FORECAST

INDIAN

DIRECT–TO-HOME (DTH)

INDUSTRY

BY KARTHICK SEKAR

Introduction:

The Indian Direct-To-Home (DTH) TV industry has been growing at rapid pace since the inception of commercial services in 2003 on the back of huge investments by the existing and new players. The DTH industry has defied the global trend of economic crisis and posted significant growth in 2008.

The DTH market has been able to acquire around 18 Million subscribers over the past six years. With the entry of new players, the number of DTH subscribers has witnessed a steady growth as the competition in the market increased and people have a wide range of options to choose from according to their requirements.

Thanks to the superior audio and video quality, the DTH services are now in a position to attract a large number of subscribers. On analysis of “Indian DTH Market Forecast to 2012”, the number of DTH subscribers is projected to grow at a CAGR of around 28% during 2010-2012. Presently, the DTH subscribers constitute only a small proportion of the total TV household in the country, representing a vast future growth potential.

By 2015, DTH will enjoy a market share of 40%, digital cable 40% and analog cable will follow with only 20% market share. The DTH service market in India has emerged as one of the most lucrative markets that have successfullySustained the impacts of the current economic slowdown. The slowdown, instead, proved a boon for the Indian DTHindustry as people started to cut on their entertainment expenditure and instead of viewing movies at theatres, theyPrefer to stay at home with their television sets.

India has about 130 million TV homes of which, Cable & Satellite (C&S) services are present in 97 million (74%) of the home. The DTH market in India comprises 11% of the total market with almost 15 million homes. The DTH industry growth lagged to 10.3% in 2008 from 16.7% a year earlier. But industry players agree that the digitization drive is expanding by 35-40% annually. However, industry estimates DTH to touch 35-40 million subscribers by 2012, and that is the number that every DTH brand has set its sights on.

The anticipated growth to the efforts of DTH industry players who are all trying to lure viewers by cutting down prices as well as offering perquisites even though it translates into loss of Rs 1,600-2,000 on each new subscriber acquiredBy them. They have started to offer a number of value-added services such as ‘movie on demand’, live recording of TVcontent, matrimonial matchmaking, etc.

Currently, the Indian DTH market is being served by seven private players – Doordarshan, Dish TV, Tata Sky, Sun Direct, Big TV, Airtel’ Digital TV and Videocon D2H. Doordarshan is free DTH service provider, which is run by the Indian government.

Share of DTH in TV Household

Pay TV market on Growth Trajectory

Still, as DTH is still a relatively new category and most people are hesitant to experiment with it. It is therefore imperative for companies such as Tata Sky, Dish TV, and Reliance BIG TV to educate the consumers about the advantages of the service and in turn create an urge to invest in it.

Porter’s Five Competitive forces: Direct to Home (DTH).

Porter’s model is based on the insight that a corporate strategy should meet the opportunities and threats in the organization’s external environment. Especially, competitive strategy should be based on an understanding of industry structures and the way they change. Porter has identified five competitive forces that shape every industry and every market. These forces determine the intensity of competition and hence the profitability and attractiveness of an industry.

Threat of New Entrants: LOW Seven major players in DTH industry

Determinants of Supplier power: Very High:- Transponder, Content, CAS & CPE (LOW)

Rivalry among existing firms: Very High Price wars, litigations & Product promoting

Determinants of Buyer power: High: - Bargaining, More options& Price Sensitive Buyers

Threat of Substitute products: Very High:- Cable Television, Internet Protocol television & Terrestrial Television

The Five Competitive Forces as applied to Direct to Home industry are described as follows:

Buyers: Ba r gaining power of buyers With enough options to choose both from the point of alternate mediums like Cable, IPTV and Terrestrial broadcast and from the point of increasing DTH operators, the consumer is at his will to decide. Customers will continue to have a high bargaining power until DTH platforms try to differentiate them as superior players with better content and clarity.

