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Submitted To Prof. Trilochan Tripathy In Partial Fulfillment of the Course Requirements of Managerial Economics During June – September, 2009 Submitted By Amitoj Kaur(09BSHYD0079) D.Anvesh(09BSHYD0236) Manisha Mittal(09BSHYD0429) Unadkat Mansi Niranjan(09BSHYD0940) Sumit Saini(09BSHYD0880) Vivek Kr. Bhutania(09BSHYD0991) Y.V. Sai Shanmukha(09BSHYD0999)
1. Objective ………………………………………………………………………………4 2. Why DTH Sector ……………………………………………………………………...4 3. Background of television industry …………………………………………………….5 4. DTH industry – An Overview ………………………………………………………...6 5. Company Analysis – Tata Sky ………………………………………………………..8 6. Factors for growth of Tata Sky ………………………………………………………..9 7. Pricing ………………………………………………………………………………..10 8. Tata Sky Financial Status …………………………………………………………….12
9. Product Comparison Across the DTH Industry
9.1 Tata Sky ………………………..………………………………………………..14 9.2 Big tv ….………………………..………………………………………………..15 9.3 Airtel Digital tv …………………..………………………………………………16 10. Product Differentiation ……………………………………………………………....17 11. Promotion Strategies of Tata Sky …………………………………………………….20 12. HHI Index …………………………………………………………………………….22
12.1 DTH industry – Market Structure ……………………………………………….23 12.2 Features of Oligopoly ……………………………………………………………23
13. SWOT Analysis for Tata Sky ………………………………………………………...24 14. Porter’s 5 forces model ……………………………………………………………….25 14.1 2 |Page
Threat of Substitutes …………………………………………………………26
14.2 14.3 14.4 14.5
Bargaining Power of Suppliers ………………………………………………28 Bargaining Power of Buyers …………………………………………………29 Rivalry among Competitors ………………………………………………….29 Threat of New Entrants ………………………………………………………30
15. Customer Base – Comparison across the industry …………………………………...31 16. Challenges for the industry …………………………………………………………..32 17. Recommendations ……………………………………………………………………33. 18. References ……………………………………………………………………………34
The objective of our project is
and would be comparing it across different other players in the market. 4 |Page . content charges. 2. DTH companies need to invest heavily in the initial years and breakeven point is also high. especially at a time when there is tough competition in the Indian DTH industry? • We would be studying the challenges and opportunities present before Tata Sky in Indian DTH industry. This is a positive aspect for this sector. it is very interesting to see how these companies react to each others’ strategies and how far they are successful in penetrating the market.WHY DTH SECTOR? DTH is a very attractive sector. it has huge opportunities and companies will act aggressively to garner subscribers as it happened in mobile space. To analyze the Indian DTH industry. Only 5 million homes have DTH connections out of 75 million cable households in India. • The project also gives us the scope to study the extent of dominance of Tata Sky in the market using HHI index. and with coming up of new companies in this sector .• • • To analyze the economics of Tata Sky Ltd. The project is also aimed at studying the different strategies followed by Tata Sky • How Tata Sky is increasing its customer base. the fixed cost that a company incurs in this sector includes the license fee. on growth front. etc thus Customer acquisitions skills assume a very important role in this sector which makes this sector a very interesting study. • We would be analyzing the cost structure of Tata Sky. uplink charges. This sector offers huge investment opportunities for long term investors . transponders fee.
satellites. every home which had a TV set. it literally changed the way the average Indian watched the television. there were as many as 1 lakh cable operators across India. Until few years back. DTH does away with the need for the local cable operator and puts the broadcaster directly in touch with the consumer. receiving dishes can be as small as 45 cm in diameter. With the liberalization of Indian economy from the License Raj in 1992.BACKGROUND As India is making rapid strides in terms of growth. In 1992. However the services provided by them were poor. selective broad cast which caused dissatisfaction amongst the customers. There were strikes.3. On the user's end. A DTH network consists of a broadcasting centre. there was only one TV channel in India. the Cable TV industry started. This created market for the DTH (Direct-To-Home television). multiplexers. To begin with. A DTH service provider has to lease Ku-band transponders from the satellite. which was owned and operated by the government of India. At the user end. The encoder converts the audio. used to have its own antenna to capture the signals. and the average Indian’s disposable income and purchasing power rising to a never before level. video and data signals into the digital format and the multiplexer mixes these signals. there is sense of growth prevailing everywhere and the Indian entertainment and media industry is not far behind. DTH service involves distribution of multi-channel TV programmes. In that era. DTH is defined as the reception of satellite programmes with a personal dish in an individual home. there will be a small dish antenna and set-top boxes to decode and view numerous channels. modulators and DTH receivers. encoders. major initiatives like inviting foreign direct investment and deregulation of domestic business led to arrival of foreign channels like Star TV and creation of domestic satellite channels like Sun TV and Zee TV. changes in tariff plans. It is currently estimated at Rs 450 billion with a CAGR of 18 % over the next 5 years. “Doordarshan”. Only cable operators can receive satellite programmes and they then distribute them to individual homes. 5 |Page . With the increase in number of channels as the outcome.
