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
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. Says Mihir Shah, vice-president of MPA India: "The larger part of the industry is yet to generate cash flows and there is a need for capitalisation to fund the next phase of growth. With the slump in the economy, it is becoming difficult to raise funds at the desired valuations."
Yet, the introduction of DTH was not smooth at all. It was seven years before the government lifted the ban it had imposed on DTH after an aborted attempt by STAR TV to bring the service in the country. The reasons were ludicrous - a security risk, a second lead to western cultural invasion.
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.
DTH unknowingly also played a key role in helping the government to push through DAS, despite stiff resistance from hundreds of thousands of small cable operators. Under DAS, the government had set deadlines for conversion of analog to digital, which began with the four metros. This would bring transparency for multi-system operators (MSOs) and broadcasters, who'd know how many paying subscribers they actually have. Earlier, local cable operators under-reported the subscriber base so that they did not have to share the subscription fee with broadcasters and MSOs.
In 2003, the government had failed in a similar effort to implement CAS initially in four metros; cable operators killed it. That was because subscribers had no alternative. In 2012, the applecart had swung the other side. Local cable operators realised the writing was on the wall - if they did not move towards digitisation, subscribers, who now had an alternative, would move to DTH.
Yet, 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?
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.