part of India), in farmhouses where there is no cable services, or, if there is a cable service, it gives only 10-12 channels."

Though DTH is being touted as a service that can be made into a mass product by the players concerned, the ground reality is that since Dish TV's October launch, it has remained a niche service with limited penetration, optimistic claims notwithstanding. Reason: lack of aggressive and cohesive marketing and poor after sales service. Not to mention diversion of attention of the existing players because of the conditional access imbroglio.

But the numbers are certainly there to encourage a DTH player even in a price sensitive market like India and despite the steep license fee of Rs 100 million that has to be paid to the government.

In India, currently there are slightly over 85 million television households (NRS 2002 figure was 80 million). Of this, cable and satellite penetration is in the region of 44 million households. As per industry estimates the C&S penetration will reach 53 million homes by 2006. By 2010, it is estimated that there will be more than 94 million C&S households making India one of largest cable markets in the world.

Looking at the break-up of TV households, about 32 million have colour TV sets, while a majority of 56 million has black and white sets. Last year a total of seven million TV sets were sold, of which approximately seven per cent were 21 inches or of the "flat" category. The television market, which has been growing at a rate of 11-13 per cent annually, is expected to maintain this momentum, if not up it.

According to a Media Partners Asia forecast made recently, the C&S penetration of about 54 per cent offers good prospects for players interested in bringing new technologies. The concept of multiple TV homes is gaining popularity in urban homes (a study shows that 11 per cent of the total C&S homes in Mumbai are multi TV homes) and mini-metros are proliferating, a factor that again should encourage a prospective DTH player.

Moreover, India is a huge country with geographical diversitie and there are several regions where the distribution of population is scattered. A large percentage of households in such areas is not serviced by cable TV because of economical non-viability. A substantial number of households in such areas also have the paying capacity but do not have access to alternative technology, apart from terrestrial broadcaster Doordarshan and its fuzzy signals.

Says Hong Kong-based Media Partners Asia Ltd's (MPA) director of research and content Vivek Couto, "In the long term, the (Indian) market will be able to support a phased rollout of CAS, the expansion of digital DTH satellite services." MPA also estimates that in about a decade's time DTH would constitute about 15 per cent of the total TV business.

But this figure, some India-based observers point out, could well be revised upwards. Simply because the absence of any digital terrestrial service in India - DD's experiments with digital terrestrial transmission remains a lab experiment still - the rate of adoption of a digital service delivered via high-powered KU-band, and even KA band, transponders may be higher than estimated at the moment.

In fact, all the DTH wannabes in India are looking at capturing around 33 per cent of the total cable TV market within two years of its full introduction (that is once Star and DD are fully onstream alongside Zee's Dish).

One key factor for DTH to take off in India, unlike in the West, will be whether the service provider has access to all the existing channels, or at least the popular entertainment, sports and movie channels.

For not every content provider is going to bite the DTH bullet. Says Narendhra Morar, commissioning editor of BBC World, "As a content provider, we are open to join any new technological platform like broadband and DTH. But before doing that we have to look at the feasibility of that platform and whether it has reached a certain critical level of penetration."

While globally a typical DTH service survives primarily on niche content, mostly led by adult and movie content - in India availability of existing cable channels has become a must for spelling success. One of the reasons for Dish TV not picking up faster in urban areas is that most prospective subscribers ask for a list of channels and get disappointed when told that Star and Sony channels, plus some smaller ones like Ten Sports, are still to join the platform.

Still, if the ASC-Zee combine is busy upgrading its approximately Rs 4 billion DTH infrastructure to accommodate more channels, the biggest DTH blockbuster is coming from the Tata-Star combine that is reportedly pouring in approximately Rs 16 billion in the project for a variety of services, including tiered TV channel offerings and interactivity.

Though these are early estimates, the Star-Tata combine is looking at providing the hardware for just under Rs 5,000 (inclusive of installation charges) with the basic tier costing around Rs 300 (all-India average) for a package of 50 channels that would not have premium channels (like sports or movie channels).

The combine is also looking at over 2 million subscribers in about 18 months time, which would mean that aggressive marketing has to be done - something that Star has mastered better than most. With enough experience gained in building up the BSkyB platform in the UK (News Corp has recently launched DTH in Australia too), the effort would be to replicate the same success in India.

At the moment, the figures being bandied around by the Star-Tata combine look fairly comparable to those of Dish TV (the total investment in the former's case is however higher) though the latter has hiked its monthly subscription rates to Rs 220 per month from Rs 100 after ESPN and Star Sports joined the platform. What Dish TV still lacks is aggressive marketing.

While these two players are ready to slug it out openly, India's pubcaster Prasar Bharati, overseeing Doordarshan and All India Radio, has aspirations of its own to become a major player.

Having already got the government nod for a Rs 5 billion (over a period of five years) assistance for its DTH project, DD is optimistic to have the KU-band DTH platform up and running before the end of next month. The issue of having the platform on air gains importance for DD - and the government too - as the service is pre-dominantly meant for those areas in north-eastern part of the country where cable is not available and the terrestrial network's signals are fuzzy. With elections in N-E of India slated to be held in the third week of April, an earlier start to DD's DTH service would mean political advantage for the government and some other political parties too.

As Prasar Bharati CEO KS Sarma puts it, "Our DTH platform would be unique and from the second year onward, we may also look at putting a monthly subscription to the service."

While a DD may not be really worried about breaking even, that is certainly an issue for the private DTH players. The present DTH guidelines stipulate that they would have to go in for a 10 per cent revenue sharing annually with the government, apart from the Rs 100 million bank guarantee that has to be given for the license for a period of 10 years, plus the fact that over a period of time the whole platform would have to be moved on to an Indian satellite.

This is one area which does not worry the ASC-Zee combine as it has already started beaming via transponders on the Insat satellite series and has plans to move on to its own Agrani satellite when it gets commissioned next year. According to Zee Telefilms and ASC Enterprises chairman Subhash Chandra, "For DTH, we need about 250,000 subscribers to break even."

Chandra's son Punit Goenka claims that already 100,000 boxes have gone out. What is more important for him is that the entire programming content is being provided by Zee Telefilms' wholly owned subsidiary through Siticable. So, Chandra points out, except for the cost of uplinking and other sundry expenses, which is being taken care of by ASC, at cost plus basis, the "rest of the revenue flows back into Zee Telefilms through Siti Cable," thus helping Zee Tele also to maintain a healthy bottomline.

Star and Tata on the other hand, feel that their breakeven may take over six years. Simply because additional expenditure would be undertaken once the DTH platform goes on air and the service is continuously upgraded.

Even as the DTH players get ready to fight it out in India, there is already the threat looming from newer technologies like broadband. Telecom companies like Reliance in particular have the potential of throwing to the winds all conventional business models. As industry veteran and Hinduja TMT executive vice-president corporate services Ashok Mansukhani aptly sums up, "The success of DTH in India would largely depend on many issues, including whether a Star agrees to come on to a Zee DTH platform and vice versa. Such issues would have financial implications too."

Also read:
Prasar targets April launch
Can Star power say Tata to Zee's Dish, DD?
What's cooking on Dish TV?
The International Scenario
FAQs regarding DTH






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