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Introduction DTH Industry in India Structure of the Indian DTH industry Substitute goods/products for the products of DTH Industry Complement goods for the products of the firm Changes in substitutes and complements over time Entry Barriers in DTH industry Recent entries in the industry References

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DTH INDUSTRY IN INDIA

INTRODUCTION Direct To Home (DTH) is a distribution platform for multichannel TV programmes on Ku band (high frequency of 11.7 to 14.55 Gigahertz) by using a satellite system which transmits signals directly to subscriber premises The term predates DBS satellites and is often used in reference to services carried by lower power satellites which required larger dishes. Following are the simplified steps on how DTH works: 1. Broadcoster Sends the signals 2. The satellite receives the signals at Ku Band 3. The Dish Antenna at subscribers home receives the signals 4. The set top box decodes

DTH Industry in India In earlier days there was only one TV channel in India the Doordarshan, Channel doordarshan was owned and operated by government of India. In those era every home which had a TV set used to have its own antenna to capture the signals. The Cable Television Ordinance Law was paased in January 1995. This enabled cable operators to feed channels and later on private companies were allowed to air their own channels and this led to the explosive growth in number of TV channels and number of cable operators. The growth of TV channels & cable operators created a big industry and market opportunities. Untill few years back there were as many as 1,00,000 cable operators across India. However the services provided by cable operators were poor.The strikes, increase in tariff plan, selective broadcast and poor services were major cause of dissatisfaction among the customers. This has created an opportunity for DTH, which serves an immediate threat to the high-end cable networks.

Some of the key player in the industry are DishTV by Zee group, TataSky joint venture of Tata & Star TV, Big TV by Anil Dhirubhai Ambani Group, Digital TV by Bharati Telemedia, SUN Direct from the promoters of Sun TV.There are some other companies who are comtemplating to start their own DTH like Videocon. There is an immense opportunity for DTH in the Indian market. The opportunity in India almost 10 times that in developed countries like the US and Europe. For every channel there is a scope for broadcasting it in at least ten different languages. So every channel multiplied by ten, that is the kind of scope for DTH in the country. Structure of the Indian DTH industry The structure of the DTH industry in India can be categorized as an Oligopoly. The word Oligopoly is derived from the Greek for few (entities with the right to) sell. An oligopoly is a market form in which a market or industry is dominated by a small number of sellers (oligopolists). An oligopoly is a market dominated by a few large suppliers. The degree of market concentration is very high. Firms within an oligopoly produce branded products and there are also barriers to entry. Key characteristics of Oligopoly are following : Few larger supplier dominates the market Interdependence between firms Each firm produces branded products Significant entry barriers into the market in the long run which allows firms to make supernormal profits Each oligopolist is aware of the actions of the others.

Analysis of Indian DTH industry: Indian DTH industry is still at nascent stage. In the year 2003 DD Direct+ was launched since DD Direct+ is non commericial and free DTH service ( www.financialexpress.com& www.wkipedia.org) hence we would focous our discussion on private players in the industry. As of now DishTV, TataSky, BigTV, AirTel Digitel TV, Sun Direct are in the industry. There are some other players like Videocon, who want to join this highlu lucrative industry. Since there are only 3 major players and the market concentration is very high Indian DTH industry is oligopolistic.

DTH Industry Market Share 2008* Brand Dish TV TataSky Big TV Others (Sun Direct, AirTel Digital TV ) Promoter Zee group Tata Sons & Star TV Anil Dhirubhai Abani Group Sun by SUN TV AirTel by Bharati telemedia Market Share 53% 30% 15% 2%

Another way of confirming it is by using the index Herfindahl. The Herfindahl index, also known as Herfindahl-Hirschman Index or HHI, is a measure of the size of firms in relationship to the industry and an indicator of the amount of competition among them. HHI s defined as the sum of the squares of the market shares of 50 largest firms (or summed over all the firms if there are fewer than 50) within the industry, when the market shares are expressed as percentages; the result is proportional to the average market share, weighted by market share. The higher the HHI Index the more oligopolistic is the industry In mathematical term it is defined as following : n H = si2 i=1 Where si is the market share of firm i in the market, and n is the number of firms. In the case of Indian DTH Industry the HHI index can be computed by squaring the market share of each player and adding them i.e.
2 2 2 2 H = 53 + 30 + 15 + 2