Suppliers: Bargaining power of suppliers

DTH industry relies on three major supplies:Customer Premise Equipment (CPE): It includes satellite dish, Set Top Box with the necessary Access card, the Ku band transponders in the orbiting satellites and content. With India overtaking Japan as Asia’s largest DTH, the bargaining power of Indian DTH operators with CPE supplies have increased. However, the availability of transponders is increasingly becoming difficult. The Ku band transponder is generally provided by Astrix, the commercial wing of ISRO either through its own satellites or by leasing transponders from suppliers. With only two domestic satellite launches between 2007 and2010 and increasing DTH players, Astrix is in a better position to use DTH as its source of income for the next 5 to 10 years. In addition, the crash of INSAT 4C and NSS-8 has worsened the situation of DTH players. As there is not much of regulation particularly in terms of channel pricing, acquiring content from the broadcasters is also difficult. DTH vendors are at the mercy of the broadcasters.

Potential Entrants: Threat of new entrants

With already 7 players in the DTH space, threat of new entrants is relatively low. There is already enough competition which will discourage new firms to enter this business. While getting a license is relatively easy, the barriers to entry are high when it comes to pricing of CPE and getting the required transponders.

Substitutes: Threat of substitutes

DTH faces stiff competition from the terrestrial, cable and IPTV. As per the industry estimates, there are 130 million TVhomes of which 97 million are served by cable and around 18million by DTH with the remaining taken by terrestrial transmission.

Industry co mpetitors: S egment rival ry

Presently as on 2010, these are the main DTH service providers in India: DD Direct – state owned free service provider Dish TV - owned by Essel Group, was the first commercial DTH service provider. TATA Sky – owned by TATA group, largest DTH service provider presently in India Sun Direct – owned by Sun group, primary focus is on low income groups and regional viewers Reliance Big TV - Owned by Reliance group, new entrant into the market Airtel Digital TV – Owned by Bharti group, recent entry to the DTH market with aggressive market strategies Videocon D2H – Owned by the Videocon Group of companies, latest entry to the DTH market

MARKET SHARE

With 7 operational players, the segment rivalry is quite high. The competition from state owned DD-Direct to private players is negligible from the content point of view as the number of channels offered by DD-Direct is very limited. However, DD-Direct does not charge any monthly subscription fee which poses a threat to the private players. Between Dish TV and Tata Sky there is an intense rivalry exhibited by price wars and discount schemes offered to new connections. Being the first mover, Dish TV has price advantage in both the STB as well asprocuring the transponders. On the other hand, Tata Sky claims its STB having superior DVD quality video. There is also a competition at acquiring the content.

Market Le a der:

Dish TV India’s first DTH service provider launched in October 2003 is the market leader with 7 million subscribers. Dish TV continues to be a market leader with 32% market share in 7 player scenario on date, with sizeable sales and distribution infrastructure of over 650 distributors and 45,000 dealers across 6500 towns – once again, the largest in the category. This reach into far-flung markets enables building of a diverse subscriber base across consumer segments, which are supported by its rich content of regional channel offerings.Dish TV has maintained its leadership position through an improved market share of all DTH subscribers. New offers, extensive marketing campaigns have contributed to impressive subscriber acquisition and are committed to provide the best value to our customers and investors by enhancing operational efficiencies and by leveraging economies of scale.

Market challengers:

The gap between the leader and the challengers is decreasing because of the increasing competition and promotion strategy followed by each player.

TATA Sky

In the enormous consumer market like India, occasionally an opportunity arises that can create incredible growth and profit provided those who seek to capture it could move quickly enough. TATA wanted to capitalize on this opportunity, as there was currently only one player in the DTH market. It was the second Mover after Dish TV leveraging on brand TATA and high brand recall. Incorporated in 2004, Tata Sky is a JV between the TATA Group and STAR. TataSky endeavors to offer Indian viewers an excellent television viewing experience through its satellite television service. The key business challenge in a country like India is meeting customer demands—which are very dynamic—under the regulatory purview of the country.

Sun DIRECT

Sun Direct is the fastest growing DTH service provider having garnered over 5 million subscribers since its launch in December 2007 and aims to become one of the leading players in the DTH space. Sun Direct challenged the existing players by involving them in the price war by acting as a discounted brand. It started offering subscriptions at as low as Rs 99 to reach as much at the bottom of the market. The biggest differentiator for the brand is the pricing point which is lesser than the other brands.

