Economic Affairs Vol. 56 No.

2 June 2011 (Page 185-188)

DTH Industry in India Future Prospectus

DTH Industry in India Future Prospectus

R. Srinivasan Lecturer in Commerce, Sengunthar Arts and Science College, Tiruchengode, Namakkal District, Tamil Nadu, India Email: [email protected] Received: 10th February, 2010 Accepted: 15th March, 2011

Abstrac DTH is one of the new technologies providing varied facilities to its viewers. Today, India has 9.5 million DTH homes and everyday the subscribers to DTH TV are increasing. Television holds an important place in our lives. Its impact being seen amongst all sections and groups of the society. Digital Television is rural India is three-fold higher than in urban areas. Nearly 80 percent of households in urban areas have television sets, more than double the 38 per cent in rural areas, the adoptation of technology has been much faster in the latter.Nearly 90 per cent of the digital Tv market has dominated by Direct To Home (DTH) service providers. The rest were being catered to by digital cable operators. The Indian DTH market has reached the inflextion point and is set to overtake the United States earlier than expected, in another two months. Keywords: Direct-to-Home, New technology, Statelite, Cable operators, Internet protocal.

Introduction
Television holds an important place in our lives. Its impact is being seen amongst all sections and groups of the society. In India TV industry has a remarkable history. It has grown from terrestrial televisions to todays satellite broadcasting or digital television. DTH is one of the new technologies providing varied facilities to its viewers. Today, India has 9.5 million DTH homes and everyday the subscribers to DTH TV are increasing. With the Indian economy booming at a GDP growth rate of 9.4%, there is a sense of growth prevailing everywhere. The average Indians disposable income and purchasing power has risen to never before levels. The Indian Entertainment & Media industry is also not far behind. It is currently estimated at a worth of Rs.450 billion with a CAGR of 18% over the next 5 years. Terms which were alien to Indians like DTH, Digital Cable, IPTV are suddenly finding presence in the countrys journals. Television holds an important place in our lives. Its impact is being seen amongst all sections and groups of the society. Digital Television is rural India is three-fold higher than in urban areas. Nearly 80 per cent of households in urban areas have television

sets, more than double the 38 percent in rural areas; the adoption of technology has been much faster in the latter. Digital TV penetration is 34 per cent in rural areas and 11.9 per cent in urban India, here were 23.5million digital TV households as on June 2010, of which 13.8 mn were in rural areas as compared to 5.6 mn in urban areas. The findings are on the basis on a survey conducted across 250910 households between January 2008 and June 2010. Nearly 90 per cent of the digital TV market was dominated by Direct to- Home (DTH) service providers. The rest were being catered to by digital cable operators. The Indian DTH market has reached the inflexion point and is set to overtake the United States earlier than expected, in another two months.

Global DTH Revenue

The most significant and disturbing prediction is financial. Even though DTH platforms worldwide are focusing on increasing ARPU ( Average Revenue Per User) by pushing premium services, the NSR report predicts that global DTH industry revenues will grow from $70 billion in July 2010 just $100 billion in 10 years, i.e., by 2018.
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Current Players Subscribers Base

There are six private DTH operators in India. While Sun Direct holds away in the southern parts, with a majority share in the DTH markets of Andhra Pradesh, Karnataka, Kerala and Tamil Nadu. Dish TV has the lead in Maharashtra, Gujarat, Madhya Pradesh, Rajasthan, Chattisgarh, Orissa, West Bengal, Assam, Bihar, Jharkhand and other areas in north India. Tata Sky rules in Delhi, Goa and Chandigarh.
Private DTH players in India A division of Zee Net Work Enterprise Launched operations in 2005 Number of Subscribers: More than 9 Million. TATA SKY A Joint Venture of Tata News Corps STAR Launched operations in 2005 Number of Subscribers: About 5.5 Million. SUN DIRECT A part of Sun Network Launched operations in 2007. Number of Subscribers: About 6.4 Million RELIANCE BIG TV A part of Anil Dhirubhai Ambani Groups Reliance Communications Launched operations in 2008 Number of Subscribers: About 3.00 Million AIRTEL DIGITAL TV A part of Bharati Airtel Launched operations in 2008 Number of Subscribers: About 4.7 Million VIDEOCON D2H A Part of Videocon Industries Launched operations in 2009 Number of Subscribers: More than 2 million Source: Reuters DISH TV

and France. However, while, 99 DTH operators were beaming over 13,800 channels at the July of 2010, it is predicted that more than 21,000 channels will be beamed from DTH platforms, by end 2018.

