Indian Cable and Satellite Industry - A Brief Introduction
Indian Cable and Satellite Industry - A Brief Introduction
Indian Cable and Satellite Industry - A Brief Introduction
As per the statistics, DTH has a 20% market share with more than 22 million DTH subscribers. The subscriber base for DTH has grown very rapidly in past 5 years. It can be evident from the fact that Dish TV was the only player in 2005 and now there are over 10 DTH service providers that have commenced their operations in DTH industry. The shortcomings of cable operators had led to the creation of immense opportunities for DTH that served as a better alternative to high-end cable networks. The Indian cable and satellite TV (C&S) services industry has grown significantly over the last few years. As of end 2010, the total number of C&S households in India is estimated to be 101 million, having grown at a CAGR of 8 per cent over the last 5 years. During this time, even though digital TV connections, especially direct-to-home (DTH) services, have gained traction, a large proportion of the households remain connected via analog cable. Analogue cable TV services poses several problems like poor broadcast quality, capacity constraints in terms of the number of channels that can be transmitted and non-addressability of the audience. Digital technology (either through DTH or digital cable), on the other hand, offers transparency, increased capacity as well as better broadcast quality. Besides, digital addressable systems can also help enhance the scope of other services, including broadband. Hence, there is a need for the speedy implementation of digitisation, which would be favourable to most stakeholders in the business.
Market is valued at INR 15 bn in 2008-09 and projected to reach INR 30 bn in 2009-10 Estimated subscriber base of 15.17mn, expected to reach 36 mn in the next 5 years Current overall share of DTH households among total TV households of India is pegged at 13%
Since a large proportion of subscribers would be unwilling to pay the upfront cost of the STB (ranging from Rs 1,500 for a basic STB to Rs 3,000 for an STB with advanced features), the funding for the same could be done in any of the following ways: By charging a fixed monthly rental for a pre-determined period. Lack of interoperability among the STBs of different operators
would ensure customer stickiness. By providing it free of cost, which is subsidised through a fund, to be contributed by the broadcasters and the MSOs. By the consumer, MSO and STB vendor entering into a tripartite lease agreement, so that the MSO is not directly impacted (as done in China, Switzerland)
Drivers:
Tata Sky (joint venture of Tata & Star TV), Digital TV (Bharti Telemedia), Dish TV (Zee group), Reliance Digital TV (Anil Dhirubhai Ambani Group) SUN Direct (Sun TV). Vediocon
Growing middle class and rising disposable income Advantage over traditional cable operators Challenges Increasing television penetration and sale of LCD monitor Price war and different package options attracting consumers Proposed sunset dates for complete migration to digital environment pushed by a year
In August 2010, TRAI proposed the migration of analog cable TV homes to digital television, in a phased manner, with complete phase-out of analog cable networks by December 2013. Subsequently, based on discussions with and recommendations from industry participants, the Information & Broadcasting (I&B) ministry has pushed the sunset date for all analog transmission across India to December 2014. This will be implemented in 4 phases as under:
Improved subscription revenues to compensate for the decline in carriage fee revenue of MSOs
Currently, in a largely analog environment, carriage fee received from broadcasters constitutes a substantial part of the revenues earned by the MSO (40-75 per cent) since LCOs retain a majority share of the subscription revenues by under-declaring subscribers. Post-digitisation, though the quantum of carriage revenue from broadcasters would reduce, it would be compensated by increased subscription revenues, owing to greater transparency. Digitisation would also result in higher proportion of primary subscribers (subscribers directly serviced by the MSO) via-a-vis secondary subscribers (subscribers connected via an LCO). Since the contribution of primary subscribers is significantly higher than that of secondary subscribers (as LCO retains the charge for FTA channels), the overall subscription revenue of an MSO would receive a fillip. Hence, as can be seen from the chart below, digitisation would result in significant increase in MSO profitability over a 4-year period.
Digitisation, however, would demand significant investments from an MSO's perspective for the upgradation of equipment as well as subsidisation of set top boxes (STB) for the consumer. Hence, there is likelihood of significant amount of consolidation within the MSO segment. Large-sized operators have already raised or are in the process of raising funds, through IPOs and other sources.These funds would primarily be utilised for 1) digitisation and 2) consolidation in the industry.
large chunk of
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Challenges: Getting a share of the cable driven market and facing the new age IPTV Trapped in TRAI content guideline Demand supply gap for transponders in a 7 player broadcast market Cap on Foreign Investments
Trends Technological Innovations Shift from price war to offering exclusive VAS Partnerships with movie distributors Combined retail of LCD and DTH Connections
Competition
Dish TV, the first company to enter is the largest player, controlling ~32.5% market share Steep competition has led to a surge in advertising spend to improve penetration
Due to growing number of players in the market, Average Revenue Per User (APRU) will decline owing to price war and discounts
TV channels are transmitted from the satellite to a small dish antenna mounted on the rooftop
DTH The Concept Functioning of DTH Ku band satellite of the subscriber's home A DTH serviceprovider has to lease Ku band transponders from the satellite The encoder convert the audio, vedio signals into the digital format and the multiplexer mixes these signals Unlike Cable TV, the broadcaster directly connect to the user
Overview Pay
TV
Subscriber
Base
Digital
CableDTHSubscribers
in
mn In
the
Indian
Pay TV
market,
DTH
penetration
is
only
17.24% (June
09),
reaching
15
mn
out
of
87
mn
paid
Cable
among
total
TV
households
of
India
is
pegged
at
13%The
market
has
private
broadcasting
Distribution
across
TV
Households
Direct,
Air
Tel
and
Videocon
and
one
Free
to
Air
operator
Doordarshan
Direct
New
entrant:
Videocon
in
May
2009
6080 Cable
HHDTH
HHHH
(%age) 60% of DTH subscribers residein rural areas and towns with a population under 1 mn and is largely dominated by freetoair Doordarshan Direct service