The other point of differentiation is with regard to their distribution channels. It is available in most basic shops such as telephone booths, cycle repair shops and video parlors. Sun DTH was the first one to move into the MPEG4 league and soon after the PAN India HD, services were launched; Sun Direct started to roll out the HD service in India.

Market follower s :

Reliance BI G TV/ Ai rtel Digital/Videocon d2h

The approach being followed is of Market Follower (as they are late entrant and their primary objective is to attract max subscribers in shortest span of time.

Consumer Behaviour Pa t tern:

Major Factors influencing the purchase decision of DTH are as below: Price Customer Service Reception Program choices New Technology and Technical Support

Strategies to sustain in competitive gr owth market

Advertising & Promoti o n:

Indian TV channels broadcast 15.7-mn advertisement every year, which totals to 362-mn seconds of TV advertisement every year. India currently has over 400 channels.TV viewer ship has declined by 5% since 2001. TV broadcasters are expected to increase advertisement rate this year by 16-18%.

DTH industry uses different marketing strategies for promotion and sales of its products. It gives advertisements with their brand ambassadors, which attract customers, door to door selling, on the phone selling, discount and offer sales, packages, etc. Marketing practices is a continuous process as the competition keeps increasing among the players in the industry. Each player is investing lot of money in promoting there brands. Many players are making advertisement with movie actor and actress as brand ambassadors for their products because DTH is mainly considered with entertainment. Some of the companies like Tata sky is having Super Star Aamir khan as brand ambassador and Airtel is having many film stars like Kareena Kapoor, A.R. Rahman, Saif Ali khan, etc. Dish TV is also having Super Star Shahrukh khan as the brand ambassador. Sun direct, also use southern actress for their brand promotion.

Marketing practices are the decisions taken by the manufacturing company to increase sales, expand themselves into many areas etc. Successful marketing practices bring sale up, while unsuccessful marketing practices have no impact on sale or negatively impact sale. Marketing concepts specific to the industry is primarily targeted at a niche segment who buy the TV sets from the electronic retail chains.

Product Innovation

The concept of innovation in DTH industry is INCREMENTAL innovation; everything that is done is due to constant research of many marketing and analysts to bring many innovations to the existing products in the DTH industry. Incremental innovation is the apt innovation, which is suitable, and all the DTH players are concentrating up on. This innovation makes the business to grow continuously and brings advantages to the customers using the products and the service.

There are many sources of innovation for this industry as mentioned in the above, the technology and the people are the main sources for the innovation. Customer’s opinions and their needs can be served by providing a service, which is matching to their needs and requirements.

Digital TV, the DTH service from Airtel, has announced India’s first skin integration innovation on its EPG screen in partnership with Yahoo. Yahoo takes forward its latest brand campaign “YOU” in this first of its kind partnership where an online portal will use DTH as a medium to promote itself. The ‘Electronic Programming Guide’ screen on Airtel digital TV is now completely integrated with Yahoo India’s homepage. Customers will find a message ‘Fill your home page with all the things that make YOU’ when they log onto to the EPG screen. A prompting ‘Red Button’ will take them to a dedicated landing page that elaborates the offerings on Yahoo India’s new home page.

The ‘YOU’ campaign enables users to customize the home page as per their liking and empowers them with the choice to integrate social applications such as Facebook with their Yahoo homepage. Network Play, right from design elements to execution and thanks to Mindshare for buying into the idea and flawlessly helping people execute it, conceived this whole idea.

Tata Teleservices Limited has announced a technological breakthrough—a first-of-its-kind innovation in India with the launch of TATA Photon TV, a new application that allows Tata Photon Plus subscribers to watch live television channels on their laptops while on the move, and on their personal computers at home and in the office. The Photon TV service is exclusively available to Photon Plus users. “With its growing popularity, Photon Plus has caught the admiration of millions of users across the country, with its high-speed data access capabilities and the ease of mobility.

TATA Photon TV is a personal computer- and laptop-based video streaming application, which allows Tata Photon Plus users to view live TV feed from various sports, news, entertainment and regional channels, and to watch recorded TV shows from the library (viz Coffee with Karan, Zoom, Pogo, etc), movies, music and videos on demand.

Internet Browsing charges will be charged as per your Photon+ tariff plan and it would be applicable while viewing Photon TV. These charges would be over and above the subscription charges for the Photon TV. (Approximate data usage is 1-2MB per Min).