the payments will be made directly by the subscriber to the satellite company offering the service. But they did not pass approval because there were concerns over national security and a cultural invasion. The major thing that DTH operators are betting on is that the service is coming at a time when the government is pushing for CAS (conditional access system). which will make cable television more expensive. video conferencing and e-mail. • In DTH. The prices of the dish and the settop box have come down significantly. Today. Finally in 2000. broadcasters believe that the market is ripe for DTH. the government even imposed a ban when the Rupert Murdoch-owned Indian Sky Broadcasting (ISkyB) was about to launch its DTH services in India. DTH was allowed. The new policy required all operators to set up earth stations in India within 12 months of getting a license.4. Internet access. The companies offering DTH service will have to have an Indian chief and foreign equity has been capped at 49 per cent. • In DTH. narrowing the tariff gap between DTH and cable. DTH INDUSTRY – An Overview: DTH services were first proposed in India in 1996. the payments will be made directly by the subscriber to the satellite company offering the service. DTH can reach remote areas where terrestrial transmission and cable TV have failed to penetrate. Overall investments required in putting up a DTH infrastructure has dropped and customers are also reaping the benefits of more attractive tariffs. • DTH has also allows for interactive TV services such as movie-on-demand. Some of the features of DTH service are as following: • • DTH offers better quality picture than Cable TV. 6 |Page .14 million and will be valid for 10 years. DTH licenses in India cost $2. In 1997.
2009 7 |Page . • • Tata group and Star network owned Tata Sky Zee group owned Dish TV Sun network owned SUNDIRECT DTH. Reliance owned BIG TV Bharti Airtel’s DTH DD Direct Plus • • • • India .2 mn in 2007 to 43 mn by 2015.India currently has 6 major DTH service providers and a total of over 5 million subscriber households.DTH Potential DTH to grow from 3. with 30% share of Pay TV T H u h ld V o se o s 180 16 0 14 0 120 100 80 6 0 4 0 20 1111 1111 11 11 111 111 111 111 Pa T H s yV H 111 Pa D HH s y T H 111 111 111 11 11 1111 1111 Source : MPA report.
Tata Sky has launched an entry-level subscription plan called ‘Super Hit Pack’ at Rs. The focus of the campaign was to establish the lineage of Tata Sky and inform potential customers about Sky. as it was the first DTH service to be advertised in India. Low cost packages to increase penetration . It was the first DTH company in the world to offer its subscribers interactive VAS under the umbrella. 8 |Page . • Tata Sky is collaborating with HUMAX and THOMSON to increase availability of Set Top Box.5. 8999/Tata Sky. Tata Sky recently launched Tata Sky Plus which uses the personal video recording (PVR) technology that allows consumers to record live. though a late entrant created a mark as a first mover in the minds of the customers. Few salient features of the company are: • Strongly innovative product offerings – Tata Sky has taken the responsibility on itself to invest in more interactive services to differentiate it from other service providers. Focus on heritage – Tata Sky latest campaign features superstar Aamir Khan.Tata Sky has recently introduced a Rs 99-a-month low-value pack for 53 channels to increase penetration of Tata Sky in smaller towns of the country. This is the new quality standard for Indian pay TV against which other companies as well as future entrants will be judged. These Set top boxes are being supplied with the help of local manufacturers. It has over 147 channels to choose from.Although it was the 3rd player to enter the market it sought to create consumer education about the category with focused advertising. 99 per month with a bouquet of 53 channels. It resulted as a joint venture between the TATA group and the STAR group. Within a short span of time it garnered a subscriber base of nearly 2. COMPANY ANALYSIS – A Birds view of Tata Sky: Tata Sky launched its services pan-India in August 2006.5 million (Aug 2008). • Tata Sky has also gone a step further and enhance the service delivery by introducing an electronic program guide (EPG) in Hindi especially for people in small towns who are more comfortable with Hindi. • • • Kick started the category advertising . It is available at a price of Rs.
