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Friday, March 05, 2010

Quagmire TV: LIVE!

While DTH players are trying to gain subscribers in the face of challenges by peers and Cable TV operators, they are wondering – “How do we do it?” arun roy transmits the direct-to-home ‘service’ solution.

“Not only are cable frustrated customers switching over to DTH, but many Non-Cable and Satellite (C&S) homes/cable-dark areas are turning to the service for home entertainment...” These are the words of Sugato Banerji, Chief Marketing Officer – DTH, Bharti Airtel, which explain how the DTH business is growing from a niche delivery mechanism into a mainstream business in India. The industry has seen significant growth over the past few years, with the number of subscribers increasing from a 1.5 million subscribers in 2004 to over 16.9 million as of August 2009. So how big is this number slated to grow to? Talking about the future of the DTH growth, an optimistic Banerji opines, “The DTH market has tremendous growth opportunities with the count of subscribers expected to reach 45 million by 2013 from the current 13.5 million.” The industry till date has been growing at a CAGR of 35% and is further forecasted to grow at around 30% over the next three years! Though the current number of DTH subscribers constitutes only a meagre proportion of the total number of over 130 million TV households, superior digital quality of video and sound along with interactive services and real-time recording and increasing number of value added services (VAS) are particularly enticing the Indian consumers to try their hands on DTH services.

The India DTH market is currently served by six private players – Dish TV, Tata Sky, Sun Direct, Big TV, Airtel Digital TV and the most recent entrant Videocon. Six providers, indeed, but the issue here is in differentiation of content, for each offering appears a twin-sibling of the others! As far as the consumers are concerned, their final choice of operator is not made on clear distinction of services.

The channel black outs by local operators and frequent pay-channel hikes by broadcasters had led to the demand for the introduction of ‘addressable system CAS’ by consumer protection groups in 2003. The scheme was rolled out in the three metros of Mumbai, Delhi and Kolkata. However, there were not many success stories to write about them as Shushmul Maheshawari, Chief Executive, RNCOS E-Services Pvt. Ltd, agreeingly elucidates, “Mandating CAS or DTH in some parts of the country haven’t brought fruitful results to the DTH industry... 25% of the subscribers subscribed to pay channels, while the remaining were content with the Free to Air (FTA) channels.” Of course, that calls for a very poor proportion of what was expected when the estimations were made public before the rollout happened. The main reason for low response to the scheme was the high cost of the set-top box. Keeping in mind this past experience, TRAI stepped-in by framing conducive rules to ensure the success of CAS and implemented CAS in certain notified areas of the three metros in January, 2007.

Though local cable providers have lost some market control, they still enjoy significant market shares in the bigger cities. Reason: first mover advantage. Even if you analyse various First World satellite TV markets, the first to market has always exercised excessive control over the market. To mention a few, in US, Cable TV rules the roost while in Europe it is Dish TV. The deciding factor for them too is who entered the market first. Cable TV entered the Indian market long before the DTH and has achieved significant penetration. Even today, DTH has a long distance to cover before it can compare its penetration to that of Cable TV in India.

And the near future will not get any easier for the DTH army as the Set top box armed Cable TV providers are working towards improving the audio-video quality of transmission, which for long has remained the differentiator between DTH and Cable TV services. So the fight will ultimately boil down to VAS feature, provided by the respective service providers. “Today the discerning Indian customer is very conscious about the service, and is sensitive to price as well. The winning DTH or Cable TV service will be one that offers superior content and interactivity to its viewers,” asserts Banerji.

Then comes the question about rural India, which is still vastly untapped by the DTH and Cable TV players, and presents a greater potential for growth. Question is – who will convince them first. In the areas where Cable TV network has not reached yet, DTH has an advantage. The reason being that unlike Cable TV network, DTH does not require the setting-up of ‘headends’ and laying of cables to the viewers home. This will allow DTH to reach these untapped areas faster than Cable TV. With sufficient marketing efforts, DTH can capture a large viewership base in these areas. Secondly, as it stands today, the Cable TV/CAS vendors are not putting in substantial efforts to increase their competitive superiority. As the switching cost to DTH reduces further and word-of-mouth marketing increases, more households would migrate onto the DTH platform. Then there is the IPTV launch (as planned by BSNL & MTNL) threat to the DTH business, which can be ignored for now at least as Maheshwari confirms, “Competition is big for DTH players to get into a market which is dominated by Cable TV. As far as IPTV is concerned, I don’t see any significant impact of this technology because it is still in its nascent stage...”

The Indian DTH market is currently worth Rs.30-35 billion, but is known to be plagued by huge losses. So financially, the operators are under huge pressure. To combat this, DTH players are pushing forward marketing efforts to gain volumes in the market. For example, Airtel Digital TV is offering the latest in technology while many others are banking on a widespread distribution network or on out-of-the-box packaging or programming. Tata Sky is leveraging the Tata brand equity to win hearts, while Sun Direct is playing on the price front.

Truly speaking, though it is a highly competitive market, price will not be the ultimate deciding factor that decides the winner; it’s the service (both in terms of customer service and quality of content) which matters, as an industry analyst puts it, “Customer service will be the key driver for customer retention.” Keeping in mind the same, operators have started offering a number of VAS such as ‘movie-on-demand’, live recordings of TV content, job searches, loan activities, matrimonial match-making, et al. “In India, value-added-services are features that give DTH operators the edge. Each operator looks at ways of monetising these services by offering enhanced services to customers, which help retain or add new subscribers”, says Banerji.

So there you are Mr. DTH provider, simply leveraging your brand power won’t be enough this time! It has to be service-led this time!

For more articles, Click on IIPM Article.

Source : IIPM Editorial, 2010.

An Initiative of IIPM, Malay Chaudhuri and Arindam chaudhuri (Renowned Management Guru and Economist).

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