DTH television service operators and television makers are banking on HD offerings to improve margins.
The season of sporting events, kicked off by the FIFA World Cup last year, and continuing with the ICC World Cup and Indian Premier League (IPL), has brought a spring in the steps of fans and brands alike. While one of the sportswear companies named the season its ‘champagne year’ because of its marketing scope, stakeholders in India’s home entertainment have found it the right time to go to town with “high definition” (HD).
The noise around HD options by both direct-to-home (DTH) players and TV manufacturers has reached a crescendo and is likely to continue with the upcoming IPL. While DTH players and television manufacturers are putting their weight behind sporting events shot in HD, production houses and channels are preparing for an HD environment to gather a critical mass.
What’s the hullabaloo all about? In layman’s language, HD refers to an increase in display or visual resolution and therefore more detailed images. The current standard definition videos have around 400,000 pixels. In HD, you get about five times more. More pixels per square inch of screen equal better image quality. And why now? Simply because the players in the game have a great hook: cricket.
HD-viewing will have to start with large events that can be shot with fewer production equipments before full-fledged HD production picks up. “HD in DTH came into the market with the 2010 FIFA World Cup. Till more channels come into the fray, HD will primarily work in value-added services (VAS) and sporting events,” says Tata Sky Chief Marketing Officer Vikram Mehra. Ernst & Young Media and Entertainment Practice Partner Ashok Rajgopal seconds that argument: “Initially, HD content will be large format events such as sporting tournaments, music concerts and international content shown by English-language channels.” How big is the market? Television manufacturers are expecting no less than 35-45 per cent of their annual sales of flat-panel TVs during the World Cup and IPL season this year. Of the 3.2 million flat panel TVs sold in India last year, full-HD TVs (1080p) account for 15-20 per cent while the rest are HD-ready (1080i/720p) and do not offer as great a viewing experience as the former.
The sports season this year is expected to tip the balance towards full-HD TV sets which would, by the year-end, account for 30 per cent for the industry sales. Of course, the buyer pays a premium for a better viewing experience; but expect a fall in prices as players vie for a critical mass. Sony India Senior General Manager (Sales) Sunil Nayyar points out, “We have already brought down the premium on our televisions.” While Sony cut prices by 15 per cent, Panasonic slashed its price tags by 3 per cent.
This fall in TV prices is music to the ears of DTH players. Dish TV COO Salil Kapoor says, “If the sales of HD TVs pick up there will be a ready base for us to push our HD services.” Some have been quick to tie up with TV manufacturers to push HD set-top boxes (STBs) during this season of cricket, apart from maintaining their own steady stream of advertising. Dish TV has tied up with Samsung, Airtel Digital TV with Sony (for Bravia) and Videocon d2h with Philips for either free or subsidised STBs. Sony’s Nayyar says, “Pairing our HD TVs with Airtel DTH helped because it conveyed the whole HD concept and package to the consumer rather than simply putting standalone components before them.”
Defining the future
The numbers are still very small. About 15-20 per cent of new subscribers of DTH services in the metros are opting for HD STBs. The numbers are almost identical for HD flat panel TV sales. The industry is actually betting on the future. Samsung India Deputy MD Ravinder Zutshi says, “The demand for HD TVs has been going up because consumers want to be ready for the future when buying a new TV. HD will become the standard in the days to come and consumers don’t like to change/upgrade big-ticket items so often.”
From the looks of it, being future-ready is the crux of the matter - both for marketers and for consumers. Tata Sky’s Mehra says, “We are future-proofing ourselves by offering HD services such as HD DVR (digital video recorder) and pay-per-view.” Apart from Tata Sky, Reliance Big Digital TV and Videocon d2h too have introduced HD DVRs. Experts believe HD in tandem with DVR will help grow the more profitable VAS services for Indian DTH players such as video-on-demand (which requires a two-way communicative set-top box).
If hardware manufacturers are making a beeline for HD devices, can TV channels and software producers be far behind?
Industry observers point out that Star has no less than five HD channels lined up for launch. A serial titled Dor on Star Plus is being produced in HD by UTV Television. Its distribution arm, Star Den, already sells National Geographic HD to platforms such as DTH. The other HD channels and channels with HD feeds include some sports content on ESPN Star Sports (distributed by ESS), Discovery HD (distributed by OneAlliance or MSM Discovery) and Movies Now. Bharti Airtel Digital TV Director and CEO Ajai Puri says, “There will be a HD-pull with more content generated in the format. We are expecting four/five channels in the next couple of weeks to stream in HD. Most of these will be English language channels in segments such as music and movies.”
For now, Airtel has two HD channels, while others have anywhere between four and five HD channels. Dish TV has a repertoire of 30 HD channels across genres which includes upscaled channels (which are re-compressed from content shot in standard definition to high definition and is 1080i) and true HD channels (which contain programming shot in HD and is 1080p). Dish TV’s Kapoor says, “HD has to cover different genres to get consumers to try the format.” However, experts point out that upscaled channels lag true HD channels in viewing quality. Ernst & Young’s Ashok Rajgopal says, “A few channels are looking at HD as a format for the future. So, even if the production cost does not get absorbed by consumer demand yet, three years down the line the channels will not be caught off-guard when the demand goes up. By upgrading the infrastructure now, they can still get high-end viewers to compensate partly for the spends.”