It has engaged a field force of approximately 3000 service engineers who are complemented by high9 |Page . This service is being provided in association with 24 X7 guru.• Tata sky. that can be ordered with any of the basic packages. on ground activities. he should be encouraged to subscribe to other packages and value added services quickly to increase revenues. radio. With the adoption of 360 degree marketing campaign which includes television. Active Wizkids etc. • • For Effective distribution Tata Sky has tied up with ITC international Business Division. control and convenience Tata Sky has a wide array of programming choices and interactive services like Active Cooking.com. 6. Tata sky has been able to pursue marketing on a digital platform. has tied up with ITC e-Choupal and Godrej Aadhar. These applications are expected to do well given that in India TV viewing in India is done as a family. Tata Sky subscribers can view TV through superior digital DVD quality picture and CD quality sound 2 b) WIDE ARRAY OF INTERACTIVE APPLICATIONS In order to empower the Indian viewer with choice. in order to increase its rural penetration. The customer is not going to stay forever with the package he subscribed to initially. KEY FACTORS OF GROWTH FOR TATA SKY: The 3 major reasons for growth of Tata Sky that can be explored are: a) SUPERIOR PICTURE QUALITY 1 Unlike analog cable. outdoor. print. c) UNPARALLELED CUSTOMER SERVICE Tata Sky has established an extensive customer service network across the country.
manned by multi-lingual customer service associates. infotainment channels.end 24x7 call centre’s. News. lifestyle channels. infotainment channels. English movie channels. Number of channels that Tata Sky is providing (128) is more than the number of channels being provided by Dish Tv (119). At less prices Tata Sky is offering more services hence. trained to solve all customer problems. thereby ensuring the highest levels of customer service. News channels Hindi and Business. sports channels. providing value for money services to the customers. 325) hence providing more benefits in terms of cost to its customers. music channels. Hindi GEC. DD channels From the above table it can be inferred that: • The price per month of Tata sky (South Jumbo Pack – Rs. English GEC. music channels. English GEC.Hindi. of channels Re Channels Available Tata Sky (South Jumbo Pack) 310 DIS Dish TV 325 128 Hindi movie channels. Tata Sky takes direct responsibility for installing and servicing the hardware for periodic problems that exist at every subscriber's home. English and business. lifestyle channels. PRICING: The prices of the key brands in the category are as follows: Contents Rate per month (Rs) No. Tata Sky retails its hardware and prepaid recharge vouchers through popular consumer electronic stores to enhance customer convenience 7. 10 | P a g e • . kids channel. kids channels. Hindi and English movie channels. DD channels 119 GEC. 310) is less than that of Dish TV (Rs. regional channel.
Tata Sky also provides cost saving economic packages like family and Value packs. • • • 11 | P a g e . In different packages Tata Sky provides a variety of channels.Tata Sky From the above table it can be interpreted that: • The price range of various packages of Tata Sky. The channels offered are different in different packages. vary from Rs. 310. The lowest number of channels being provided are 53 (Super Hit Pack) to 128 channels ( South Jumbo Pack). With the help of this they could target lower-end customer as well as the higher-end customers. 99 to Rs. Tata Sky provides a vast variety of channels and services to its customers.
12 | P a g e .19 million in FY 2007 to .838 million in FY 2011.8.845 million in FY 2009. TATA SKY FINANCIAL ANALYSIS: Assumptions: • • • • ARPU increases from Rs 190 to Rs 470 in 2010-11 Revenues increases @ CAGR of 112% till 2010-11 Expenditure reduces from 180% to 75% till 2010-11 Debt : Equity reduces from 2:1 to 1:2 till 2010-11 From the above table the following interpretations can be made: • The total revenues of Tata Sky have been continuously increasing from 0. • The company is expected to generate revenues of 3.
The company is expecting an increase in the total value of its assets to 3000 in the financial year 2011. • A significant shift in the EBITA Margin of the company. that is. from negative in FY 2007 to 25% in FY 2010.• A significant increase in the company’s assets can be observed. from 1000 in the year 2007 to 1769 in the financial year 2009. is being expected. • The profit after tax is also expected to shift from -355 in FY 2007 to 358 in FY 2011 13 | P a g e .