Rate of innovation in this sector is growing at a faster rate in the recent years where as it is not very impressive before this period. The reason for this is the fair competition between the all players in this DTH industry. It led to the development of new products in this sector which also led to the diversification of products as there is abolition of entry of foreign industries into Indian industries initially. It also made the industries in this sector to establish their own R&D departments for successful product innovations like Airtel Live, Videocon d2h.

Market se g mentation

GEOGRA P HIC S E G M ENTATION In terms of geographical location, North India and Western India together contribute over 8 million DTH subscribers, while the southern market contributes 3 million. The states of Maharashtra, Goa, Punjab, Uttar Pradesh, and Rajasthan are theleaders in DTH subscription, contributing over 6.5 million DTH connections to the overall base.

Urban and R ural :

In order to cater to the diverse taste and needs of both urban and rural people, operators provide entirely different range of services and offerings. In rural areas, fleet of vans for demos, installation as well as selling hardware and pre-paid vouchers are being used. Most players are building up their subscriber base by targeting viewers outside the big cities, which suggests that about 60 per cent of DTH subscribers reside in rural areas and towns with a population under a million.

Region and S tates :

It has come up with special offers for the southern region where regional and sports channels are viewed the most. Like Ultimate sports bonanza offer – Rs 1890 with 3 Months of South Silver subscription available in Tamil Nadu, Kerala, Karnataka & Pondicherry only. Ultimate sports bonanza offer - Rs 2490 with 12 Months of Silver subscription available in Andhra Pradesh only. Dish TV has structured a basic bouquet of customized package of channels, which are in demand in a particular state at a very affordable price pack like North diamond pack and South diamond pack.

Brief profile of players in the industry

DD D I RE C T:

Doordarshan is the public television broadcaster of India and a division of Prasar Bharati, a public service broadcaster nominated by the Government of India. It is one of the largest broadcasting organizations in the world in terms of the infrastructure of studios and transmitters. Recently, it has also started Digital Terrestrial Transmitters. On September 152009, Doordarshan celebrated its 50th anniversary. Doordarshan had a modest beginning with the experimental telecast starting in Delhi on 15 September 1959 with a small transmitter and a makeshift studio.

The regular daily transmission started in 1965 as a part of All India Radio. The television service was extended to Bombay (now Mumbai) and Amritsar in 1972. Until 1975, seven Indian cities had television service and Doordarshan remained the only television channel in India. Television services were separated from radio in 1976. Each office of All India Radio and Doordarshan were placed under the management of two separate Director Generals in New Delhi. Finally, Doordarshan as a National Broadcaster came into existence.

National telecasts were introduced in 1982. In the same year, then Prime Minister Indira Gandhi introduced color TV in the Indian market with the live telecast of the Independence Day speech on 15 August 1982, followed by the 1982 Asian Games being held in Delhi. Now more than 90 percent of the Indian population can receive Doordarshan (DD National) programmes through a network of nearly 1400 terrestrial transmitters and about 46 Doordarshan studios produce TV programs today.

DD Direct+ is a free Direct to Home (DTH) service that provides satellite television and audio programming to households and businesses in the Indian subcontinent. Owned by parent company Doordarshan, DD Direct Plus was launched on December 16, 2004. Now chairman of DD plus+ is Shri Arun Bhatnagar and CEO is B S Lalli under the ministry of information and broadcasting.

Dish TV

Dish TV is the first private DTH satellite television provider in India, using MPEG-2 digital compression technology, transmitting using NSS Satellite at 95.0. Dish TV's managing director and Head of Business is Jawahar Goel who is also the promoter of Essel Group and is the President of Indian Broadcasting Foundation and Mr. Subhash Chandra is the Chairman of Dish TV.

Dish TV is a division of Zee Network Enterprise (Essel Group Venture). EGV has national and global presence with business interests in media programming, broadcasting & distribution, specialty packaging and entertainment. Zee Network incorporated dishtv to modernize TV viewing. By digitalizing Indian entertainment, this enterprise brought best television viewing technology to the living room. It not only transmits high quality programmes through satellite but also gives a complete control of selecting channels and paying.

