It is a question being asked everywhere. What will happen to the direct-to-home (DTH) market now that Reliance’s BIG TV has come in? Will everyone else get annihilated, will consumers flee to BIG?
Nothing of that sort is going to happen.
The entry of Reliance, the fourth private player in the Indian DTH space, or that of Bharti Airtel later this year, will not change things. It is the existence of all six DTH operators — private and government-owned — at the same time, for at least five years, that will change forever the structure of the Indian television broadcasting industry. As they cut prices, install set-top boxes in homes and sell TV signals like toilet soaps, DTH operators are ushering in pay television in the truest sense of the word in India. That is good news for the Rs 21,000-odd crore television broadcasting business.
The facts are old. According to TAM Media Research, India has 115 million TV homes, of which 72 million use cable to buy their satellite television signals. The rest depend on state-owned Doordarshan’s free terrestrial signals — either because they cannot afford cable TV or because it can’t reach them. Since very few of the 72 million homes that buy their TV signals are metered with a set-top box, subscription revenues have always been a problem. Broadcasters continue to claim higher viewership and reach than they might actually have and multi-system operators or signal wholesalers (MSOs) and cable operators (retailers) continue to underdeclare their reach. The result is revenue leakages — only 20-odd per cent of the Rs 13,000 crore collected as subscription revenues comes back to broadcasters. In mature markets, this figure is closer to 70 per cent.
This non-metered existence creates another complication. A digital set-top box enhances the ability of a TV set to receive channels. Its absence has meant a choke on the cable pipe. Against a capacity of 106, more than 160 channels battle to be on our TV screens every day. Add to this hundreds of local cable channels. This had led to a charge (called carriage fee) of anywhere between Rs 15-30 crore a year to put a new channel on air. Then there is a placement fee. That means an extra charge to place say 9X before a Zee TV. This hits advertising revenues, the bulwark of the business, because viewership figures could fall when a channel gets shifted or dropped.
The solution is a meter or set-top box in every home. The box could come from anyone who sells TV signals — a cable, telecom (IPTV), DTH or terrestrial operator. What matters is that these 72 million homes and the ones that get added are metered. As luck would have it, DTH operators are the first ones to have successfully sold signals through a set-top box on a large scale. Though cable started offering set-top boxes long before DTH, it hasn’t been as successful. There are only 1.13 million homes that have digital cable against 14 million DTH homes.
Whether it is BIG TV, Tata-Sky, Sun TV or any other player, their first few years will be spent simply correcting a historic wrong or a structural anomaly in the Indian market. They will be busy converting the Rs 13,000 crore collected on the ground into real revenues for everyone. It is exactly what computerised ticket sales at multiplexes and digital theatres have done to the film business — plugged cash leakages that have plagued the industry for decades. Much of the growth you see in the film industry is simply coming from collecting a higher proportion of the revenues that were lost till a few years back. The fact that DTH operators are willing to burn capital (about a billion dollars in piled up losses so far) and compete at cable’s prices will force cable to speed up. This in turn will hasten the correction.
Will DTH make money? Not immediately. When a company hits 10-15 million subscribers, is when its ability to negotiate a better share from broadcasters increases. That is also when it could do its own channel or programming (a la HBO) and raise subscription fees. Those numbers are at least five years away. And a DTH-only series, like Sex and the City (a cable-only series) is out; exclusive content is not allowed on DTH currently.
So the revolution right now is a rather quiet one of steadily unlocking the real value in the business. The earth shattering will be limited to the adverts.