AIRTEL DTH. Uniform volume level across all channels Stable set-top-box with less bugs or issues Provides good Customer service and after-sales support Exclusive access to some authentic international channels like BBC entertainment. DISH TV. RELIANCE BIG TV: PRODUCT COMPARISON : 9. Ceebebies Tata Sky Product Review : 14 | P a g e .1 TATA SKY Tata Sky Features: • • • • • Joint venture with International DTH Brand-Sky. 9. famous for its exquisite technology. The company is expecting a breakeven by financial year 2011.TATA SKY.• Hence it can be concluded that the company has been showing a good performance in terms of revenue generation.
The customers get to select regional package based on their language/regional/cultural preferences. As a result its customers have to worry less about the maintenance issues regarding the Set-Top Box. malayalam. It also provides a feature of viewing 12 channels at a time on single screen Good performance even during the monsoon season.the uniform volume level across all channels.• • • • Tata Sky has made constant innovation and technology enhancements which are the main reasons that the company could provide a very stable set top box. hindi/Punjabi or oriya/bengali packages. Tata Sky also provides installation services within 24 hours of the purchase of the product. Tata Sky has customized its packages which enable the customer to choose and pay for only those channels which they require. 9. 15 | P a g e . This entitles the customer to get an option to make a package having base package and any one of the regional languages like kannada. telugu. Reliance Big TV Product Review: • • • Reliance BIG TV is a cost-effective service whose base package comes with large number of channels. Tata Sky provides excellent picture/audio quality. This feature ensures that the customers don’t have to waste time on adjusting the volume levels as they surf the channels.2 RELIANCE BIG TV Reliance BIG TV Features: • • • • • • • • Reliance Big TV uses MPEG-4 technology which can carry more number of channels Good picture and audio quality The company makes its packages cost effective by providing lots of channels in base pack itself. Another important feature which can be of great value to the customer is .
Few Inferences from the above comparison: • Tata Sky is the only DTH which provides uniform volume level across channels. 16 | P a g e . • The set-top box provided by Airtel Digital is Sleek and stylish • It provides better connectivity as provides a larger dish antenna Airtel Digital TV Product Review: • Although Airtel Digital is a late entrant in DTH space it has come up with a completely flawless DVD quality picture and sound. Digital TV by Airtel stands out as a lot costlier.3 AIRTEL DIGITAL TV Airtel Digital TV Features: • Airtel digital tv has good DVD Quality picture and CD quality • It provides a universal remote which works both with TV and Set top box • One of the major features of Airtel digital is that it exclusively offers World-space satellite radio channels. • It provides a sleek and stylish looking set top box. Digital Tv has completely undone that issue by coming up with universal remote. • It also provides exclusive access to World-space channels • While Airtel Digital tried to differentiate its product from the rest the high cost associated with it acted as a big negative aspect for the company • The are many other players in the market providing lots of channels at a lower price. This acts as a disadvantage for the customers For the installation of the set-top box the customer has to wait for 3-4 days from the time of purchase 9. • At the time when the other players were providing different remotes for set top box and television .• • The set-top box of Big TV is little unstable. • Tata Sky and Big TV are better choice for rainy areas because of bigger antenna size.
10. Customers can select any of the various attractive package of channels available. Also the system provides the user with efficient navigation system as shown in the figure below: 17 | P a g e . A set top box and network access card per television. PRODUCT DIFFERENTIATION: Tata Sky launches itself as a DTH services requiring a Dish.• Incase the customer is very selective about channels. • To start enjoying DTH experience from today. Tata Sky as a product provides to its customers a large bouquet of channels at different pricing packages. Tata Sky is the best fit as it has lots of small packages and add-on packages so that the customers can customize the package as per their needs. These packages are formed according to ensure user convenience. go for Tata Sky because that’s the only DTH which will be delivered and installed the same day after you place the order.
Support in 11 languages 18 | P a g e .It provides a large number of services to its customers. Various services provided by TATA Sky include: • • • • • • • • • • • • • • • Active Services Active Cooking Active Stories Active Newsroom Active Darshan Active WizKids Active Sports Active Learning Active Games Active Astrology Parental Control Search and Scan Banner Guide (including Hindi Display) Customer Service.24 x 7 help.
