CASE STUDY ON TATA SKY: STRATEGIC ADVANTAGE THROUGH TECHNOLOGY

INTRODUCTION
Direct-to-home (D II) service involves the transmission of programmes via
satellite to individual homes where personal dish antenna is installed for the
reception of signals. This technology does away with the cable operator as a
medium between mass broadcaster and viewers of programmes. Due to the
advantages of DTH such as doing away with middlemen, that is, the cable
operator, and absence of the need for cables covering the last mile, DTH is able
to reach even the remote corners of the world. It also allows more channels to be
beamed. In India cable transmission is still analogue, so DTH offers better-quality
pictures and stereophonic sound. DTH also allows interactive TV services like
email, videoconferencing, Internet access and movie-on-demand. Broadcasters
show preference for DTH as it reveals actual TV programme viewers, which is
usually underreported by the cable operator.
The DTH network consists of a broadcasting station, satellite, encoders,
multiplexers, modulators and the receiver. The service provider leases Ku-band
transponders on the satellite. Video, audio and data signals are converted by an
encoder to the digital format and mixed by a multiplexer. The viewer uses a small
dish antenna, which can be as small as 45 cm in diameter, and a set-top box
(STB) to decode the encrypted transmission and view a number of channels.
DTH services have been allowed in India since 2001. There is a licence fee, and
there are restrictions like a foreign equity cap of 49 per cent. The first DTH
service was Dish TV, which was launched in 2003 by the Essel Group, the owner
of Zee telefilms. The government-owned DIN- Direct from Doordarshan was
launched in 2004. In 2005, DTH licences were given to four companies: Tata Sky,
an 80:20 joint venture between the Tata and Star groups, Sun Direct from
Kalanidhi Maran's Sun TV and Reliance. One pattern that is seen the world over is
that there is a huge first-mover advantage between technologies in this industry.
India already has the cable system and hence DTH has an uphill task in finding
acceptance initially. The reverse has happened in Europe where DTH had
developed before cable and currently holds 80 per cent of the total satellite TV
programme subscriptions. In the United States, though, as cable had come first it
dominates over DTH. In India, DTH is making inroads into the rural and remote
areas where cable has not yet reached, as well as among niche urban homes
where interactive innovative content is in demand. Apart from the service
providers mentioned earlier, there are other DTH service providers in the country
today like Airtel and Videocon.
INDUSTRY ANALYSIS
A feature of the DTH service in India is that although all service providers are
reporting losses, new players are regularly entering the fray. Dish TV reported a
loss of Rs 413 crore in 2007-08 and a loss of Rs 200 crore one year before, in
2006-07. Tata Sky showed a loss of Its 1,100 crore in 2007-08 and a loss of Its
886 crore one year earlier, in 2006-07. Sun Direct expects to lose Its 200 crore
from 2005-10. Some observers have labelled the sector as 'direct to loss TV'!

The reason why new entrants find the sector attractive despite its propensity to
create losses is the very high potential promised by the sector, even if it takes a
minimum of five to six years to break even. The potential market for DTH is high
and totals 71 million households. This is too big an opportunity to ignore. As there
are many players in the market now, they are competing in offering innovative
pack-ages and interactive content. A challenge for the sector is the rapid
development of technology. In the future. DTH will face string competition from
Internet Protocol TV (IPTV) and mobile TV, although the current threat from these
areas is not that high.
ENVIRONMENTAL ANALYSIS
Based on Figure I 1.1, the environmental analysis of the DTI I industry is
discussed in the sub-sections of this section.
Bargaining Power of SupplierVery High
DTH relies on three major suppliers: customer premise equipment (CPI:)-satellite
dish, STB and access card, and Ku-hand transponder and content.

