afaqs!

GECs run the show for DTH providers

By Tarana Khan , afaqs!, New Delhi | In Media Publishing | March 10, 2009
The top three GECs continue to drive numbers and monies for the DTH players

Until a few years ago, the sole direct to home (DTH) player, Dish TV, was fighting a tough scenario. STAR Plus and Sony, the leaders in the general entertainment channel (GEC) category, had denied content to Dish TV. DTH was a new service competing with the decade-old and well established cable distribution system. The consumers were reluctant to subscribe to the service due to the absence of these two channels in the bouquet offered by Dish TV.

A High court ruling, which said that no broadcaster could deny content to any distributor, came as a relief for the DTH service provider .

& #BANNER1 & #Since then, DTH services have grown rapidly. In the last few years, newer players have entered the market, and today the private operators claim about 10 million households as subscribers. Another 5 million or more - mostly in small towns and villages - are estimated to be with the state owned DD Direct+.

However, the top three GECs - STAR Plus, Colors and Zee TV - continue to be important for the DTH players when it comes to designing packages. Besides, the GECs, the other important content for the DTH players are sports channels. In fact, all DTH players are using these channels strategically in their packages to lure more consumers and earn more revenue.

Most of the DTH service providers do not include all of the top three GECs in the basic packages, except for Airtel digital TV, which till recently sold its basic package for Rs 400, much higher than the entry package of the other DTH players. Now, Airtel too has joined the low cost bandwagon and is selling a regional pack in which the monthly subscription is Rs 99. However, this pack only includes Star Plus among the top three GECs.

For instance, Dish TV's basic package starts at Rs 99 and includes Zee TV. To have access to Colors, one has to take the package costing Rs 160, and for STAR Plus, the package costs Rs 220.

Similarly, for Tata Sky, the basic package, which has STAR Plus, costs Rs 99 but one has to pay Rs 200 for the package containing Zee TV. Curiously, Colors is listed as a lifestyle channel with this operator and is available as an add-on lifestyle package at an additional cost of Rs 45.

DTH: What it costs the consumer
DishtvTata SkyBig TVSun DirectAirtel digital TV
Connection + STB16901499169012501750
Base Pack9912598299 (4 months)99
Pack with STAR Plus, Colors, Zee TV220260 (215+45)190499 (5 months)400
(All figures in Indian rupees) All operators charge taxes extra, except Tata Sky
To get the top three GECs - STAR Plus, Colors and Zee TV, a subscriber has to pay Rs 190 on Big TV, which is the lowest. This is followed by Rs 220 on Dish TV and Rs 245 on Tata Sky.

The pricing strategy of most DTH players is to keep the entry cost low and charge higher for premium services, much like the cellular service providers, where each player is fighting to get a lion's share of the market.

The DTH players need to keep the entry cost low as they are competing with the low priced analog cable distribution system. "However, in such a scenario, the average revenue per user (ARPU) is low, which affects the overall revenue of the company and profit margins of the DTH players," says Jehil Thakkar, executive director and head, media and entertainment, KPMG.

In 2008, DTH companies declared a loss of Rs 2,000 crore and are expecting double that figure in losses this year.

Now, to increase the average revenue per user, DTH players need to keep one of the top three GECs out of the basic package and include it in a higher priced premium package.

Another senior media observer says, "The market scenario has changed dramatically in the last few years. When Dish TV was launched, STAR Plus was at its peak and commanded more than 60 per cent of GEC viewership. Sony added another 20 per cent. Together, these two channels were a must have for subscribers."

"However, in today's scenario, the viewership of GECs has fragmented and even the market leader doesn't hold more than 25 per cent share of the market. So, even if one of the top three channels are dropped from the basic package, the consumer doesn't feel the difference."

Consumers have a wider choice of channels now and no broadcaster can influence the distribution chain beyond a point.

The DTH players, however, claim that simple commercial sense rules their pricing strategy. As Anjali Malhotra Nanda, vice-president, marketing, Dish TV, says, "We are forced to slot GECs and sports channels on higher packs as these are more expensive and the commercials do not support them to be carried in a lower value pack."

According to the rates provided by distribution companies, the STAR bouquet of 18 channels is available to DTH operators at Rs 48 per subscriber per month. The MSM (formerly Sony Entertainment) bouquet of five channels is available for Rs 29. This does not include Colors, which is priced at Rs 10. TDSAT (Telecom Disputes Settlement and Appellate Tribunal) has issued an order which directs broadcasters to offer their channels to DTH operators at half the prices offered by them to cable companies in non-CAS areas.

However, other DTH players say that it's not always price and the consumers takes the final call. Vikram Mehra, chief marketing officer, Tata Sky, says, "The Tata Sky packages are designed on the basis of internal research findings which indicate the demand and popularity of any channel in the region."

Deepak Srivastava, chief executive officer, Airtel digital TV, concurs, "The customer is actually very discerning and chooses the plan which delivers high value."