ARPU lift
DTH player Tata Sky has been lining up recent Hindi movies shot in HD — such as Guzaarish, Dabangg and now Tees Maar Khan — to create viewer pull. Which also means Tata Sky will not expect a premium for HD content. Mehra says, “We will be offering pay per view in HD. But we won’t charge more for HD content because the consumer would have already bought an HD STB. So, the onus is on us to provide him with content that he can watch.” Opting for HD STBs or HD DVR STBs will set consumers back by more than Rs 2,000-3,000, compared to Rs 1,100-1,500 for standard definition devices.
The extra money shelled out by consumers is expected to improve loyalty to the product, apart from helping marketers maintain their margins. Airtel Digital TV’s Puri says, “HD service makes for a better business model for us. The willingness of the consumer to stick with our services increases because they would have spent more for these services to begin with.” Star Den CEO Gurjeev Singh Kapoor adds, “HD services will help DTH players increase the average revenue per user because the higher-end of the market will subscribe to it. It might change with cable operators offering HD but that will take another year and a half at least.”
The pricing will dictate which channels will turn HD first. KPMG Executive Director (media & entertainment) Jehil Thakkar says, “HD viewing will have to transcend the affordability issue to bring in more volumes.” For now, Thakkar points out, it will remain another new technology for the early adopters to try out. Since early adopters are likely to be from the higher end of the market with a taste for niche channels, HD programming is first seen in these. “Sports, infotainment content have often led the way in HD in most countries. Once, more audiences prefer HD-viewing, general entertainment channels will jump onto the bandwagon,” says Thakkar.
Money down HD
The spanner in the producer’s works could well be the production paraphernalia. UTV Television CEO Santosh Nair says, “The primary cost incurred in HD production is the procurement of HD cameras. Buying HD cameras would set a producer back by Rs 24-27 lakh, while standard definition cameras cost Rs 12-14 lakh. Most Indian producers are renting HD cameras at Rs 1.9 - 2.25 lakh per month. Compare that to the rent of standard definition cameras that come for Rs 1.4 lakh.”
UTV Television is producing the Hindi serial Dor for Star Plus and a Marathi serial for ETV Marathi in the HD format. Nair says delivery platforms such as cable and DTH should first be on HD to encourage the shift among producers. “Only then will producers buy HD equipment rather than rent them on an ad hoc basis. Otherwise, converting HD content back to standard definition is cumbersome and costly,” Nair adds. KPMG’s Thakkar says production costs of infotainment programmes shot in HD is 2.5-3 times higher than standard definition.
The production costs are often passed on to the platform — in this case to the DTH players. While most deals between channel distributors and platforms are kept under wraps, a la carte rates published at the behest of the Telecom Regulatory Authority of India shows that tariffs for HD channels could be three to five times higher than their standard definition cousins. For example, Discovery, as distributed by OneAlliance, is priced at Rs 8.03 while Discovery HD is priced at Rs 25. For its part, National Geographic is priced at Rs 3.08 and its HD version Rs 16 per month per user.
Tariffs on transmission of HD feeds on channels have not been fixed by the telecom regulator because it is felt that viewers who can afford HD telecasts on expensive TVs don’t need such protection. A Telecom Disputes Settlement and Appellate Tribunal (TDSAT) bench ruled recently, “Televisions on HD feeds are watched by those who can afford to purchase specialised type of set-top boxes or a very costly TV set. They cannot prima facie be said to be falling within the category of viewers who require protection.” The ruling related to a plea by DTH operator Sun Direct TV challenging Trai for not fixing the tariff on HD feed.
As a result, DTH operators have to negotiate hard with channels for events such as cricket or football matches and live concerts. However, DTH players score on negotiations with distributors, opting for a minimum guarantee fee (a fixed price to channel distributors, over and above which revenues usually go to the DTH player’s coffers) to cushion content costs.
The main trade-off on HD transmission for DTH players is the space on its transponders that HD channels take up. True HD channels occupy three times the space of regular channels, while upscaled versions take up 1.5 times the space. So, for the cost of three standard definition channels, DTH players can beam one HD channel to their audience. Upscaling of regular channels is done at the DTH player’s backend without any changes to the main feed of the channels. For older players such as Tata Sky and Dish TV, there is an added step — that of changing STBs that run on a lower compression of content in MPEG2 to MPEG4 that accept high compression content for HD channels. Vivek Couto, founder of Media Partners Asia, a Hong Kong-based media research agency, says, “There will be more margins in DVR and HD services as seen in the US and UK than value-added services such as pay-per-view for DTH players.”
KPMG’s Thakkar gives the industry four-five years more to make HD the new normal. With storage of entertainment content gradually moving online, the compatibility of HD devices with the internet will also play a role in the future. In a 2010 report, Nielsen had found that while 56 per cent of US households had an HD TV, more than 80 per cent of the viewing remained a standard definition experience because of the lack of HD content or an HD TV. However, India might leapfrog this trend too, given that even mass content providers such as general entertainment channels and Bollywood studios are investing in HD content.