DTH service was launched back in 2004 by launching of Dish TV by Essel Group's Enterprises. Dish TV is on the same satellite where DD Direct+ is. Dish TV started its service in Pakistan with the collaboration of Budget Communication. Dish

TV was only DTH operator in India to carry the two Turner channels, Turner Classic Movies and Boomerang. Both the channels were removed from the platform due to unknown reasons in March 2009.

Dish TV uses NSS-6 to broadcast its programmes. European-based satellite provider, New Skies, launched NSS-6 on 17December 2002. Dish TV hopped on to NSS-6 from an INSAT satellite in July 2004. The change in the Satellite was to increase the channel offering as NSS 6 offered more transponder capacity.

Tata Sky

Tata Sky is a DTH satellite television provider in India, using MPEG-2 digital compression technology, transmitting usingINSAT 4A at 83.0°. Tata sky was incorporated in 2004.

Tata Sky is a JV between the TATA Group and STAR. Tata Sky DTH endeavors to offer Indian viewers an excellent television viewing experience through its satellite television service. Vikram Kaushik is present CEO of Tata Sky Ltd. The TATA Group is one of India's largest and most respected business conglomerates. It comprises 93 operating companies in seven business sectors and diversified group information systems and communications, engineering, materials, services, energy, consumer products and chemicals.

The TATA Group has operations in more than 40 countries across six continents and its companies export products and services to 140 nations. The Group and its enterprises have been steadfast and distinctive in its adherence to business ethics and their commitment to corporate social responsibility. This legacy has earned the Group the trust of many millions of stakeholders in measure few business houses anywhere in the world can match.

The SKY brand, owned by the UK-based British Sky Broadcasting Group, brings to Tata Sky the reputation of more than 20 years experience of satellite broadcasting. SKY is well known for the innovative products and services launched by BSky, such as DTH broadcasting in 1989, digital satellite broadcasting in 1998, interactive television services in 1999 and the SKY+ personal video recorder in 2001. Tata Sky joins an international group of DTH businesses that includes platforms as far apart as the UK and Italy in Europe, and Mexico and Brazil in Latin America.

Tata Sky Ltd is the First Indian DTH provider to be awarded the ISO 27001:2005 accreditation, the ultimate benchmark for information security. The assessment for the certification was conducted by Intertek Systems Certification, the management systems registration business unit of Intertek Group plc and is accredited by several internationally recognized accreditation bodies worldwide.

In October 2008, Tata Sky announced launching of DVR service Tata Sky+ that allowed 45 hours of recording in a MPEG-4 compatible Set Top Box. The remote is provided with playback control keys and is being sold with special Offers for existing subscribers. An independent and voluntary council of experts known as Super brands Council selected Tata Sky as a SUPER BRAND for the year 2009-2010. It is the only Indian DTH to have won this distinction.

Sun Direct

Sun Direct is a DTH satellite television provider in India, using MPEG-4 digital compression technology, transmitting usingINSAT 4B at 93.5°E. It is the country's first MPEG 4 technology DTH service provider. Sun Direct is a DTH Service in India headquartered in Chennai, Tamil Nadu.

Sun Direct TV was registered in February 16, 2005. However, the failed launch of INSAT 4C resulted in a lack of transponders, delaying the launch. The service was finally launched on December 2007 after availability of transponders from INSAT 4CR. Because of the lowest pricing of any DTH in India Sun Direct spread rapidly all over the country. On December, Sun Direct was launched in Mumbai and announced its pan India launch. By 2009, it became leading DTH provider with 3 million subscribers. This makes it fourth largest DTH service provider of India.

In April 2009, Sun Direct officially launched its High-Definition service in India. Sun Direct uses the latest MPEG-4 based technology to increase broadcast capacity.

Sun Direct provide next-generation services in fast-growing and emerging markets quickly and efficiently. Sun Direct selected Oracle based on its convergent multi-service capabilities and proven real-time scalability allowing itto consolidate billing operations, enables powerful new service offerings and improves visibility into customer information across services.

