Eyeing eyeballs

SPECIAL REPORT

Direct to home (DTH) may be fast running out of elbow room, with all the bigwigs in the fray. Dish TV, the DTH service of Subhash Chandra-promoted ASC Enterprises, India's first direct-to-home television broadcaster, had logged about 15,000 subscribers within the first two weeks of its launch on October 2, 2003.

In fact, it is targeting 1.5 million subscribers by December 2004. Not to be left out, Star TV also had ambitious plans regarding DTH, but its alliance with an Indian company to fulfil foreign investment cap guidelines threw a spanner in its plan.

The impasse did not last long as it finally formed an alliance with the mighty Tata group. 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 a whopping Rs 1,600 crore to put up the infrastructure to launch its subscription-based DTH services by December.

The battle for eyeballs just got a lot bigger. Prasar Bharti looks to burst onto the scene with a 40-channel rich free-to-air DTH service to be launched later this month. It had sent letters to 25 private channels - represented by a handful of broadcasters - inviting them on board its DTH platform.

The road to the launch was not without its bumps as Prasar Bharti kept overshooting the launch dates. Originally scheduled for March 2004, the date got shifted to April 1, 2004. However, it looks fairly certain that the services would be launched by the end of June.

The tearing hurry to launch DTH at one level indicates the loss of faith on part of broadcasters in the implementation of conditional access system (CAS).

While Prasar Bharti is viewing DTH as a low cost-option to cover rural areas currently not under its coverage, private players like Star and Zee are adopting it to sell their exclusive high-quality content to a niche audience and ensure their fair share of revenues in the absence of CAS.

With Zee and Star already having invested Rs 500-1600 crore to put up the infrastructure required for DTH, the moot question is whether the climb to break-even get tougher for the players?

What's on the platter?

DTH basically refers to the transmission over satellite of programming directly into small receiving antennas located at viewers' homes. The transmission is usually done in Ku-band to receiving dishes that can be as small as 45 cm. What is common to all three DTH offers is the standard set-top boxes along with dish antennas, costing Rs 4,000-5,800.

However, there is one difference between private players and Prasar Bharti - while Zee and Star are expected to charge a monthly rate anywhere between Rs 110 and Rs 400, Prasar Bharti's offering would be literally free to air - i.e. there would be no monthly charges once you pay for set-top box and dish.

In the present scenario, Doordarshan covers 89.7 per cent of the population and 77.7 per cent of the area. It would cost up to Rs 4,000 crore to cover the remaining 10 per cent population and 20 per cent area on C-band.

The value proposition that comes from DTH is that Ku-band transmission has been opted for as a cheaper alternative - which would mean a much lower Rs 500 crore-project across the Tenth Plan period. Also, DTH would be more accessible in remote areas where the cable's excessive length may make the system expensive or technically unacceptable.

The still-to-be-named DTH service would, initially, be offered in remote areas across eight states that are not connected either terrestrially or through cable. There have also been talks of 10,000 dish antennae to be distributed free of cost to public institutions like gram panchayats.

Analysts feel that DD's challenge would be at best nothing more than a social initiative. Thus, Prasar Bharti's free-to-air move is not really a threat to private players. The real competition will, thus, be among Zee and Star.

What's the allure?

Quite a few advantages are inherent in the system over the cable network. One plus point is higher subscriber accountability as the system eliminates the cable service provider in the distribution chain. Thus there would be no under-reporting of subscribers as is prevalent in the cable system.

This in turn would ensure greater control over the distribution chain for broadcasters unlike even the CAS environment which would result in multi-system operators (MSOs) gaining prominence.

DTH is also good news for smaller channels because digital technology allows a provider to compress between eight and 10 channels on a single transponder. So most big broadcasters are likely to be left with plenty of unutilised transponder space, which can mean an all new revenue stream.

Another plus is that 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.

Two to tango

DTH is expected to take Zee forward along with its newer platforms like animation content. "In DTH, the focal point remains the quality of the content offered. The demand for niche content is not DD's calling card and that is where players like Zee and Star would score," says a media analyst.

The niche may not just extend to watching Fox News or an exclusive channel, but also the saas-bahu serials that are the staple of most Indian households. Zee's Dish TV had undertaken a coup of sorts by bringing both Star Sports-ESPN combine on board along with Sony. Analysts say it would make more sense for both Star and Zee to license their content on each other's networks. However, analysts maintain that it would be difficult for more than two operators to carry out a successful foray in the Indian domestic scenario as it had been proven globally.

They cite the case with Asian markets like Japan and Taiwan wherein a plethora of players had led to a huge shakeout eventually, resulting in the number of players being drastically reduced.

What lies ahead

Analysts say the crucial break-even point of DTH providers depends on the number of TV households and its rate of growth, both of which are advantageous to the current players.

Considering that there are presently around 85 million TV sets, and only about 43 million cable homes, there is a large market that is waiting to be tapped for DTH services. Some analysts believe that there is a market for Zee in rural areas which are still not connected by cable television. Here, DTH services may make more sense from a customer acquisition point of view.

Analysts also say the first mover in the arena has a long head-start which would prove advantageous in achieving the break-even point. The value of transponders is likely to fall as compression allows more content to go through the same satellite, and as more satellites are launched.

Secondly, an expansion in bandwidth would also see a corresponding demand for content and niche content providers will see huge demand.

However, one reservation that industry watchers have is about the set-top box's ability to receive DTH services from multiple operators. In any case, entry cost for DTH would be similar to that of CAS as the set-top box would cost the same - between Rs 2,500 and Rs 3,000.

Given that CAS implementation still looks a long way off, DTH is one avenue that looks like a good choice for the discerning viewer and a revenues driver for broadcasters.

POSITIVES

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• DTH removes under-reporting of subscribers as is prevalent in the cable system.
• Viewers can access niche content of their liking without asking the cable operator to provide it.
• DTH would be more accessible in remote areas where the cable's excessive length may make it expensive.

NEGATIVES

•  A subscriber will opt for DTH only if he receives many more new channels that cable TV cannot offer.
• Monthly subscription rates are likely to be more than that of cable TV.
• The two major DTH platform providers - Zee and Star - have not decided to share their content yet.
• The government may not allow adult channels to come to India. The world over, DTH thrives on adult content, premium movies and sports.