Saturday, February 9, 2013

Back to the drawing boards

DTH players were on a dream flight in India so far, but the delay in rollout of Phase II of CAS has dampened expectations. Vareen Gadhoke Ray & Surbhi Chawla discuss the upcoming trends and how DTH players can make them count

When Direct-to-Home (DTH) first came along, it brought the promise of streamlining the highly fragmented pay-TV market in the country, which had hitherto been the stranglehold of local cable operators (LCOs). All that the players really had to do was conquer, which they continue to do, through mud-slinging, comparative advertising and even some cheap ground level tactics. DTH was a very welcome platform for broadcasters and media houses, which were fighting these LCOs on the grounds that they were not declaring their total subscriber base. The launch of the first phase of Conditional Access System (CAS) brought more transparency, thereby aiding higher yield in subscription revenues. But the launch of the second phase of DTH, which was to make CAS mandatory in more areas of the country, has been delayed quite unexpectedly. This has stymied their dream run, and slowed down their onward march quite considerably. In such a scenario, what does the future portend for these players in India?

Direct to Hell or Heaven

The future of pay-TV in India is being driven by media owners and distributors, which are expanding market share with an eye on profits, rather than at the expense of profits. The major concern for this sector was that at a very nascent stage, seven major players (Dish TV, Tata Sky, BIG TV, Airtel Digital, Sun Direct, DD Direct and the newly launched Videocon d2h) along with organised CAS operators (like Hathaway and Sify) were slugging it out to get the maximum share of this growing pie. As a result, the first phase of growth saw the basic DTH box being offered at a subsidy, and at times, even virtually free of cost to catch hold of the early adopters and get them to experience this new wave of technology. The plus point of this can be seen from the fact that the Indian pay-TV sector generated sales to the tune of $6.5 billion for financial year ending March 2010 [Media Partners Asia (MPA)].

Thanks to the continously intensifying tussle among the players, the sector is facing the same fate as the telecom operators. DTH players too are unable to garner as much in ARPUs. The tempering of their enthusiasm due to delay in Phase 2 rollout make it worse. EBITDA profits for the sector reached $800 million for the financial year ending March 2010, implying a modest profit margin of around 13%.


Source : IIPM Editorial, 2012.
An Initiative of IIPM, Malay Chaudhuri
and Arindam Chaudhuri (Renowned Management Guru and Economist).

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