H = 85399 Since this value of H is petty high it indicates that the market is oligopolistic. Substitute goods/products for the products of DTH Industry

Substitute goods : Refers to a good which is to some extent interchangeable with another good. In economics term it means that when the price of one good increases, demand for the other good increases. The total number of TV owning households in India is estimated at 117 million. This represents a 54% penetration of TV in Indian households. Out of this, Cable and Satellite households are 68 million. The total subscriber base of DTH has crossed 8.9 million. At times there were 1,00,000 cable operators, however due to stiff competition and the introduction of other alternatives like DTH, CAS, IPTV, Online TV the number of cable operators have come down to 60,000. DTH is a new entrant in channel broadcasting & entertainment industry. It faces direct and stiff competition from various service provider which sends TV signals to homes. Terrestrial Television: Doordarshan is the public television broadcaster of India and a division of Prasar Bharati, a public service broadcaster nominated by the Government of India. It is one of the largest broadcasting organizations in the world in terms of the infrastructure of studios and transmitters. Doordarshan is the world's largest terrestrial broadcaster with over 1400 terrestrial TV transmitters located throughout the country covering approx. 88% of India's geographical area. Doordarshan was the only player in industry providing news and entertainment. It enjoyed the monopoly and has been very successful for some time however offlate it is continuously losing interest of audience because of stiff competition from private channels. Cable TV Operators: In 1992, the government liberated its markets, opening them up to cable television. This led to astronomical growth of number of TV channels and created a huge demand of cable TV operators. The cable TV operators came in to the business and connect urban & rural home to the private channels. Cable TV operators are present in almost all cities and towns of India, they charge installation fee and monthly rental for the services provided. These operators even telecast local and regional channels. Cable TV providers also provide CAS services. CAS or conditional access system, is a digital mode of transmitting TV channels through a set-top box (STB). The transmission signals are encrypted and viewers need to buy a set-top box to receive and decrypt the signal. Cable TV operators poses a serious threat and stiff competition to DTH Industry.Infact DTH industry is trying to eat the market share of cable TV operators. Conditional Access System(CAS): Conditional Access system was introduced metro cities of India to provide the subcribber the choice channel he/she wishes to view. CAS required the subscriber to buy set-top-boxes. The implementation of CAS was focused only on the big cities of India. CAS is very much similar to DTH as far as the power to the user is concerned.

IPTV: IPTV describes a system where a digital television service is delivered using the Internet Protocol over a network infrastructure, which may include delivery by a broadband connection. IPTV is technically far superior than any other alternative. A number of other operators, including Bharat Sanchar Nigam Ltd and Reliance Communication are planning to launch IPTV in a big way. Researchers from Gartner [2007] believes that IPTV will struggle in India for following reasons Cable TV users pay almost half of what digital subscribers pay Low broadband penetration will inhibit IPTV uptake; 2007 is a critical year for pay TV, with CAS being mandated in a phased manner, and more players are moving into DTH, which is growing. IPTV will be priced at the same prie as digital cable or DTH, so no price differentiation

As the number of broadband users are increasing in urban and semi urban cities IPTV can pose serious threat to DTH player in long run. OnLine TV: The world wide web is changing lot of things, the way data & information are stored, and shared has changed dramatically. Web 2.0 offers users to watch TV programs online. There are already websites like: http://www.indiatvonline.com/ http://www.tvdekho.com/ Apart from these website TV channels are also streaming live videos of their programs. Online TV though is a niche industry as of now but with increased penetration of broadband connection, it can pose significant challenge to DTH industry. Cartel: A cartel is a formal (explicit) agreement among firms. Cartels usually occur in an oligopolistic industry, where there is a small number of sellers and usually involve homogeneous products. Cartel members may agree on such matters as price fixing, total industry output, market shares, allocation of customers, allocation of territories, bid rigging, establishment of common sales agencies, and the division of profits or combination of these. The Indian DTH industry is still in nascent state. It is in growth stage and so far no cartel has developed. Given the nature of DTH industry (high volume) there will definitely come a time when the industry will go through M&A followed by catelizing.

