DTH: Service At Your Rooftops

The only constant in today’s media industry is change. Given the growth and

significance of this industry in the global economy, this change puts industry

players in the permanent position of assessing new products, services and

enabling technologies. Customers worldwide have become extremely choosy about

what they want. It has also become a challenge for media players to not just

meet such demands but also constantly innovate to stay alive in an extremely

competitive environment. The likelihood of investing in a white elephant or

"missing the train" of a successful product opportunity, is surely as

great as identifying the right product at the right time. Direct to Home (DTH)

broadcasting has been one such area of high investment with the dual purpose of

effecting good revenue in the long run and providing top class services as well.

DTH TV distribution is one in which a large number of channels are digitally

compressed, encrypted and beamed from very high power satelites. The programs

can be directly transmitted to homes, using very small dish antennae and card

operated Integrated Receiver Decoders (IRDS). It normally provides a basic

service consisting of a certain number of channels at a particular cost. DTH can

provide a lot of other high revenue-generating, value-added services like

Internet access, video conferencing, video-on-demand, home

security/shopping/banking, e-mail, pay per view, near video-on-demand and data

broadcasts.

The market dynamics of DTH could be broadly classified as broadcast policies

and regulations, market potential, major players involved in DTH consortia,

cost, revenue, value-added services, evolving technologies and superior content

and connectivity. The DTH end-to-end service value chain is complex,

technologically sophisticated and includes almost all aspects of broadcasting,

such as satellite ownership/bulk leasing of transponders, large-scale

broadcasting studios/up-link earth-station, acquisition/production/arrangement

of many programing channels, user-friendly creation of an Electronic Program

Guide, sourcing/distribution/technical support of subscribers’ reception

equipment, elaborate marketing of DTH services, comprehensive subscription

billing systems and revenue collection, etc. These diverse requirements coupled

with considerable financial risks involved, means that a consortium of companies

dealing with these services is the best likely solution for this venture.

Certain business projections have been drawn for DTH service providers in

India based on three parameters namely, subscriber base, project cost, and

revenue. These parameters have been projected for the total market size for DTH

in India.

Subscriber Estimates

Since cable has penetrated the Indian market in a big way with roughly 35

million C&S homes, a parallel can be drawn with the US market pattern where

cable was the first mover, present now in approximately 160 million households

compared to a mere 10 million DTH homes. Due to the critical penetration

achieved by CATV in India, it is imperative that in its first few years of

operations, DTH stay focused on a niche market. This niche would basically

constitute the rich segment from urban as well as rural areas due to the primary

reason of high initial costs for DTH and the associated psychology of people.

The second reason could be the better service and value-added services (VAS)

like pay per view (PPV), NVOD and Internet being offered on DTH. Two approaches

have been drawn for the subscriber projections. One is based on the disposable

income of the population and the second on the cannibalization of CATV, multiple

TV households and VAS, the projections from the two being almost the same,

almost.

Project Cost Estimates

Broad business assumptions here are that, a DTH platform would carry about 70

odd channels with additional services like PPV, NVOD and Internet. The principal

costs would involve programing costs, satelite transponder costs, conditional

access systems, customer premise equipment costs and marketing costs associated

with DTH. It is found that the cost of financing the customer premises equipment

is massive and is therefore, viable to finance the set top box (STB) and dish

antennae, the cost of which can be recovered from the customers on a monthly

basis. But, it is assumed that the customer will pay for the installation

charges. It is also interesting to note that financing the STB and dish antennae

accounts for more than 75% of the project cost and is extremely price-sensitive.

Therefore, a slight change in the equipment costs would significantly change the

project cost. Drawing a parallel with cable costs here, it is seen that,

initially, cable connections were costly. In fact, one had to pay deposits, too.

However, with the popularity of cable, the costs reduced drastically. The same

is expected to happen with DTH equipment whose costs are assumed to decrease by

10 percent on an annual basis.

Project Revenue Estimates

The major business assumptions here are that, since a large chunk of the

project cost deals with financing the equipment for DTH, the earnings from

recovering this cost from subscribers will form the major component of revenues

earned. Therefore, a decrease in the cost of equipment would actually help in

faster recovery of the expenses incurred. The other broad channels of revenue

are base subscription, bouquet subscription, and NVOD, PPV and Internet usage.

Opportunities for DTH in India look great. There exists a tremendous

potential for direct -to-home broadcast in this market and it is projected that

by 2005, there would be around 2.5 million DTH subscribers in India. This figure

is likely to increase due to the increase in TV and cable households and also

the growing multiple TV households, which would form a large percentage of the

total subscriber base. Since India’s population crossed the one billion mark,

it is no surprise that satellite operators and programmers worldwide have set

their sights on the world’s largest open market for DTH satellite TV services.

The growing popularity of TV as a communication medium has resulted in the TV

media sectors undergoing a rapid transformation. Also, when DTH transmissions

start in India, the market will open for the following types of equipment –Ku-band

dish antennae and Integrated Receiver Decoders (IRD). In a couple of years with

Multipoint Microwave Distribution System and Net Television, the entire digital

domain is going to open up very fast. DTH can help in narrower targeting of

satelite-delivered services, rather than a single regional service, allowing

programing to be more directly geared to the interests, language and culture of

the particular audience, as well as providing a vehicle that integrates and

offers locally-produced and local language material.

Drawing a Parallel with the American DTH market, certain conclusions are

drawn. Cable has been an early mover in India like the US and with DTH

operations starting as early as 1992, the American DTH market is 10 million

homes big today, as compared to 160 million cable homes. Similarly, with cable

penetrating 35 million homes in India, given the time and resources, the DTH

market size would stand at approximately 5 million homes by 2007, assuming of

course that operations start by 2002. The American TV household is roughly about

90 percent of the total US population with a figure of 2.24 TV’s per

household. This number has grown tremendously over the last 15 years and is

fast-approaching saturation. This is boom time however, for the Indian TV market

with numbers expected to touch 100 million from the present figure of 70

million, in another six years. This, combined with growing multiple TV

households, shall triple the DTH subscriber base in 2004, from the 0.5 million

expected in 2002 (starting year of operation). Finally, the two main operators

for DTH in the US, DirecTV and Echostar, account for 95 percent of the total DTH

subscriber base there and have proved to have been extremely profitable. A

similar picture is seen for the Indian scenario where not more than two DTH

service providers can co-exist profitably.

It has now been over a decade since DTH satellite broadcasting began to show

promise as a new technology capable of widespread distribution of programs and

services. In those early days, the prime concern of many governments was that

the spread of DTH satellite would result in mass-Americanization and a decline

in the cultural values and ideas of their people. The solution that has to be

found is to maintain some form of national control, ranging from outright ban on

ownership of satellite signal-receiving equipment, to introducing licensing

regimes, prescribing guidelines for program content and placing limits on the

foreign ownership of broadcasting licenses or ventures. The present DTH policy

drawn addresses some of the issues which effectively strike a balance between

the economic benefits of introducing new services, consumer demands for change,

and the government’s over riding interest in maintaining control over

broadcasting. It remains to be seen how India will strike a final balance in the

structuring of its laws and regulatory scheme, to maximize the benefits of the

new technologies, while ensuring that national and public interests in the

control and content of those services, are protected.

Monideep Chattopadhyay