 "DTH")
Ayear ago, Tata Play, the satellite television broadcaster once known as Tata Sky, became the first company in India to take the “confidential” pre-filing route for an initial public offering (IPO). Under the confidential route, the company did not need to reveal the details of the preliminary documents and could change its mind about going public after hearing back from the Securities and Exchange Board of India.
The following month, Tata Play got the green signal from the stock market regulator to proceed with its IPO. However, the issue is yet to happen. The current market buzz is that it could take a lot more time.
Meanwhile, unconfirmed reports suggest the Tata group could buy out the 20 per cent equity in Tata Play held by Temasek, the Singapore-based investment firm, at a valuation of just under $1 billion (Rs 8,350 crore at the prevailing exchange rate). That is a comedown for what was till 2019 one of India’s largest and most profitable media companies. In fact, soon after the “confidential” pre-filing for the IPO, word on the street was that Tata would seek an enterprise valuation of Rs 16,000 crore to Rs 18,000 crore in the issue.
So, what is happening to Tata Play?
“There is no problem with the firm, there is a problem with the business,” says Anuj Gandhi, founder of Plug and Play Entertainment, a media tech startup. Gandhi was earlier head of partnerships for the cable business of Reliance Jio.
Mihir Shah, vice president, Media Partners Asia, says: “The pay TV market is contracting; relative to the market, Tata Play has done well.” MPA is a research, advisory, and consulting firm.
DTH, which is short for direct-to-home broadcast through satellites, and cable together constitute the pay TV market. From more than 160 million homes four years ago, pay TV is down to about 100 million.
Tata Play did not respond to repeated requests for an interview. However, other DTH players agree that their business is
in turmoil.
Leaking viewership
“There is leakage at both ends,” says Manoj Dobhal, CEO, Dish TV.
At the top end, viewers are going to streaming platforms through broadband internet, which telecom firms Jio and Airtel are better placed to offer. At the bottom end, they are deserting pay TV for free DTH, which Prasar Bharati offers through DD Freedish.
It is not that people are not watching TV, it is just that more and more of them are watching it through means other than a DTH or cable connection. Roughly 15-25 million of the 60 million homes that have dropped off pay TV have shifted to broadband either through cable or telecom.
If you hook up your smart TV to a broadband connection, you can watch both streaming platforms as well as regular television on it. These become hybrid homes. Of the remaining, how many have gone to DD Freedish and how many have fallen off the grid is not clear. As a result, the money coming in from distribution (read cable and DTH) in the Rs 71,000 crore TV business, which is a combination of advertising and subscription, has been falling steadily. It declined from Rs 48,700 crore in 2019 to Rs 40,700 crore in 2022, according to a FICCI-EY report.
This is reflected in the declining subscribers and revenues of Dish TV, Tata Play, and Airtel Digital TV. In 2022-23, Tata Play made a loss of Rs 105 crore on revenues of Rs 4,530 crore. Dish TV’s revenues fell to Rs 1,110 crore in FY23, less than half its FY19 level, while its losses almost doubled to more than Rs 2,230 crore.
DTH, however, has fared better than cable. Going by estimates, cable has crashed from about 100 million homes in 2020 to less than 55-60 million.
Set-top box
Dishing it out
Most Americans watch Netflix through a broadband connection from Comcast, a cable company. Adam Thomas, senior principal analyst, TV and video, at UK-based research firm Omdia, points to the British BskyB, which used to be Tata Play’s sibling when it was Tata Sky.
“Like Tata, it built up a strong base of premium DTH subscribers, before diversifying to offer streaming content through its NOW service, which has more than 3 million subscribers in the UK,” says Thomas. NOW has helped push up the average revenue per user by more than 35 per cent at Sky.
Indian DTH operators have done the same thing. In 2020, Tata Play launched Binge, offering Netflix and 20 other streaming services in bundles. Airtel Xstream, which offers 18 streaming video brands, such as SonyLIV and Lionsgate, has just hit 5 million subscribers.
“Can we make it a 20 million-consumer platform” is the question being asked internally, says Adarsh Nair, chief executive officer, Airtel Digital. The mother firm sits on more than 375 million telecom subscribers and 15 million DTH users. That is Airtel Xstream’s catchment area.
“There are 40-plus SVOD (subscription video-on-demand) services. Pay TV operators like Tata Play that traditionally served as wholesalers of linear TV channels have an established direct relationship with the customers. Aggregation of OTT services is thus a natural transition to expanding average revenue per user in the longer run,” says Shah.
OTT, or over the top, is another name for streaming platforms because they run over the existing internet infrastructure.
However, the question is whether plain aggregation can increase the value of a firm or whether it will just be a medium-term revenue driver. Isn’t it critical to own the last mile?
“If Tata Play had 15 million CTVs (connected or smart TVs), investors would be interested,” says an analyst.
About 50 million homes in India have wired broadband. Half of them have smart TVs, according to estimates. A bulk of the video viewing happens on smartphones, which roughly 600 million Indians have. Why, then, bother with wired broadband and smart TVs?
The large screen, whether it is linear or smart TV, gets advertising rates that are four to six times the rates for audiences on a mobile screen. The more video rides on wired broadband, the more is the value the business can soak up from growth in streaming. At one point, Tata Play had used its sibling, Tata Broadband, to push into the last mile, but abandoned that effort. “It is hard to expand broadband because of the capex (capital expenditure),” says Nair of Airtel Digital.
It costs between Rs 5 lakh and Rs 6 lakh per km to lay fibre. The payback takes more than seven years. That is why many telecom companies use what Nair calls “the last mile cable operator model” to take internet into homes. They lay fibre up to a point and use the last-mile pipe of cable operators to deliver streaming products.
Nevertheless, wired broadband remains a challenge. Most operators point out that investing in last-mile access for broadband services makes sense in the top 1,000 cities, where the quality of the fibre is good. “In Maharashtra, the network will be great in Pune or Mumbai, but go to Latur or Nanded and the data connectivity is bad,” says an operator. Using those networks to drive smart TV-led growth in streaming does not make sense.
Dobhal of Dish TV sees growth on several fronts, such as from homes that want to upgrade from cable and the ones that still do not have a TV. Many first-time TV owners are opting for a smart or hybrid set-top box, which operators could target. “The (DTH) industry has stabilised and should recover from here onwards. There won’t be double-digit growth, but low single-digit growth is possible,” says Dobhal.
How much value it creates for investors is a question that remains in play.