Thus Tata Sky has all features to compete well with the existing players in the market. pause a live telecast and even rewind a TV program that you are watching.999 for the hardware (Digicomp) + Rs 1. Tata Sky+ is a premium set-top box with a personal video recorder that allows you to record up to 45 hours of live TV. PROMOTION: 19 | P a g e . However Tata sky recently launched a new variant called Tata Sky +. Thus Tata sky gained an edge over its customers by adapting Product Differentiation. 11. Tata Sky+ gives you the power to record one program while watching another. For its new customer the cost of Tata Sky Plus is given as below: Tata Sky Plus Cost Rs 8. This product contained some additional features over the original Tata Sky. it also introduced a special offer of up gradation to the premium product at reasonable cost. To protect its existing customer base using Tata Sky.000 installation & activation charges + Rs 50 per month Tata Sky+ usage fees + Cost of the channel package.
Tata Sky has also launched an interactive game quiz featured around Mahendra Singh Dhoni to coincide with the Twenty20 World Cup.5 billion marketing budget was planned to be spent during the festival season in India. Tata Sky has always followed an aggressive promotion strategy. The company is also had talks with several mutual funds and financial services firms to advertise through its interactive services. most other major TV channels found a place on the Tata Sky platform INTERACTIVE ADVERTISING is a new stream of revenue that DTH operators are now eyeing. the consumer can then text to customer care. Meanwhile. A DTH user can access advertising content by clicking on an active button and can then access the information brochure on TV. DTH operator Tata Sky has made the first move in this direction by tying up with consumer electronics major. When Tata Sky was about to be launched. when consumers have a tendency to splurge on goodies. If she/he needs more information. traditional and non-traditional.In order to stay ahead of its competitors.5 billion for marketing the DTH service across all platforms. apart from Zee Turner family of channels. it earmarked approximately Rs 1. starting late September and lasting till Christmas-New Year. A major part of the Rs 1. They invested not only in the pilot MDU (multi-dwelling unit) projects in some cities of India but also planned to educate an average Indian about the advantages of a DTH service supported by the Tata’s and Star. 20 | P a g e . therefore. Dish TV is also exploring its options. represents consumers with high disposable income. The DTH operator believes that 68% of its consumer base belongs to the SEC A category and. Samsung. Industry players believe that DTH interactive advertising may work out to be the cheapest way to reach out to a targeted set of consumers and is likely to generate more interest in the future. One of its major competitors.
Recently Tata Sky signed Aamir Khan.In the past. As the brand ambassador. the DTH operator has been test-piloting feature by running several contests around programmes and the interactive features were made available to its customers. as a brand ambassador.. Kiron Kher. The HHI is expressed as: HHI = s1^2 + s2^2 + s3^2 + . Boman Irani and Paresh Rawal. consumers were offered free goodies by participating in a contest. Its tag line “ Isko laga dala. The company believes that the actor makes a perfect fit with the Tata Sky brand values of trust. For instance when the movie Dhoom was offered on its pay-per-view service. the actor will be instrumental in communicating the benefits of Tata Sky to consumers across the country. Radio and other mediums. Earlier also the company used various Bollywood celebrities for different campaigns like Hritik Roshan.. and then summing the resulting numbers. 12. Outdoor.000. It is calculated by squaring the market share of each firm competing in a market. Thus the company has followed an intensive promotion and advertising strategy. high-quality entertainment and innovation. HERFINDAHL – HIRSCHMAN INDEX (HHI Index): A commonly accepted measure of market concentration is the HHI index. Aamir Khan will feature across all Tata Sky brand and product communication including advertisements on TV. Print. The HHI number can range from close to zero to 10. one of India’s highly acclaimed actors. + sn^2 21 | P a g e . toh life jingalala “ has become quite popular.
000 (100^2). Nor is the value close to 0. indicating nearly perfect competition. there were only one firm in an industry. The closer a market is to being a monopoly.where sn is the market share of the ith firm. Here. Hence it is neither a monopoly nor a perfect competition. the HHI value is not at all close to 10000.1 DTH Industry – An Oligopolistic Market Structure: 22 | P a g e . that firm would have 100% market share. and the HHI would equal 10. The value of H indicates that it is an oligopolistic market. If. The following diagram shows the major players in the DTH industry and their market share. Or. each would have nearly 0% market share. the higher the market's concentration (and the lower its competition). for example. 12. and the HHI would be close to zero. if there were thousands of firms competing. indicating a monopoly. HHI = (7*7) + (51*51) + (18 * 18) + (24 * 24) = 3550 Thus the in the range from 0 to 10000.
