DTH industry in India

Despite the global financial meltdown, the future of DTH industry in India has numerous
opportunities. A 20 per cent annual growth is being witnessed in the DTH sector and there is still
scope for more
CJ: Priyanka Bhardwaj

Mon, Jan 12, 2009 11:54:56 IST

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IN THE current context of the global financial meltdown, the Direct to Home (DTH) industry in
India is in the throes of multifarious challenges and opportunities.

The ‘big game’ is all about shaping up grandiose plans to master the winning rules to garner as
much portion of the Indian DTH pie as possible by a handful of players.

Since the DTH space denotes ‘big value’, akin to the space occupied by television and telephony,
inter-firm rivalries have thrown up price wars, discount schemes, procurement of transponders,
ambitious targets for improving the subscription base, popular bouquet of channels, set top
boxes with superior quality of videos, improving content, etc as a desperate means to entice the
Indian viewer.

A neat 20 per cent annual growth is being witnessed in the DTH sector in India with over 8.5
million households having digital pay-TV.

According to Harsh Bijoor, a brand consultant, “Since Dish TV, the biggest market player on the
Indian soil, has not scraped even five per cent of the pie, there is plenty left for other players to
eat.”

In the early 2008, five major players, Zee’s Dish TV, Tata Sky, Reliance ADAG, Sun Direct and
Bharti Telemedia formed an umbrella body – DTH Operators Association of India (DOAI).

The Cable and Satellite Broadcasting Association of India in its ‘2008 Pay TV Piracy Survey’ have
predicted that the Grey TV market of around USD 1.1billion will gradually be taken over by the
legal DTH industry.

Marcel Fenez, chairman CASBAA, said, “Despite the global sinking of economies, the Asia Pacific
market is healthy and the decline in growth will not derail the industry. With 1.7 million digital
cable subscriptions, the digital pay-TV market is finally taking off and this degree of penetration
represents a tipping point for our industry in Asia.”

Starting with a million strong subscriber base in August 2006, Tata Sky, a DTH joint-venture
Company between Star (owned by Rupert Murdoch) and the Tata Group, now has more than 2.7
million connections and the forecast for 2012 is that it will further increase to eight million.
The Indian DTH growth scenario bodes well for the advertising industry as well with over Rs 30-
40 crores being earmarked by these companies annually for advertising revenues.

While Tata Sky has roped in Bollywood actors Amir Khan and Gul Panag for its promotion,
Shahrukh Khan endorses for the Dish TV.

MD and CEO of Tata Sky, Vikram Kaushik, recently confirmed in an interview that the company
estimates were standing at Rs 40 billion for its final funding requirement as ‘competitive entries’,
‘explosive growth in volume’ and customer acquisition have jacked up the costs.

Tata Sky recently launched the NDS-developed XTV personal video recorder (PVR) that enables
the customers to watch a particular TV show while recording another. It is being hailed a ‘major
introduction’ in the Indian DTH market.

Within a few days of its launch 2, 500 PVRs, priced at Rs 8, 999, were sold as claimed by the Tata
Sky MD, Kaushik.

This places Tata Sky among the top 19 ‘pay-TV operators’ around the world with NDS solutions
being a unique introduction to facilitate flexibility of PVR to their subscribers.

A deal along similar lines was announced by Bharti Airtel, in the provision of DTH services,
dependent on NDS for its conditional access.

N Arjun, executive director Bharti Telemedia, expressed enthusiasm about the company’s
expansion plans by disclosing that his company looked forward to providing the best of home
entertainment services via Airtel digital TV in terms of latest technology and exciting content.
“Since DTH is the future of home entertainment, with the support of our technology partner NDS,
we will render superior, state-of-the-art services to our DTH service customers”, he said.

Sun Direct, which entered the DTH sector as a discounted brand in opposition to Tata Sky,
notched at a 30 per cent premium and supposedly mopped up over a million subscribers within a
short time span.

Tata Sky, though placed at a launch-premium of Rs 1,000, is open to segmentations.

A demand of a tax holiday of five years from the government has been mooted by the DOAI that
should incentivise the DTH industry as its market has reportedly surpassed the Japanese one in
the last five years.

The Indian DTH industry players look forward to a seven times multiplication of its market, about
40 million subscribers by 2015, from a total of 165 million pay TV households.

Analysis

Since 1959, when Indian television was first launched and the state owned Doordarshan aired
just two channels in black and white as recently as 1991; the world of entertainment has made
rapid and unusual strides.
The turning points were the 1982 Asian Games when colour television was introduced and the
1991 liberalisation and deregulation that ushered in the era of foreign investments and foreign
channels that egged the domestic players to jump into the foray.

From large metros, satellite TV moved to smaller towns that spurred the sale of TV sets and
brought about an upgradation from black and white television viewing to the colour one. With
time, more and more changes took place and finally the DTH services arrived.

DTH operations in India could be enhanced if the dearth of satellite capacity is removed by
increasing the number of available Ku-band transponders that at present is 12 on Insat 4A,
which in turn would mean more channels for viewing.

Tax burdens on DTH are another area of complaint for operators.

Around 40 per cent of revenues are siphoned off to pay taxes and license fee and another 12 per
cent for services imposed by the Central government. Apart from this, there are entertainment
taxes that differ from state to state.

Cable TV operators also give a stiff level of competition to the DTH sector by suppressing their
prices artificially by way of under-declarations.

This has pressurised the DTH operators to cut their profits to the extent of making them
unviable.

“At present, there are 80 million TV households in India, of which over seven million are DTH
ones. Since the penetration is just under nine per cent, there is much room for a massive growth
rate”, according to the Bharti Airtel’s head of brand and media, Chandrashekhar Balakrishnan.

“This is what the company is focusing on, to enhance its subscription base to 20 per cent,” he
added.

Industry analyst Siva Sundaram said that India will be the leading power in Asia by 2010 in the
field of cable market and by 2015; it will be the most profitable in the area of pay TV market.

Interestingly, the rural rich were the first to positively respond to the advent of DTH industry and
those in the remote areas with no or unreliable access to the cable services will be tapped in by
the DTH players.

The ‘Indian Readership Survey 2008 R2’ findings have shown that the Dish TV is the largest
player with over 3.1 million subscribers, followed by DD Direct, Tata Sky and Sun Direct, which
has a predominance in the southern zone.

The zone wise analysis puts the western zone with 2.24 million topping the subscriber base
charts and the North, South and East following the lead.

While the ‘big game’ hots up between the DTH service providers, the regular big Indian couch
potatoes may keep surfing the channels and choosing from the burgeoning options.