BIG T V

Reliance BIG TV is a DTH satellite television provider in India based in Navi Mumbai, using MPEG-4 digital compression technology, transmitting using MEASAT-3 91.5°east. It is the 5th DTH service launched in India. Reliance BIG TV limited is a part of Reliance Communications Ltd., a subsidiary of Reliance Anil Dhirubhai Ambani Group founded by the Late Dhirubhai Ambani, the Indian business tycoon and owned by his son Anil Ambani.

BIG TV started operations from 19 August 2008 with the slogan "TV ho Tho BIG Ho" ("If you have a TV, make it BIG"). It currently offers close to 200 channels and many interactive ones, 32 cinema halls (i.e. Pay Per View CinemaChannels) as well as many Radio channels. The company plans to increase the number of channels in the near future to 400 and begin High Definition (HD) broadcast. It is the first Pan-India DTH provider that uses MPEG-4 for broadcasting. There are also plans to introduce services like i-Stock, i-News and other such interactive services in the future.

Reliance BIG TV was launched on August 19, 2008 with the sole aim of providing the consumer with quality and enriched home entertainment service at value-driven pricing. Reliance BIG TV's launch in August was probably theBiggest roll-out in home entertainment ever and deployed the most advanced MPEG4 technology that enabled them to deliver best quality digital audio-video to the consumer. It also got prepared for the future when Hi-Definition TV willbe launched in India because only MPEG4 technology can support HD TV and not MPEG2 which is used by the earlier entrants in the DTH industry.

Reliance BIG TV's retailer network is spread across 100,000 outlets in 6,500 towns in India. This was literally unheard of in the DTH industry. They had effectively out-stripped the competition here. When it came to pricing – packaging, their introductory offer stood at Rs. 1,490/- with 3 to 6 months of free subscription. They also introduced 32 Pay-Per-View Movie Channels, the highest by any DTH player.

Airtel digital TV

Bharti Airtel Limited is the flagship company of Bharti Enterprises and is India’s largest integrated and the first private telecom services provider with a footprint in all the 23 telecom circles. As India's leading telecommunications company, the Airtel brand has played the role of a major catalyst in India's reforms, contributing to its economic resurgence. Airtel since its inception has been at the forefront of technology and has steered the course of the telecom sector in the country with its excellent products and services.

Airtel Digital TV is a DTH (Direct to Home) service from Bharti Airtel. It uses MPEG-4 digital compression with DVB- S2 technology, transmitting using INSAT 4CR 74°E Airtel digital launched on 8 October 2008 with a 360-degree mega campaign 'Come Home to the Magic. Since then it has launched 2 other campaigns: ‘Stars come home’ (March 2009) and‘DTH Picture Clarity (August 2009) has increased its channel base to 183+ channels.

Airtel digital TV is now amongst the fastest growing DTH brands in the country and is available across 5000+ towns in India. It is also been ranked as the best DTH service by “Living Digital” magazine. Airtel chief Sunil Mittal said that Airtel digital TV and other DTH players have a bright future in Indian market as the people are getting more attracted towards DTH because of its quality and affordability.

Videocon d2h:

Videocon d2h is a DTH satellite television provider in India based in Mumbai, using MPEG-4 with DVB S2 digital compression technology. Videocon Leasing & Industrial Finance Limited was incorporated on 4 September 1986As Adhigam, Trading Private Limited. In terms of the necessary resolutions Passed under Sec. 21 of the Companies Act,1956, the name of the Company was changed to Videocon Leasing & Industrial Finance Limited on 14 February,1991. The Company received a fresh certificate of incorporation from the Registrar of Companies, Gujarat at Ahmadabad on 14thFebruary, 1991.

Videocon d2h launched May 1, 2009. It came with a very good strategy for selling both of its electronic products like TV’s DVD’s along with the new set top box. This is offering direct to TV without any set top box also. Only the antenna is enough, it also came with DVD, which is connected, directly to the TV or antenna is connected to DVD, which gives a best quality of out put.

“There is only one winning strategy. It is to carefully define the target market and direct a superior offering to that target market.”

”Philip Kotler”

Conclusion

A few things are assured in the Indian television industry even in the face of paradigm shifts. The industry is likely to be characterized first by a period of fragmentation and then by an increasing concentration of global consortia asunprofitable participants fold. What is clearer than ever is that satellite TV is here to stay and will play role in bringing television to mass around the world.