In the second of our viewpoints, indiantelevision.com brings you an analysis of how a DTH proposition should be approached in the Indian market. The analysis is by Anjan Sur, a strategic business analyst for the Zee Convergence Group, Bangalore

Over the last three years, the direct-to-home (DTH) satellite industry has come on strongly worldwide. It has grown from a niche delivery mechanism into a mainstream business. The spread of subscription-based DTH satellite TV promises to enhance choices for many households in developing countries.

With the Government throwing open the DTH sector in the country,a handful of players have come up with grandiose plans to enter the market. Given the stiff level of competition this premium services will face from the existing multi-channel cable network, possible entrants need to clearly grasp a few of the winning rules of the game.

HOW PLAYERS CAN MAKE MONEY
A DTH offer comprises six elements.

• Content: The movies,news channels,sporting events,and/or general entertainment features that constitute an offer to consumers.
• Space: Ownership or access to sufficient transponders in the right orbital slot to broadcast an offer to a specific area.
• Ground: The ability to distribute, install and service dishes and set-top boxes(otherwise known as customer premises equipment, or CPE), combined with access to relevant technology and manufacturing capabilities.
• Subscriber management: Ability to acquire and deactivate subscribers,bill and collect from them, activate pay-per-view movies and perform customer service.
• Financing: The provision of credit to customer seeking to buy or lease CPE.
• Government relation: Ability to navigate government procedures and regulations to obtain permits and so on.

So diverse are these requirements,that no existing player in any market will be able to fulfill all of them on its own. This, the industry will be populated by consortia and it is unlikely that more than one or two DTH consortia will be able to achieve break-even.

STRATEGIC AND SUCCESS FACTORS

Exploit Bottlenecks: In this market,content and transponder capacity are scarce and controlled by a few players.

With content, access to unique local language material is critical. In a market like India,all a DTH player may need to do is repackage existing channels that are not universally available. In sports, some players have won an advantage through long-term rights purchases. Broadcasting rights to cricket in India, for example,belongs to ESPN for the next five years. It also controls the right to football for West Bengal(the most popular league) for ten years.

The second obvious bottleneck is in transponder capacity. A modest DTH offering is likely to require a minimum of 10 to 15 transponders-almost a dedicated satellite. The number of satellite that can broadcast to a particular region is limited by physics.

Move First: In the DTH industry, a credible and well managed first-mover service has a tremendous advantage over others. In India, a first mover may effectively shut out competition.

Exploit Market Niche: In some markets, the segment of consumers who desire highly specific content may be large enough to form the core subscribership of a DTH service. An example of this could be again cricket in our country.

Any DTH consortium must decide how it will deal with a number of strategic choices that will determine its success:

• Build an appropriate content offer: This is the single most crucial choice a DTH company will make. In a remote town with no access to television, for example,even a DTH bouquet of just two channels might seem attractive.Transponder costs are also a factor in an appropriate content offer. It is the bouquet size that determine how many transponders are needed,creating a tradeoff between the cost of transponders and the richness of the offering.
• Leverage killer content: A subscription service could use its rights more effectively. It might secure the exclusive right to broadcast a sporting event live, even if it is shown on free TV later.
• Offer superior services: Cable companies are frequently criticized for installation delays, billing errors and surly staff and the nature of cable plant makes signals prone to disruption. Staff and customer service issues relating to CPE installation and maintenance may yield a fine of differentiation above and beyond picture quality.
  

Where to Place bets
Another strategic choice consortia must make is which markets to make bets in. A few rules of the thumb are:

• Number of TV households: the number of TV households and its rate of growth determines how easy it will be to break even and how quickly, if at all, a developing market will become attractive.
• TV advertising and its growth: Ad revenue are also available to a DTH service provider, so the existence of a robust or growing ad market is important.
• Technical barriers to access TV: Even if DTH offers are likely to be thin on the ground,it is possible for a company to own a piece of the chain that links a service to subscribers.Until recently, Sky had a monopoly on the UK encryption standard, Videocrypt and could effectively dictate the terms of DTH competition, This was because it had a large installed base of set-top boxes using this standard.
• Ownership of key content: The availability of sports and film rights is a crucial determinant of market attractiveness. In India, such rights are divided among many separate players. In such a case, no rights owner is likely to be strong enough to play kingmaker.
• Position in a market: The most important asset is arguably an ability to play a unique role in the DTH value chain. This advantage may reside in business that have little or no obvious connection with DTH. A company that has pioneered a business offering credit for consumer durables in a developing country, for instance, might be well placed to supply finance to purchasers of CPE.

CONCLUSION
A few things are assured in the DTH industry even in the face of paradigm shifts. First, the value of transponders is likely to fall as compression allows more and more content to go through the same satellite, and as more satellite are launched. Second, as bandwidth explodes, so will demand for content. Obscure sports and the like will become more valuable;conversely, much of the content that is currently valuable will face downward pricing pressure. Niche content providers will emerge.

The industry is likely to be characterized first by a period of fragmentation and then by an increasing concentration of global consortia as unprofitable participants fold. What is clearer than ever is that satellite TV is here to stay and will play role in bringing television to mass around the world.


The author can be contacted at anjansur@hotmail.com. The views expressed in this article are his own and are not to be attributed to either Zee Television or Indian Television Dot Com



See more DTH items