• High Cost of the set top boxes 23 | P a g e . Following entry barriers exist in the DTH Industry. The initial cost required for setting up the company is very high as it requires transponders and other hi tech equipment. 12. transponder and other high tech equipment: the huge initial cost of setting up the business acts as a huge entry barrier for the new entrants. Each oligopolist is aware of the actions of the others. There are significant entry barriers in this market. Entry barriers in Indian DTH Industry: The Indian DTH industry is a high tech industry requiring huge capital investment. • High set up cost of satellite.The DTH industry in India can be categorized as an OLIGOPOLY. • DTH Industry is a high volume low margin industry: Any new entrant in the DTH industry has to make sure that it builds significant customer base as soon as possible to ensure its profits. There exists interdependence between firms.2 Important features of Oligopoly Market: • • • • • Small number of large players dominates the market. The oligopolists produce branded products. with barriers to entry in the market. The HHI index and the market share of firms indicate the amount of competition among them. In this type of market the degree of market concentration is very high. It is a market structure in which the market or the industry is dominated by a small number of large players who are called “oligopolist”. OLIGOPOLY: Oligopoly is a Greek word which means “for few entities with the right to sell”.
Leads in introducing new packages & Services 5. Innovative Product offering Tata Sky Plus WEAKNESSES 1. Cannot match free service like DD 3. Technological expertise with Newscorp’s DTH arm Sky 3. Interactive channels and program guides 8. Superior Picture quality 4. Expansion of distribution network through exclusive stores 4. Leveraging on brand TATA and High brand recall 2. Larger disposable incomes with India 2.• • Long gestation period and high break even period Multilingual & Multicultural differences in India. Currently Does not offer free Set Top Box like Dish TV 4. Dependency on broadcaster and had issues with Sun TV OPPORTUNITIES 1. Customer service 6. Litigation due to issues related to sports channels which it lost 5. Interactive advertising – Tie up of with Samsung 24 | P a g e . Tapping niche markets with Better service and Product offering 3. Second Mover after Dish TV who captured Market Share 2. SWOT ANALYSIS FOR TATA SKY: STRENGTHS 1. 13. Rural penetration through ITC E-Choupal and Godrej Aadhar 7.
Porter’s five forces are the: • • • • • 25 | P a g e Threat of substitutes. Dependency on CPE suppliers to some extent 5. Bargaining power of suppliers.5. IPTV provides superior technology if implemented 2. Cap on Investment (20%) 10. Cable Set top Boxes provide easy switching due to negligible switching costs 3. Increase in number of TVs sold 6. Increase in the geographical boundaries with Rural Market untapped 7. Interoperability Regulations 11. No Exclusivity in Content and Rule of ‘Must Carry’ 9. CAS being made Compulsory would encourage switch. Growing demand for quality of service in the form of DTH over Cable 8. High dependence for transponders on ISRO 6. Bargaining power of buyers. Dependency on broadcasters for their channel content and thus increase in cost 7. ENVIRONMENTAL ANALYSIS – PORTER’S 5 FORCES MODEL: Michael Porter has identified five forces that are widely used to assess the structure of any industry. . Rivalry among competitors. 8. Videocon may enter DTH by building its own set top boxes. 9. THREATS 1. Cap on foreign Investment (49%) 14. Value Added Services are gaining steam. and Threat of new entrants. Increasing Competition internally 4.
As per the industry estimates. of which 71 million are served by cable and around 6 million served by DTH with the remaining taken by terrestrial transmission. there are 120 million TV homes. the strength of the five forces determines the profit potential in an industry by influencing the prices. Cable and IPTV. 14. We now apply the Porter’s five forces model in the context of DTH industry.1 THREAT OF SUBSTITUTES DTH faces stiff competition from the Terrestrial. there is not much data on its subscriber base.the elements of return on investment. Stronger forces are associated with a more challenging business environment. As IPTV is a new entrant.Together. and required investments of businesses . costs. Our observations are categorized into the five forces as below. 26 | P a g e .
