The only constant in today’s Media industry is change. Given the growth and significance of this industry in the global economy, this change puts industry players in a permanent position of assessing new products, services and enabling technologies. Customers worldwide have become extremely choosy on what they want and it has become a challenge for the media players to not only meet such demands but also constantly innovate to stay alive in an extremely competitive environment. The likelihood of investing in a white elephant or “missing the train” of a successful product opportunity is surely as great as identifying the right product at the right time. Direct to Home (DTH) broadcasting has been one such area of high investment with a dual purpose of effecting good revenues in the long run and providing top class services as well.
Direct-To-home (DTH) TV distribution is one in which a large number of channels are digitally compressed, encrypted and beamed from very high power satellites. The programs can be directly transmitted to homes, using very small dish antennae and card operated Integrated Receiver Decoders (IRDS). It normally provides a basic service consisting of a certain number of channels at a particular cost. DTH can provide a lot of other high revenue generating, value-added services like Internet Access, Video Conferencing, Video On Demand, Home security/Shopping/Banking, E-mail, Pay Per View, Near Video On Demand and Data Broadcasts.
The Market dynamics of DTH could be broadly classified as Broadcast policies and regulations, Market potential, Major players involved in DTH consortia, Costs, Revenues, Value added services, Evolving technologies and Superior content and connectivity. The DTH end-to-end service value-chain is complex, technologically sophisticated and includes almost all aspects of broadcasting, such as satellite ownership/bulk leasing of transponders, large scale broadcasting studios/up-link earth-station, acquisition/production/arrangement of many programming channels, user-friendly creation of an Electronic Programme Guide, sourcing/distribution/technical support of subscribers reception equipment, elaborate marketing of DTH services, comprehensive subscription billing systems and revenue collection, etc. These diverse requirements coupled with considerable financial risks involved, means that a consortium of companies into these services is the best likely solution for this venture.
Certain Business Projections have been drawn for DTH service providers in India based on three parameters namely- Subscriber base, Project cost and Revenues. These parameters have been projected for the total market size for DTH in India.
Subscriber Estimates– Firstly, since cable has penetrated the Indian market in a big way with roughly 35 million C&S homes, a parallel can been drawn with the U.S market pattern where cable was the first mover, present now in approximately 160 million households compared to a mere 10 million DTH homes. Due to this critical penetration achieved by CATV in India it is imperative that in its first few years of operations, DTH will be focused on a niche market. This niche would basically constitute the rich segment from urban as well as rural areas due to the primary reason of high initial costs for DTH and the associated psychology of people. The second reason could be the better service and value added services (VAS) like pay per view (PPV), NVOD and Internet being offered on DTH. Two approaches have been drawn for the subscriber projections. One is based on the disposable income of the population and the second based on cannibalization of CATV, multiple TV households and VAS, the projections from the two being approximately the same.
Project Cost Estimates- Broad business assumptions here are that, a DTH platform would carry about 70 odd channels with additional services like PPV, NVOD and Internet. The principal costs would involve programming costs, satellite transponder costs, Conditional Access systems, Customer Premise Equipment costs and Marketing costs associated with DTH. It is found that the cost of financing the Customer Premises Equipment is massive and therefore it is viable to finance the set top box (STB) and dish antennae, the cost of which can be recovered from the customers on a monthly basis. However, it is assumed that the customer will pay for the installation charges. It is also interesting to note that financing the STB and dish antennae accounts for more than 75% of the project cost and is extremely price sensitive. Therefore a slight change in these equipment costs would significantly change the project cost. Drawing a parallel with cable costs here, it is seen that initially cable connections were costly. In fact one had to pay deposits too. However with the popularity of cable the costs reduced drastically. The same is expected to happen with DTH equipment whose costs are assumed to decrease by 10% on an annual basis.
Project Revenue Estimates- The major business assumptions here are that, since a large chunk of the project cost deals with financing the equipment for DTH, so too will the earnings from recovering this cost from the subscribers form the major component of revenues earned. Therefore a decrease in the cost of equipment would actually help in faster recovery of the expenses incurred. The other broad channels of revenues are base subscription, bouquet subscription, and NVOD, PPV and Internet usage.
Opportunities for DTH in India look great. There exists a tremendous potential for direct to home broadcast in this market and it is projected that by 2005 there would be around 2.5 million DTH subscribers in India. This figure is likely to increase due to the increase in TV and Cable households and also the growing multiple TV households, which would form a large percentage of the total subscriber base. Since India’s population crossed the one billion mark, it is no surprise that satellite operators and programmers world-wide have set their sights on the world’s largest open market for DTH satellite TV services. The growing popularity of TV as a communication medium has resulted in the TV media sectors undergoing a rapid transformation. Also when DTH transmissions start in India the market will open for the following types of equipment -Ku-band dish antennae and Integrated Receiver Decoders (IRD). In a couple of years with Multipoint Microwave Distribution System and Net Television the whole digital domain is going to open up very fast. DTH can help in narrower targeting of satellite delivered services, rather than a single regional service, allowing programming to be more directly geared to the interests, language and culture of the particular audience, as well as providing a vehicle that integrates and offers locally produced and local language material.
Drawing a parallel with the American DTH market, certain conclusions are drawn. Cable has been an early mover in India like in the U.S and with DTH operations starting as early as ‘ 92 the American DTH market is 10 million homes big as of today compared to 160 million cable homes. Similarly, with cable penetrating 35 million homes in India, given the time and resources, the DTH market size would stand at approximately 5 million homes by 2007 assuming operations start by 2002. The American TV household is roughly about 90% of the total U.S population with a figure of 2.24 TV’s per household. This number has grown tremendously over the last 15 years and fast approaching saturation. This is boom time however, for the Indian TV market with numbers expected to touch 100 million six years hence from the present figure of 70 million odd. This combined with the growing multiple TV households shall triple the DTH subscriber base in 2004 from the 0.5 million expected in 2002(starting year of operation). Finally, the two main operators for DTH in the U.S, DirecTV and Echostar account for 95% of the total DTH subscriber base there and have proved to been extremely profitable. This has thrown a similar picture for the Indian scenario where not more than two DTH service providers could coexist profitably.
In conclusion, it has now been over a decade since DTH satellite broadcasting began to show promise as a new technology capable of widespread distribution of programs and services. In those early days, the prime concern of many governments was that the spread of DTH satellite would result in mass Americanization and a decline in the cultural values and ideas of their people. The solution that has to be found is to maintain some form of national control, ranging from outright ban on ownership of satellite signal receiving equipment, to introducing licensing regimes, prescribing guidelines for program content and placing limits on foreign ownership of broadcasting licenses or ventures. The present DTH policy drawn addresses some of these issues which effectively strikes a balance between the economic benefits of introducing new services, the consumer demand for change and the government’s overriding interest in maintaining control over broadcasting. It remains to be seen how India will strike a final balance in the structuring of its laws and regulatory scheme to maximize the benefits of the new technologies, whilst ensuring that the national and public interests in the control and content of those services are protected.
*The article is authored by Monideep Chattopadhay, a student of the ICFAI Business School, Bangalore.
*All arguments and views expressed herein are the authors’ personal views.