Complement goods for the products of the firm Complement good: Complement good is a good which is consumed with another good; its cross elasticity of demand is negative. This means that, if goods A and B were complements, more of

good A being bought would result in more of good B also being bought.This is also termed joint demand. TV sales and DTH sales: DTH & Cable industry are complimentary goods for TV Sales and vice versa. An increase in sales/market penetration of either of them lead to increased sales/market penetration of other. The slide given below illustrates the complemantary relationship between two goods. [Source : TAM Panel Expansion Jan 2007 FINAL.ppt ]

Changes in substitutes and complements over time The DTH industry is a growning industry. The substibute for this industry are following: Doordarshan DD Direct+ CableTV & CAS IPTV Online TV Changes in Doordarshan: The government of India and prasar bharti in general have realized the importance of TV channels and have improved the quality of programs and doordarshan is in the process of transforming itself as multi channel provider. Currently Doordarshan offers 19 channels in various languages. However inspite of its best effort Doordarshan is struggling to regain its old glory.

Changes in DD Direct+: DD Direct+ is free DTH service and offers 51 TV channels and 24 radio channels. DD direct+ mostly offers channels of Doordarshan. However DD Direct+ is also interested in commercializing the operations, if it happen and if DD Direct+ is aggressive than it will be a very serious threat to private DTH providers. Changes in CAS: The substitute CAS (Conditional Acces System) has changed significantly. The idea of CAS was mooted in 2001, due to a furore over charge hikes by channels and subsequently by cable operators. Poor reception of certain channels; arbitrary pricing and increase in prices; bundling of channels; poor service delivery by Cable Television Operators (CTOs); monopolies in each area; lack of regulatory framework and redress avenues were some of the issues that were to be addressed by implementation of CAS It was decided by the government that CAS would be first introduced in the four metros. It has been in place in Chennai since September 2003, where until very recently it had managed to attract very few subscribers. It has been rolled out recently in the other three metros of Delhi, Mumbai and Kolkata. Changes in IPTV: MTNL launched IPTV on 21 October year 2006 and BSNL in Kokata has been offering IPTV from August 2007, IPTV is available in all areas of Delhi as well.. IPTV can be bundled with services like Telephony, VoIP(Voice Over Internet Protocol) & IPTV and this can be a very serious threat to DTH. However the reach of IPTV is limited to metros only. Changes in Online TV: There are plenty of sites which are streaming TV programes online. The online TV offers the flexibility to the viewer to watch the program as and when they want rather than when the program is aired. As of now online TV are not threat but this can definitely pose problem for DTH in future. Changes in Complement: Television sets are complimentary good for DTH industry. Now the TV sets are coming with advanced technology. For example Plasma TV, LCD TV etc. Consumer electronics and tv manufacturers association (CETMA) television sales clocked 21 per cent growth in august this year with 4.6 lakh set sales against 3.8 lakh in the same month last year. The growth in sales of TV sets would definitely lead to higher sales of DTH. Entry Barriers in DTH industry The DTH industry is a high tech industry and it require lot of capital investment. The initial cost of setup for the company itself is very high, it requires tranponders and other high tech equipment. The following entry barriers exist in DTH industry 1. High initial setup cost of satellite, transponder and other higtech equipment : The initial cost of setup for broadcaster is hugh so this acts as a big entry barrier. 2. DTH is a lowmargin and high volume industry: DTH thogh is a lucrative business however it is a low margin and high volume industry. For a new entrant to succeed it has to ensure that it builds customer base soon other wise it will not be possible to make profit.

3. Cost of a set top boxes: The cost of setup box installed in a homes is stil very high and the cost of a set top box is a significant entry barrier. Higher number of subscriber can bring down the cost incrementaly. 4. Pricing has to be competitive versus cable: For a new entrant to be successful it is going be very difficult as they entrant will to compete with local cable operators as well as existing DTH service provider. There are already established players in the market and the price war has already started. 5. Differentiation through content: There are hundreds of TV channels in India and as per the industry reports there are close to 150+ channels waiting for approval, this take the numbers to 400 different TV channels. So providing the right content to the right consumer will also play a crtical role in success of new entrant, differentiation through content is must. 6. Customer Service: The quality of customer service will be a key differentiator. As Indian consumer are habitual of calling the cablewalah whenever there is some issue.A new entrant will face challenges in two fronts; One to ensure that it is providing better customer service than local cable operators and on the other hand it has to provide better customer service than existing DTH service provider. 7. Multicultural & Multilingual Gepgraphy: India being a multicultural,multrilingual society it is very important for the new entrant to ensure that it maintains a fine balance between the regional and nation flavour. 8. Long gestation and break even period: It takes lot of time to for a new entrant to stabilize and grow in this industry. Even achieveing the break even period is comparatively high. The Dish TV from Zee which was launched in 2003 will reach break even in 2009(6 years ) and TataSky launched in 2006 hopes to break even in 5-7 years. This long break even period is a significant barrier for new entrant. 9. High Cost of content: The cost of content is high in this industry and poses a serious challenge for the service provider. Recent entries in the industry The DTH industry in India is still at nascent stage and recently three companies have entered in the industry Big TV from ADAG(Anil Dhirubhai Ambani Group),Sun DTH by promoers of SUN TV and Digital TV from Bharati telemedia. DTH industry in India offers immense potential of growth.It is one of the fastest growing DTH market in world. Economic drivers of this decision for BIG TV by ADAG The total number of TV owning households in India is estimated at 120 million. This represents a 54% penetration of TV in Indian households. Out of this, Cable and Satellite households are 68 million. Television households are estimated to grow to 165 million in 2011, resulting in an annual compounded growth rate of 6.5% p.a. The DTH industry is currently pegged at 2.6 million subscribers.