As seen in the above figure 1. In case of CAS controlled areas. c) Internet Protocol Television (IPTV) : 27 | P a g e . On the other hand. Irrespective of whether CAS or not. b) Cable TV: Cable TV currently operates in 2 modes. Mumbai and Kolkata. and the other through Non-addressable system in the rest of the country. The reach provided by this route is phenomenal with Doordarshan covering 88% of India’s geographical area. Covering the remaining 12% area required substantial capital investments which does not outweigh the benefits. in offering digital terrestrial television.Figure: Medium of Broadcasting and their share. he can also do without that and see the 70 odd Free-to-Air (FTA) Channels.300 per month depending on the place where he lives. Also there would be resistance from the Local Cable Operator’s (LCOs) lobby as DTH totally displaces them. Cable TV enjoys a big share in comparison with other mediums. Due to the phenomenal reach of the Cable TV. One is through CAS (Conditional Access System) covering cities such as Chennai. the subscriber has to either buy or rent the Set Top Box (STB) to see the pay channels. The transmission was done originally in Analog mode but beginning from 2002. Of course. we do not see it as a formidable threat. the subscriber can comfortably see the channels by paying anywhere between Rs. a) Terrestrial Television: Doordarshan is the world’s largest terrestrial broadcaster with over 1400 terrestrial TV transmitters. all the channels are available without the necessity of any separate receiver. due to the lack of attractive content. in areas where non-addressable system is used.100 to Rs. Parts of Delhi. it poses a serious threat to the growth of DTH industry. Even with the wide reach and low cost approach that is possible with this technology. Doordarshan has partnered with BBC resources – the consulting wing of BBC.
IPTV encourages a two-way request-response model where the consumer chooses the program he wants to view. even if strict regulations are enforced on. Telecom companies such as BSNL and MTNL have spotted these earnings potential and have already started with trial implementation in cities like Bangalore and Kolkata. The Ku band transponders in the orbiting satellites and content. 28 | P a g e . Right now this medium is totally unregulated and hence there is a chance for customers being taken for a ride. the bargaining power of Indian DTH operators with CPE suppliers have been steadily increasing. After this small discussion on IPTV. With India set to overtake Japan as Asia’s largest DTH by next year . Companies like Reliance Communications and Bharti Airtel are also planning to follow soon. 14. IPTV takes the interactivity to a newer level.2 BARGAINING POWER OF SUPPLIERS: DTH industry relies on three major supplies. In regular mediums. IPTV has a potential to become a huge success. we see it as a considerable threat to DTH in Urban and Semi Urban areas where broadband has made its mark. all the channels are pushed to the consumer regardless of his preference. Cable companies are urging the TRAI to issue a consultation paper process to include IPTV under the aegis of Cable TV act. It is often presented as a bouquet of Video (IPTV). Set Top Box with the necessary Access Card.IPTV is a service where television signals are digitally sent over the telecommunications line. Audio (Telephone) and Data (Broadband Internet) services. With widespread adoption of Broadband in the country and the growing techno savvy population. They are: • • • Customer Premise Equipment (CPE) comprising of the Satellite Dish.
On the other hand. However. TATA SKY v/s DISH TV – Showcase of Rivalry: Between Dish TV and Tata Sky there is an intense rivalry exhibited by price wars and discount schemes offered to new connections. Astrix (the supplier of transponders – a subsidiary of ISRO) is in a better position to use DTH as its cash cow for the next 5 to 10 years. With enough options to choose both from the point of alternate mediums like Cable. With only two domestic satellite launches between 2007 and 2010 and increasing DTH players.4 RIVALRY AMONG COMPETITORS: With 5 operational players and 1 player in the queue. the availability of transponders is increasingly becoming difficult. Customers will continue to have a high bargaining power until DTH platforms try to differentiate them as superior players with better content and clarity. Being the First move. The competition from state owned DD-Direct to private players is negligible from the content point of view as the number of channels offered by DD-Direct is very limited. DD-Direct does not charge any monthly subscription fee which poses a threat to the private players who charge monthly subscription charges. acquiring content from the broadcasters is also difficult. 14. Tata Sky claims its STB to offers superior DVD quality video due to its advanced STB. IPTV and Terrestrial broadcast and from the point of increasing DTH operators. Dish TV had price advantage in both the STB as well as in procuring the transponders. the consumer is at his will to decide. the Inter firm rivalry is quite high.However. 14. As there is not much of regulation particularly in terms of channel pricing.3 BARGAINING POWER OF BUYERS: We would take the entire broadcasting industry for analyzing the bargaining power of the buyers. DTH vendors are at the mercy of the broadcasters. 29 | P a g e .