Challenges Faced by the Industry

Policy and Regulation Being a nascent industry, there are lots of teething issues with the current policy framework and the way it is regulated in reality. Some of the notable challenges faced are as below. Lack of Exclusive Content In the global DTH market, competition is mostly on providing niche content. In India TRAI does not allow broadcaster to offer content exclusively to a specific player. Hence content differentiation as USP is not possible currently in the Indian scenario. TRAI has clearly indicated that exclusivity can be provided only when DTH market matures and there is perfect competition in the market place. But DTH operators are feeling that without content differentiation, the competition can only be on price which may even cannibalize the industry. Cap on Foreign Investment The total foreign equity including FDI/NRI/OCB/FII cannot exceed 49% and within that FDI component cannot exceed 20%. This would reduce the interest of foreign investors as they cannot get a controlling stake in the company in spite of a heavy investment. On the contrary, up to 74% of foreign equity, with no limit on FDI, is allowed in the Cable industry. Cap on Cable Company/ Broadcaster Investment The current regulations restrict the cap on Broadcasting/Cable company investment in the DTH venture to 20% and also prevent the DTH firm to hold more than 20% in a Broadcasting/Cable company. As one can see, DTH operators are able to overcome this challenge by spinning of new companies. But removing this rule would reduce the bureaucracy involved and also reduce the content cost for an operator due to the synergies created between him and the broadcaster. The Rule of Must Carry DTH Operator is obliged to carry all the channels provided by every broadcaster on a non-discriminatory basis. However, with the capacity constraints in place, this is not feasible. So in cases, where the operator is willing to broadcast only the popular channels, the broadcasters either deny giving the entire bouquet or charge prices for the complete bouquet. Interoperability issues. TRAI mandates an open architecture for STBs to ensure technical interoperability but in reality this is not being implemented.

Dish TV (9.00 million subscribers), with 50 per cent share in the paid DTH market, is the dominant player, followed by Tata Sky (5.5 million subscribers) and Sun Direct (6.4 million subscribers). With DTH companies competing aggressively to gain a larger share of the pie in what is set to become the largest DTH market in the world by 2011, a slew of price cuts have been announced. Set up boxes (STBs) are now available for less than Rs. 1,000(the amount includes installation charges), spurring rapid growth.

Small Revenue Growth

The most significant and disturbing prediction are financial. Even though DTH platforms worldwide are focusing on increasing ARPU ( Average Revenue Per User) by pushing premium services, the NSR report predicts that global DTH industry revenues will grow from $ 70 billion in July 2010 to just $ 100 billion in 10 years, it by 2018.

Market Fragmentation
The reports points towards market fragmentation, and increased competition, from other sectors such a not Cable TV, but also IPTV, and the internet particularly in advanced markets such as the USA

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However, with increasing consumer awareness, the dilution of this rule would soon be corrected. In addition, in the recent consultation on paper. TRAI also wants to try out the commercial interoperability (The ability to return a purchased STB or lease a STB) route. Although this is good from the consumer point of view, DTH operators cannot build a switching cost for the end user. Non-availability of Transponders A Ku transponder can be used for 12 to 20 channels depending on the compression (MPEG 2 or MPEG 4) technology used in the satellite. A DTH operator will at least need 5 to 8 transponders to compete in the market. Right now, ISRO has INSAT 4B in the orbit with 12 ku transponders each. The next in the line is INSAT 4CR due in September 2007, which will open up another 12 Ku transponders. INSAT 4 G will be launched in 2009-2010 with a capacity of 18 Ku transponders. Also with the launch of INSAT 4 G, ISRO would have used up the entire spectrum that was allotted to it by WARC, ITU. Even with 54 transponders by 2010, with 7 operators, the demandsupply gap is huge with each operator getting approximately 150 channels. Also, if any of these launches fail like INSAT 4 C, it may spoil the plans of DTH operators.