The DTH Industry revenue is expected to grow at 80% compounded per annum over the next 5 years and will be in the range of Rs.100 billion in 2011. Due to the continued buoyancy in the Indian economy and an annual growth rate of over 9%, the country's gross domestic product is touching US$ One trillion. This, coupled with increasing penetration of TVs, will give a boost to the demand for better quality products like DTH. In terms of sheer numbers, DTH subscribers are expected to touch 27 million in 2011 and 61 million in 2015. Big TV, which is targeting five million customers to begin with, seeks to capture 40% of the current DTH market in the next 12 months. Currently, there are 120 million television homes out of which 80 million are cable and satellite (C&S) homes and a measly six million pay-TV DTH homes, comprising less than 5% of the domestic television market. In 2007, the size of the Indian media and entertainment industry was in the tune of Rs 50,000 crore, which is expected to grow to about Rs 1,15,000 crore by 2012. However, research reports reveal that in wherever digitisation has happened and CAS has been made mandatory, 25% of the audience has shifted from cable to DTH. Big TV hopes to capture the market by offering more than its rivals. While both Dish TV and Tata Sky initially launched their services in 4,400 and 3,500 towns respectively, Big TV will reach 6,500 towns. Both Dish TV and Tata Sky had 35,000 retail windows to reach to customers whereas Big TV had 1,00,000.

Economic impact of the decision: BIG TV DTH was the largest retail rollout of a home entertainment Service in India.

BIG TV, achieved the 1 million subscriber mark, within 90 days of its launch. This has helped BIG TV to capture the share of 15 per cent in just 3 months in the fast-evolving Indian DTH sector. It has become the 3rd largest player in very short time and is positioned to challenge DishTV and TataSky. This is very significant considering the fact it took years for DishTV & TataSky to reach the same number of subscribers. AirTel Digital TV was launched on 9 th October but they could not become as big as BIG TV. BIG TV poses very serious challenge to DishTV & Sky TV. References: [1] http://en.wikipedia.org/wiki/Oligopoly [2] http://www.expresscomputeronline.com/20021118/opinion2.shtml [3] http://www.dishtv.in/Static/pdf/Mgmt.%20Discussion%20&%20Analysis.pdf [4] http://en.wikipedia.org/wiki/Herfindahl_index [5] http://en.wikipedia.org/wiki/Doordarshan [6] http://www.apnadth.com/tech_ovr.htm [7] http://www.indiantelevision.com/special/sperep1.htm [8] http://teck.in/mtnl-launches-indias-first-iptv-in.html [9] http://www.contentsutra.com/entry/419-iptv-will-struggle-in-india-says-gartner/ [10] http://tutor2u.net/economics/content/topics/monopoly/oligopoly_notes.htm [11] http://www.enotes.com/small-business-encyclopedia/industry-life-cycle [12] http://en.wikipedia.org/wiki/Complementary_good [13] http://www.tamindia.com/tamindia [14] http://www.scatmag.com/technical [15] http://timesofindia.indiatimes.com/articleshow/323215483.cms [16] http://www.labnol.org/india/corporate/reliance-adag-joins-the-dth-bandwagon/93/ [17] http://www.ficci-frames.com/Archive/2003/synopsis03/dth.htm [18] http://www.atimes.com/atimes/South_Asia/IH30Df01.html