Figure 11.1 Environment Analysis for the DTH Industry

The bargaining power of DTH operators with CPE suppliers has increased due to
supply. Transponder is provided by Astrix, Indian Space Research Organization
(ISRO); hence dependency exists, and due to there being no regulations
regarding channel pricing DTH operators are at the mercy of broadcasters.
Bargaining Power of BuyerHigh
Consumer has the power to choose in this industry as different providers offer a
variety of services. Unless players can differentiate themselves from the
competition. the market will remain mostly homo-geneous. Customers will have
high bargaining power and be influenced by costs versus services.
Threat of SubstitutesVery High
DTH services face major competition from terrestrial TV, cable TV and IPTV.
Doordarshan is the world's largest terrestrial broadcaster with over 1,400

transmitters, covering 88 per cent of India's geo-graphical area. They offer digital
services in collaboration with BBC resources. This wide reach and low-cost
approach are offset by its lack of attractive content.
Cable TV operates in two modes: CAS<Metros> and IPTV, which requires a
separate STB and non-addressable system. Its cost varies from Rs 100 to Rs 350
depending upon the location. Because local cable operators will lose out to DTH
operators there is bound to be resistance from local cable operators.
IPTV is a service where television signals are digitally sent over
telecommunications lines. Mahanagar Telecom Nigam Ltd. (MTNL) and Bharat
Sanchar Nigam Ltd. (BSNL) plan to tap these lines. Even with strict regulations
(not yet enforced), it is a considerable threat due to its new level of interactivity.
Threat of New EntrantsLow
With there being already seven players in the DTH space, threat posed by new
entrants is relatively low due to the presence of enough competition. Getting a
licence is relatively easier but issues related to pricing of CPE and getting
required transponders are quite challenging. Also, first-mover advantage exists in
this industry.
Competitive RivalryVery High
With seven players already established in the market, inter-firm rivalry is intense.
DD offers free service but has a very small bouquet of channels. Dish TV has the
first-mover advantage and holds the high-est market share. New players in the
sector have very big brand names and have started their business with extensive
publicity. There is also competition with respect to acquiring content. Further,
there are regional discrepancies.
COMPANY OVERVIEW
Offerings from Tata Sky
Tata Sky has leased all its 12 Ku-band transponders on the INSAT 4A satellite. Its
offerings to the customer are

More than 160 channels with 4-day listings of all programs.

Interactive series, which includes Active Stories, Active Games and Active
Darshan.
Offers options like guide, parental control, search and scan banner and
favourites.
Tata Sky + is the newest offering from the stables of Tata Sky, which allows its
viewers to pause, record and rewind live TV.
Whereas Tata Sky basic starts at Rs 2,499 + channel packages, Tata Sky +
starts at Rs 9,999 + channel packages.

Vision of Tata Sky

Connecting every television home

Empowering every television viewer and revolutionizing home entertainment

Mission of Tata Sky

Tata Sky aims to revolutionize Indian home entertainment by offering superior

digital versatile disc (DVD)-quality picture and compact disc (CD)-quality
sound.

STRATEGY OF TATA SKY

Tata Sky's target customers include people from various strata of the society,
with different service packages available to each person. To improve its
performance in the competitive DTH market, the Tata Sky management should
assess the company's brand positioning in its target segment by establishing a
distinctive image for itself compared to its competitors. But these initiatives
present challenges, which Tata Sky is facing currently, caused by rising costs, the
sporadic nature of demand and the relentless downward pricing pressure due to
competition. Adding to these challenges, slackening of demand and higher
interest rates are not welcome signs. With these in mind, Tata Sky should try to
become fast paced and highly competitive. To counter these challenges and still
be profitable, various strategies have been suggested based on what will suit the
demands of Indian market and its consumer behaviour to increase Tata Sky's
market share.
CURRENT SITUATION

Tata Sky crossed the two-million connections mark in a period of 20 months,

achieving its position as the fastest-growing DTH service provider across the
globe.
The marketing budget of Tata Sky in the beginning was 15 per cent of sales.
This included around 5 per cent for advertisements, 7 per cent for discounts
and promotions, and 1 per cent for sponsor-ships.
Recently, Tata Sky roped in Aamir Khan ( Bollywood actor) as its brand
ambassador. Aamir Khan would feature in all of Tata Sky's brand and product
communications, including advertisements in TV, print and radio.
Further, tie-ups with ITC's e-Choupal and Godrej Aadhar give Tata Sky a wider
rural reach. Also, for its distribution Tata Sky has a tie-up with ITC's
international business division.
The Web site www.24X7 guru.com has joined hands with Tata Sky to provide
content for active learning.
Tata Sky has adopted a 360 marketing campaign approach that encapsulates
television, print, outdoor and radio along with on-ground activities and
marketing on the digital platform.