| The two groups involved in this huge play are, of course, Rupert Murdoch's News Corp and the Tatas. News Corp, the global media company, has been taking on cable operators across the globe. |
| The Tatas, India's diversified business house, want to move into the entertainment programme delivery business. Both have joined hands to set up an ambitious direct to home (DTH) venture. |
| The Tata-News Corp combine (the Tatas will hold 80 per cent of the project's equity while News Corp will hold the rest) is forking out some Rs 1,600 crore to put up DTH infrastructure, in all probability on the outskirts of Delhi. |
| And while no one on either side wants to talk officially, Ice World cobbled together the key elements of their strategy by talking to sources involved in the project. |
| The Tata-News Corp combine has aggressive targets: it hopes to bag over 3 million customers in 18 months, many of them from cable operators, by offering digital quality pictures and an array of premium channels, pay per view TV, the latest Hindi blockbusters and the best of Fox entertainment. |
| A senior Tata group executive also cites the interactivity that BSkyB, the Murdoch-owned satellite TV company in the UK, offers subscribers. |
| Strikingly, the News Corp-Tata combine is looking at an aggressive pricing strategy "� a monthly subscription fee of Rs 250 to Rs 400 for up to 80 channels. |
| That suggests that instead of just focusing on rich subscribers in the metropolitan cities, the venture will aim at the mass market. "The eventual plan is to cover the whole country," confirms a top Tata group executive. |
| The Tata-News Corp duo is, in fact, quite clear that it's not positioning DTH as just a niche platform but as an alternative to cable TV services. |
| Says Peter Mukerjea, CEO of Star in India: "Over the years we see DTH as a mass platform, offering quality channels at an attractive price." |
| Adds the Tata group executive: "There will be a basic offering (at the rates cable operators charge) and a premium offering. But the rate will have to be as competitive as cable." |
| If all goes well, the project will roll out either in October (if the Tatas decide to use Videsh Sanchar Nigam Ltd's uplinking facility) or in December (if the new joint venture company sets up an uplinking facility of its own). |
| News Corp, of course, has a wealth of experience in the global DTH market. It has successfully challenged big cable operators all over the world. |
| In the 1990s in the UK, it handed out digital set-top boxes free to vanquish Britain's cable operators. News Corp's BSyB, with 6.5 million subscribers, is bigger than all the UK cable companies put together. |
| And in the US, News Corp, which has acquired DirecTV with over 12 million subscribers, is threatening the dominance of Comcast, the largest US cable company. |
| In India, its DTH project directly pits it against cable operators and multi-system operators (MSOs). That should send a chill through their spines at a time when more than one telecom behemoth is eyeing the business of delivering content to Indian homes through a single pipe. |
| Still, News Corp and its Indian partner will face a host of challenges. They will have to face competition from the Zee group, which has already launched its platform and controls content too. |
| Siticable boss Jawahar Goel claims that he already has one lakh subscribers for the DTH platform, launched last October, though he is behind his target of a million subscribers by October-end this year. |
| That is why Goel is investing another Rs 200 crore to upgrade his DTH infrastructure. He wants to double the number of channels he can offer subscribers from 48 to 96 by July. |
| Strikingly too, Goel is doing a strategy somersault "� he now wants to offer DTH services in the metropolitan cities too, even if this means competing with cable operators (Siticable is also a large MSO). |
| Earlier, Siticable had declared that it would offer DTH in the hinterland and in rural India. Says Goel: "At the moment we are offering our service in areas where there is no cable at all. But with the upgradation, we will get into urban markets also." |
| Several others like the state-owned Doordarshan and the Hindujas have announced that they will launch DTH services, but their plans could take time to materialise. |
| Whether all of them will survive, of course, will depend on the size of India's DTH market. Estimates of this vary. Star's Mukherjea says that it should be about a third of the existing 40 million cable home market, or about 13 million. That is because he sees many cable homes switching to DTH. |
| Goel is more cautious: he thinks that the number of subscribers to DTH services will be around 5 million in the next two to three years, with a majority of them coming from cable connection-starved areas. Goel's reason: India has 90 million TV sets and only 40 million cable homes. So over 50 million homes in rural areas and so on don't have any cable. |
| The Zee group has been banking on its relatively low DTH entry costs for subscribers. Goel says that the upfront cost of entry for a subscriber is Rs 4,800, including the Rs 3,200 for a set-top box. |
| Says Goel: "That is by far the cheapest in the world." And if the conditional access system (CAS) is implemented, the subscriber's DTH entry cost will be even more attractive because he will in any case have to pay a similar amount for a CAS box (Rs 2,500 to 3,000). |
| Yet entry costs are only one element of the DTH game. The others are the monthly subscription rates and the content offered to encourage subscribers to cable services to switch to DTH. |
| The challenge is to offer them more channels than what they get on cable and at prices that are not hugely above cable subscription rates. |
| The Zee group has been facing serious content problems. It has not been able to bring Star and Sony on its DTH platform. |
| So while its monthly subscription is only Rs 110 (for free-to-air channels), it offers fewer channels than cable operators do. Admits Goel: "It is a serious problem. We hope it will get resolved quickly." |
| The Tata-Star combine is looking at several options. One is to price a basic bouquet of 50 channels plus some pay channels in English and Hindi at Rs 250. But the basic bouquet will not contain either sports (Star-ESPN) or cinema channels (like Star Movies). |
| The other alternative is to offer various bouquets of basic channels catering to different regions. So in south India, for example, the 50 channels will also include popular regional channels which will not be available in north India. |
| The premium offering would cost Rs 400 a month for 80 channels. These could include Star and HBO movie premium channels, a lifestyle channel, two specialised health channels, Fox News and a premium Hindi channel (which will show new pay movies 180 days after they have been released in movie theatres). |
| Says a source: "There is a large market which wants to see the latest movie in the comfort of home. And it makes sense for producers too as they recover their money upfront." |
| So, for instance, if a million viewers fork out Rs 100 to see a new movie, that's Rs 10 crore in the pocket "� equivalent to what can be earned earn from four regions in India for a good film. |
| But content as well as infrastructure costs money. Broadcasting companies will get 55 per cent of the subscription money. In the US, DTH platform owners pay 5 to 7 US cents to broadcasters per subscriber after a certain number of subscribers (around 2 lakh) are roped in. |
| Worse, the government takes away 10 per cent of the subscription as its revenue share. So for DTH operators, the gestation period to make profits can be pretty long. |
| Says a senior executive who is involved in the Tata-Star project: "Our business plan envisages break even after seven and a half years." But Zee is more optimistic: it expects to break even once it has 2 lakh subscribers. |
| These are not the only challenges Star and the Tatas will confront. The government's DTH policy hints that platform owners have to use the Indian Space Research Organisation's INSAT series satellites. |
| But the current satellites are not powerful enough. So the dish antenna on the ground has to be larger than 60 cm, something that will inconvenience DTH subscribers. |
| One possible solution is for ISRO to hire more powerful satellites and then resell transponders to DTH operators at a premium till the INSAT 4B, which can cater to the needs of DTH platform operators, goes up into the skies. |
| The Tatas and Star will, unquestionably, overcome such problems. Though DTH is a big bucks game, the prize is worth fighting for: direct access to the subscriber, who is now in the grip of the cablewallah. |
| Tata-Star versus Zee: how they stack up Zee
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Tata-Star *
* The Tata-Star rates and plans are only being discussed "� they could change dramatically. |
DTH isn't expensive in the US
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