2000 crore over the medium term. While getting a license is relatively easy.5 THREAT OF NEW ENTRANTS: With already 6 players in the DTH space.5 million subscribers in the next 18 to 20 months while Tata Sky aiming for 8 million subscribers by 2012. the barriers to entry are high when it comes to pricing of CPE and getting the required transponders. The companies have also set ambitious targets with Dish TV aiming to reach 4. So any new entrant will face a high cost when it comes to equipment and transponders. Figure: DTH Industry – Five Forces Model 15. threat of new entrants is relatively low. 15. 850 crore over the next 3 years. the rival Tata Sky is willing to spend Rs. There is already enough competition which will discourage new firms to enter this business. CUSTOMER BASE – COMPARISON ACROSS THE COMPANIES: 30 | P a g e . There is a definite First mover advantage .While Dish TV is planning to spend Rs.
to take the overall subscriber base to over 17 million. Although this sounds pleasant.50 1. The five DTH operators will still have only around 30% market share by 2013. A comparison is made for all the existing players in the DTH industry in terms of current customer base.10 4. Big TV. it is actually not. Dish TV. as compared to 70% for the cable operators.18 DEC 2009 (Projected) 5.The five DTH operators. Tata Sky and Sun Direct are expected to add six million new subscribers by the end of December.10 6.10 0. DTH OPERATOR DEC 2008 (In mn) DISH TV TATA SKY AIRTEL DIGITAL TV RELIANCE BIG TV SUN DIRECT 2.40 3.10 2.20 1.00 1. projected customer base and increase in the customer base for the period December 2008 – December 2009.90 17.10 1.20 4.20 3.90 1.40 TOTAL 10.10 Table: Comparison of Customer base Observations: From the above table it is very much apparent that DISH TV enjoys the first mover advantage by having the maximum number of connections.60 Net projected Additions 1. 31 | P a g e .20 1. Airtel Digital.
particularly state levied entertainment tax • Technology Neutrality as a policy needs to be consistently followed by the Government • Content differentiation through bringing in a Self regulatory regime and technological controls • Control of Content Cost for DTH to make it a level playing field • There exist sales and distribution challenges in India. Products go into tens of thousands of shops in large geographies. 17.However. 32 | P a g e . Though it was incorporated in 2004. the trade is relatively unorganized. CHALLENGES: The challenges faced by the DTH Industry are: • High License Fee • Organization of taxation regime . One phrase that needs a mention here is “No one knows India better than the TATA GROUP and No one knows Entertainment better than STAR. it has got the highest growth rate. which may lead to a short term loss but a medium term break even and profit. one firm that needs to be looked upon with interest is TATA SKY. Although India is a very big country. and getting set-top boxes and remote controllers in good shape across the length and breadth of India is a significant challenge • Massive logistical challenge. RECOMMEDATIONS: The following price related strategies could be adopted. 16. Together they bring the world’s best satellite television service TATA SKY”. There are many factors that have helped Tata sky in achieving such a feat.
Pre Paid cards from Retail shops to be activated using Telephone and Drop Boxes at Societies. ensuring timely payment and convenience to the customer – Credit Card through Website.• • • • Free Set Top: Set top Boxes can be given free while ensuring lock in by providing base pack free for limited time duration. 33 | P a g e . thus inducing update to next level. Payment Options: Allow multiple points of payment. Multiple Connections: Provide discounts for consumers buying second Tata Sky Connection (up to 50% off) Encourage References: Provide discounts on Monthly charges if a reference from existing consumer becomes a new customer.
php National Programs on Energy Efficient Set top Boxes http://www.iea..dth..blogs.xml www.tata-sky.oneindia.sun.com/india/news/tdsat.com/customers/servers/tatasky.indiantelevision.com www.business-standard./on www..18.in/players. REFERNCES: • • • • • • • • www.html www.pdf Data shared by Consumer Electronics and Appliances Manufacturers Association (CEAMA) 34 | P a g e .org/Textbase/work/2007/set-top/background/stb_programs.php www.html Data Given by various manufacturers and service providers http://www.tatasky.tatasky.com/headlines/y2k9/sept/sept57.in/tata+sky/1/showtags.com/channel-packages..