Price war in DTH is not healthy
The boom in the direct-to-home (DTH) services industry began when Tata Sky, a joint venture between Tata Group and News Corp, entered the market two years ago. Since its entry, Tata Sky has touched a subscriber base of three million. In between, the DTH industry, which is expected to touch a base of 40-50 million subscribers by 2015, saw the entry of players including Reliance Big TV, Bharti Airtel and Sun TV. Also, there have been major changes in the market dynamics in the form of price wars and introduction of services such as personal video recorders, customised channel packages and movies-on-demand.
Vikram Kaushik, managing director and chief executive officer, Tata Sky Ltd, on how he sees things panning out for the industry and Tata Sky.
How is the DTH industry handling the economic downturn?
The last quarter of calendar year 2008 was good and things have never looked better. With the entry of new players and one existing player taking its business national, the industry will grow fast. We also decided to change the rules of the game, focus more on technology and, hence, came out with Tata Sky Plus, which has personal video recorder.
The idea was to basically give a signal to the market that while everybody else was focusing on lowering their prices to enter the market, we wanted to continue our focus single-mindedly on technology and customer service.
Do you think the current economic conditions will bring about any change in market dynamics?
The DTH industry has descended into a price war too early in its life, which is not a good thing. It raises the cost of entry and, therefore, the business model of all the industry players is under severe strain. And now, the economic downturn with lack of funding and high cost of funding has only made things worse. I am pretty hopeful that all the players have started realising that it is not in their interest to just indulge in a price war because it is not healthy for the business and they will not be able to make it in the longer term.
We certainly believe that we must compete by trying to offer superior value and not the lowest price.
So will we see prices of DTH services going up?
Prices are already beginning to look up. The promotions, which we restarted in festival season and extended beyond it, are now being withdrawn. It is not possible to function otherwise. A set-top box costs Rs 4,000-5,000 and look at what price it is being sold.
Are interactive services a bigger stream of revenue than pay-per-view or movies-on- demand? How do you see these panning out?
We did a consumer survey which revealed that our viewer on an average spends 180 minutes in front of a television, of which 35 minutes are on the interactive platform. So, you can imagine its potential. For example, when we ran the 'red button' contest on the show, Koffee with Karan, we got 1,25,000 hits in one episode itself.
Pay-per-view, on the other hand, had a limited visibility since only old movies were available. It is only now that latest releases are becoming accessible on this platform and soon we will have several new Hollywood films too. Consumers are willing to spend for specific functions.
Several new players are claiming big subscriber base numbers already. Your comment.
We must not get carried away by subscriber base. The consumer who goes for Rs 85 package is different from the one who takes Rs 310 package. In India, cable connection is never taken out of the house. So, consumers who have pending DTH service bills sometimes go back to cable. This sort of churn is obviously higher in the segment that subscribes to a package of Rs 85. Hence, the players catering to this segment will face difficulty in getting their money despite a big subscriber base. Average revenue per user (Arpu) is what matters.
What is the Arpu for you?
We can't give you the exact number, but it is higher than other players.
Is consolidation in the industry a possibility?
India has enough potential to accommodate five major players as of now. But yes, in the long term, only two or three will survive. The current business model is sustainable, provided prices are rationalised. The amount of subsidy that the players are giving currently is not healthy.
DNA: Money: 'Price war in DTH is not healthy'
The boom in the direct-to-home (DTH) services industry began when Tata Sky, a joint venture between Tata Group and News Corp, entered the market two years ago. Since its entry, Tata Sky has touched a subscriber base of three million. In between, the DTH industry, which is expected to touch a base of 40-50 million subscribers by 2015, saw the entry of players including Reliance Big TV, Bharti Airtel and Sun TV. Also, there have been major changes in the market dynamics in the form of price wars and introduction of services such as personal video recorders, customised channel packages and movies-on-demand.
Vikram Kaushik, managing director and chief executive officer, Tata Sky Ltd, on how he sees things panning out for the industry and Tata Sky.
How is the DTH industry handling the economic downturn?
The last quarter of calendar year 2008 was good and things have never looked better. With the entry of new players and one existing player taking its business national, the industry will grow fast. We also decided to change the rules of the game, focus more on technology and, hence, came out with Tata Sky Plus, which has personal video recorder.
The idea was to basically give a signal to the market that while everybody else was focusing on lowering their prices to enter the market, we wanted to continue our focus single-mindedly on technology and customer service.
Do you think the current economic conditions will bring about any change in market dynamics?
The DTH industry has descended into a price war too early in its life, which is not a good thing. It raises the cost of entry and, therefore, the business model of all the industry players is under severe strain. And now, the economic downturn with lack of funding and high cost of funding has only made things worse. I am pretty hopeful that all the players have started realising that it is not in their interest to just indulge in a price war because it is not healthy for the business and they will not be able to make it in the longer term.
We certainly believe that we must compete by trying to offer superior value and not the lowest price.
So will we see prices of DTH services going up?
Prices are already beginning to look up. The promotions, which we restarted in festival season and extended beyond it, are now being withdrawn. It is not possible to function otherwise. A set-top box costs Rs 4,000-5,000 and look at what price it is being sold.
Are interactive services a bigger stream of revenue than pay-per-view or movies-on- demand? How do you see these panning out?
We did a consumer survey which revealed that our viewer on an average spends 180 minutes in front of a television, of which 35 minutes are on the interactive platform. So, you can imagine its potential. For example, when we ran the 'red button' contest on the show, Koffee with Karan, we got 1,25,000 hits in one episode itself.
Pay-per-view, on the other hand, had a limited visibility since only old movies were available. It is only now that latest releases are becoming accessible on this platform and soon we will have several new Hollywood films too. Consumers are willing to spend for specific functions.
Several new players are claiming big subscriber base numbers already. Your comment.
We must not get carried away by subscriber base. The consumer who goes for Rs 85 package is different from the one who takes Rs 310 package. In India, cable connection is never taken out of the house. So, consumers who have pending DTH service bills sometimes go back to cable. This sort of churn is obviously higher in the segment that subscribes to a package of Rs 85. Hence, the players catering to this segment will face difficulty in getting their money despite a big subscriber base. Average revenue per user (Arpu) is what matters.
What is the Arpu for you?
We can't give you the exact number, but it is higher than other players.
Is consolidation in the industry a possibility?
India has enough potential to accommodate five major players as of now. But yes, in the long term, only two or three will survive. The current business model is sustainable, provided prices are rationalised. The amount of subsidy that the players are giving currently is not healthy.
DNA: Money: 'Price war in DTH is not healthy'
