Case Study

It began on October 2, 2003. And, Dish TV, the first company to launch direct-to-
home (DTH) television services, decided to tread slowly. Instead of taking on
cable operators head-on in metros and cities, where most subscribers were, the
fledgling DTH company decided to focus on rural markets, remote areas and the
outskirts of some cities where cable network wasn't available or very poor.

The strategy was understandable for another reason, too. As part of the Essel
group, which also owned the largest cable operators in the country, it didn't want
to tread on their toes. Says Jawahar Goel who single-handedly launched DTH
services in the country through Dish TV: "We hardly had four transponders and
could offer only 48 channels, compared to analog cable that was giving 60 and
was much cheaper. And, STAR refused to give its channels. So, we decided to
go slow and concentrate in cable-dry and cable-frustrated markets, rather than
cable-rich markets and build the market step by step."

It was an arduous task to train technicians to put dish antennas (they took help
from defence personnel) on walls or convince consumers they had to pay a huge
premium to get quality viewing. So, even after two years, Dish had only 350,000
subscribers, less than one per cent of all TV households. Goel never believed
there would be many players in this capital-intensive business - maybe at most
two, so that they could make some money. And, even the most optimistic of
analysts thought it would remain a niche offering, not comprising more than a
tenth of the total TV households after a decade.

Change & its cost

They were all wrong. Ten years later, with a little over 37 million customers and
23 per cent of TV households, DTH has successfully challenged the might of
cable television with superior quality of broadcasting and a clear technological
edge. And, they have provided the much needed revenue for broadcasters (half
of their subscription revenues), enabling them to reinvest and expand their
channels and offer better programming.

The juggernaut hasn't slowed despite the widespread push of digitisation of

analog cable, prodded by the government. DTH is adding about 8.5 million
customers a year, four times more than cable additions. Media Partners Asia
(MPA), the Hong Kong-based consultancy, says by 2020, 42 per cent of TV
homes will be on DTH. On the downside, Goel admits he could have never
dreamt there would be over six players battling in a market that perhaps has
enough room for only two or three, and desperately needs consolidation (BIG is
in talks to sell off to Sun TV). The adverse impact is reflected in the fact that
though the industry has burnt $4-5 billion in cash to build infrastructure, most
DTH companies are still deep in the red, with accumulated losses of Rs 9,000
crore and debt of Rs 7,500 crore.

With DTH now taking digital cable operators head-on after a digital addressable
system (DAS) has been implemented in 42 cities, the competition will become
even fiercer. Sector experts privately admit another $3-4 billion will have to be
put in to go for the next expansion, as well as upgrade of technology to keep
ahead in the race.

Looking back

In 2007, the inflection point for DTH was about to begin. All knew it was a
superior technology, offering better viewing. But the growth was limited, both due
to lack of transponders that limited the variety of channels, and the reluctance of
companies like STAR to offer their bouquet of channels to Dish, which limited
subscriber choices.

All that changed in 2007, when STAR (which launched in 2006) and Zee (Dish
TV and Zee were part of the Essel group), after a bitter battle in the courts,
decided to call a truce and offer their channels on each other's platforms. Dish
TV also acquired new transponders, which made it possible for them to raise the
number of channels on DTH in one go to over 150. Much more than any cable
operator was able to offer.

Tata Sky also changed the rules. Unlike Dish, they started concentrating on the
big metros and cities, where it saw a market was waiting to be tapped, of
consumers who wanted quality viewing and, of course, more choices. They took
away consumers disillusioned with analog cable. Says Harit Nagpal, chief
executive of Tata Sky: "We started concentrating on urban markets where
consumers were ready to pay a premium for better quality." That is why for Tata,
DTH is an urban phenomenon, with 60 per cent of the customers residing in the
top 20 cities. For Dish TV, which had to shift attention to urban India, it is about
half of their market.

As competition intensified, with more coming in (Reliance, Airtel and Sun TV

joined the party), the upfront entry price for a potential DTH subscriber also fell.
Standard set top boxes were on offer for Rs 3,999 in 2003. Prices have gone as
low as Rs 500; currently, a superior DVR box that can record programmes is on
offer for only Rs 2,500.

Also, there are many new challenges DTH now has to face. Merely offering
quality viewing is no longer enough to keep subscribers in the fold; now, that is
what even digital cable players are offering. With local cable operators which
have developed a long-term relation with the subscribers for years falling in line,
can DTH operators match it with their more formal consumer complaint systems?

Ahead
DTH operators say the technological edge will continue. "What we offer now,
cable operators will take years to catch up," says Nagpal. So, for instance, HD
suddenly is catching up and Tata Sky is offering all its new subscribers a DVR
set box now as standard at the same price. Already, two million DTH subscribers
have hooked on to HD and in cable it has just about started. Nagpal says the
differentiation will now also happen based on "packaging" for consumers. He
says Tata, for instance, offers customised packages from where consumers can
include or exclude any of the channels, according to their needs. This flexibility is
not offered by digital cable. "You will not expand the market by charging more for
a channel but by encouraging him or her to see more channels of his choice,"
says Nagpal. The next battle between DTH and digital cable is set to begin.

Q1. Trace the Sector, Industry and Segment for DTH business in India.

Q1. a) In your opinion what stage of the Industry Lifecycle does the Indian DTH
industry fall under and why?

b) What strategies would you adopt keeping in mind the lifecycle stage that you
have mentioned above?

Q2) Analyze the Indian DTH Industry using Porter’s Five Forces Model. (Rate
each of the five forces as ‘high’ , ‘medium’ or ‘low’ with reasons, and arrive at the
overall industry attractiveness. (5 marks).