covering cities such as Chennai, parts of Delhi, Mumbai and Kolkata, and through Non-addressable system in the rest of the country. In case of CAS controlled areas, the subscriber has to either buy or rent the Set Top Box (STB) to see the pay channels. 4. Internet Protocol Television ( IPTV) IPTV is a service where television signals are digitally sent over the telecommunications line. It is often presented as a bouquet of Video (IPTV), Audio (Television) and Data (Broadband Internet) services. Telecom companies such as BSNL and MTNL have spotted these earnings potential and have already started with trail implementation in cities like Bangalore and Kolkata. Companies like Reliance Communications and Bharti Airtel are also planning to follow soon. 5. Bargaining Power of Suppliers DTH industry relies on three major supplies: Customer premise equipment (CPE) comprising of the Satellite Dish, Set Top Box with necessary Access Card, the Ku band transponders in the orbiting satellites and content. With India set to overtake Japan as Asias largest DTH by next few year, bargaining power of Indian DTH operators with CPE suppliers have been steadily increasing.

Environment Analysis- Porters Model

Let us apply the porters five forces model in the context of DTH industry. Out observations are categorized in to the five forces as below. 1. Threat of Substitutes DTH faces stiff competitions form the Terrestrial, Cable and IPTV. As per the industry estimates, there are 120 million TV homes, of which 71 million are served by cable and around 6 million by DTH with the remaining taken by terrestrial transmission. As IPTV is a new entrant, there is not much data on its subscriber base. 2. Terrestrial Television Doordarshan is the worlds largest terrestrial broadcaster with over 1400 terrestrial TV transmitters. The reach provided by this route is phenomenal with Doordarshan covering 88 % of Indias geographical area. Covering the remaining 12% area required substantial capital investments which does not outweigh the benefits. The transmission was done originally in Analog mode but beginning from 2002, Doordarshan has partnered with BBC resources- the consulting wing of BBC, in offering digital terrestrial television. The transmission could be received using a low cost Yagi antenna. 3. Cable TV Cable TV currently operators in 2 modes, viz. Through CAS
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Conclusion
With the existing regulatory restrictions, increasing content cost and lack of transponders, DTH terrain appears too steep to climb. With content differentiations not happenings in the near future, companies have to differentiate only at the services and cost levels. The increasing consumer awareness and expectations also make it difficult to satisfy the consumer. India being the home of entertainment hungry populace, volumes play the role of a growth driver. Attractively priced and feature rich package targeted at the critical mass is the mantra for sustaining the growth. Todays customer is sensitive to price as well as to quality. A prudent DTH operator should also take a serious look at the substitutes and complements. There should diversity and creates his presence in the entire spectrum of broadcasting and telecommunication services. The final winner cannot be a pure DTH player but a convergent player who offers all in one to the value-conscious, price sensitive Indian consumer. The DTH industry is very bright in the future years.

References
1. Consultation paper on Headend- In- The-Sky (HITS), TRAI, July 24, 2007. 2. Mass Communicator, October- December 2009, pp.21- 24 2007. 3. Navya, M. (2008), in control of the remote, The Times of India, December 10.

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4. Rural Indias swift Digital TV Embrance, Business Standard, December 2010. 5. Satellite and Cable TV, Journal of Broadcasting, February 2010, pp. 61-70. 6. TRAI spanner in DTH content exclusivity plan, Economic Times, Aug 15.

7. Trivedi, H. (1991), Mass Media and New Horizons. (7th edition) Concept. 8. Verma, M. (2008), DTH viewers spend more time in front of television, The Economic Times, August 30. Publishing Company New Delhi.

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