Indian DTH Sector: Survival of the Fittest!

In a country with a population in excess of 1.8 billion, more than 50 percent of households own a television set. Television has transformed itself from being a luxury product to a bare essential for every household. Traditionally, the cable operators in India have had a free run enjoying themselves in a market bereft of competition. Suddenly the game seems to have changed for them with the Direct to Home (DTH) players thronging the market one after the other.

However, with the distinct price advantage and local programming cable connections have managed to stay fairly relevant in changing times. However, rise in the disposable income and increasing standard of living has meant that there is a huge market for DTH players as well. Within a short span of time, the DTH segment has endeared itself to consumers. According to a ‘TAM Annual Universe Update –2010’ study, 80 percent of the 135 million TV-owning households are subscribed to Cable & Satellite connections. Of this subscriber base, one in every five households has a digital connection. Going further, India is set to overtake the US as the largest DTH market in the world by 2012 according to a Reuters report. By 2014, the number of DTH subscribers in the country is expected to reach 45 million and by 2020, 58 million. During the same period (2014), the report projects cable operators to have a market share of around 70 percent , which is expected to fall to 64 percent by 2020.

The DTH story is very interesting. At one point of time, in 2005 the sector had just one player with pan-India presence – Dish TV. In 2008, Tata Sky joined the Subhash Chandra venture, with both fighting the unorganised sector comprising of cable operators. However, the scenario changed very quickly when Sun Direct, a regional player till then, decided to expand into the western and northern part of the country. This was soon followed by Reliance BIG TV's entry which coincided with the company’s INR 600-crore annual budget. Three months later, BIG TV claimed to have acquired 15-percent of the DTH market share. This was followed by Airtel’s entry into the segment.

Players like Reliance and Airtel quickly gained significant advantage over other providers, having a telecom subscriber base of more than 50 million. Furthermore, Reliance also had the option to tap into the subscriber base of Reliance Energy, its PCO partner. Airtel also had an edge over other standalone DTH players as it could leverage its one million retail outlets for mobile bill payment and recharge. Still, it was never a case of David v/s Goliath. Other DTH operators also had support to fall back on. For instance, Tata Sky, by virtue of being a joint venture between Tata Group and media baron Rupert Murdoch's News Corp had the reinforcements required to brace themselves against competitors. Chennai-based Sun Direct is also joint venture between Chennai-based broadcaster Sun TV Network Ltd and Malaysia's South Asia Entertainment Holdings Ltd. Dish TV is backed by Zee Networks.

The intense competition has created a win-win situation for the end consumers. DTH operators are fighting a price war while ideating innovative services to capture the imagination of the consumer. In the process, end users are benefitted by offerings of multi-channel functions, interactive and personal services live event recordings etc. Tata Sky kicked of the trend of providing an advanced set-top box with a built-in recording feature, a move which was soon emulated by almost very other player. Today we can expect out DTH provider to offer hi-tech innovations like MPEG technology, digital video recording, and High Definition viewing experience. The intense competition is a foreboder of consolidation in the industry. Analysts are of the strong view that, of the existing players, who are already on their toes vying to remain ahead, companies caught snoozing will end up losing.

With the ongoing battle for supremacy in the DTH space, it would not be wrong to conclude that DTH is recreating the trend in the Indian telecom market, where despite growth, increased competition shrunk margins of existing players. In the face of stiff competition, the service providers were compelled to offer innovative service offerings in a desperate bid to stay relevant.