Comstrat 2008 - Tata Sky

Ami Kothari +91-9820672221 Palak Sood Swathi Velisetty +91-98925 97890 +91-98205 62709

Jamnalal Bajaj Institute of Management Studies
Environment Analysis - Porter’s 5 forces Bargaining Power of Supplier - High DTH relies on three major suppliers: Customer Premise Equipment – Satellite dish, Set top box and Access card, Ku Band Transponder and content. Bargaining power of DTH operator with CPE supplier has increased due to supply. Transponder is provided by Astrix, ISRO hence dependency exists and due to no regulations in channel pricing, DTH operators are at mercy of Broadcasters. Bargaining Power of Buyer-High Consumer has the power to choose in this industry with variety. Unless players can differentiate against each other, the market shall remain mostly homogeneous. Customers will have high bargaining power and will be influenced by costs versus services. Threat of Substitutes- Medium DTH faces major competition from Terrestrial, Cable & IPTV.

Doordarshan is world’s largest Terrestrial broadcaster with over 1400 transmitters and covering 88% of India geographical area. They offer Digital service in collaboration with BBC resources. This wide reach and low cost approach are offset by its lack of attractive content. Cable TV operates in 2 modes: CAS<Metros>which requires separate set top box and Non Addressable system. The cost varies from Rs. 100 – Rs. 350 to customers depending upon location. Due to its phenomenal reach, there is bound to be a resistance from Local Cable operators.

IPTV is service where television signals are digitally sent over Telecommunications line. MTNL & BSNL plan to tap this line. Even with strict regulations (not yet enforced) it is a considerable threat due to its new level of interactivity. Threat of New Entrants- Low With 7 players in the DTH space, threat of new entrants is relatively low due to enough competition. Getting a license is relatively low but issues related to pricing of CPE and getting required transponders. Also first mover advantage exists in this industry. Competitive Rivalry- Medium With 7 players established in the market inter firm rivalry is intense.

DD offers free service but has a very small bouquet of channels. Dish TV got first movers advantage and has a highest market share in the market. The new players have very big brand names and have started with extensive publicity. There is also competition with respect to acquiring content. There are also regional discrepancies.


Current Situation - SWOT Analysis Strengths
1. Leveraging on brand TATA and High brand recall

2. Technological expertise with Newscorp’s DTH arm Sky 3. Superior Picture quality
4. Leads in introducing new packages & Services

5. Customer service 6. Rural penetration through ITC E-Choupal and Godrej Aadhar 7. Interactive channels and program guides 8. Innovative Product offering Tata Sky Plus Weaknesses
1. Second Mover after Dish TV who captured Market Share

2. Cannot match free service like DD 3. Currently Does not offer free Set Top Box like Dish TV 4. Litigation due to issues related to sports channels which it lost 5. Dependency on broadcaster and had issues with Sun TV Opportunities 1. Larger disposable incomes with India 2. Tapping niche markets with Better service and Product offering 3. Expansion of distribution network through exclusive stores
4. Interactive advertising – Tie up of with Samsung

5. Increase in number of TVs sold 6. Increase in the geographical boundaries with Rural Market untapped 7. Growing demand for quality of service in the form of DTH over Cable 8. CAS being made Compulsory would encourage switch.

9. Value Added Services are gaining steam. Threats 1. IPTV provides superior technology if implemented 2. Cable Set top Boxes provide easy switching due to negligible switching costs 3. Increasing Competition internally 4. Dependency on CPE suppliers to some extent 5. High dependence for transponders on ISRO
6. Dependency on broadcasters for their channel content and thus increase in cost

7. Videocon may enter DTH by building its own set top boxes. 8. No Exclusivity in Content and Rule of ‘Must Carry’ 9. Cap on Investment (20%) 10. Interoperability Regulations
11. Cap on foreign Investment (49%)


Strategy - Product Matrix TATA Sky’s target customers include various strata of the society, with different service packages available to each one. To improve its performance in the competitive DTH market, TATA Sky management should assess its brand positioning among its target segment by establishing a distinctive image for the company compared to competing companies. But these initiatives presents challenges, which TATA Sky is currently facing squeezed by rising costs, sporadic nature of demand, and relentless downward pricing pressure due to competition. Adding to it, slackening of demand, and higher interest rates are not welcome signs for it. With this in mind, TATA Sky should try to be rapid-paced and highly competitive. To counter these challenges and still be profitable, we have tried to suggest various strategies based on what will suit demands in the Indian market and its consumer behaviour to increase TATA Sky market share. Current situation:
• • • • • • •

Tata Sky crossed the two million connections mark in a period of 20 months, thus retaining its position as the fastest growing direct-to-home service provider across the globe. The marketing budget that TATA Sky begun with was 15% of sales. This included around 5% for advertisements, 7% discounts and promotions and 1% sponsorships. Currently TATA Sky has roped in Aamir Khan as its brand ambassador. Aamir Khan would feature in all TATA Sky brand and product communication, including advertisements in TV, print and radio. Further, tie ups with ITC E-Choupal and Godrej Aadhar give it wider rural reach. Also for its distribution, TATA Sky has a tie up with ITC International Business Division. The 24X7 has joined hands with TATA Sky to provide content for Active Learning. Tata Sky has adopted a 360 degree marketing campaign approach that encapsulates television, print, outdoor and radio along with on-ground activities and marketing on the digital platform. Tata Sky plans tie-ups with Sony Pictures, Fox for content- Pay per View service for exclusive events.

Target: Tata Sky hopes to have about eight million connections by 2012.


Product Tata Sky launches itself as a DTH services requiring a Dish, A set top box and network access card per television. Later variant like Community dish for entire building were launched. Latest the Tata Sky Plus with Personal Video Recording technology has been launched. 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. Support in 11 languages Considering a survey result, based on consumers preferences:
Program Choices New Technology 50 40 30 20 10 0 1 2 3 4 5 6 Reception Technical Support Price Customer Services

Factors Affecting Consumer buying Behaviours:
1. Price: Tata Sky has offered competitive pricing but has been on the higher end and its due to

promotional campaigns it has added in incentives leading to increase in customer base. In search of newer audiences in smaller towns, DTH operator Tata Sky is introducing a new Rs 99 package — Super Hit Pack
2. Customer Services: Tata sky offers an excellent website and dedicated customer line. They have the

concept of registered mobile number providing easy communication. But their Customer service lines are always busy and the waiting period is usually very long. This may be an irritant for existing customers.

3. Reception: The reception is usually excellent in comparison to existing cable TV. But during

monsoons and Cloudy days they are affected. The rate of signal distortion is more for Community dishes in comparison to Individual dishes. This technical problem should be sorted.
4. Program Choices: After litigations, Tata sky is able to offer huge bouquet of channels but it is still

less compared to the Cable TV. They should ensure extensive program choices to induce switching from Cable to DTH
5. New Technology: Tata sky Plus is an initiative in this direction. Various services under Active are

part of this Technology game. Being a interactive and dynamic offering would increase its appeal.
6. Technical Support: Technical support system of Tata sky is well establishes. If a 24 hrs limit can be

provided for all complaints and work on ‘holidays’ when people are generally home could be sold as a USP. Tata Sky as a product has evolved from the time to inception. Further to enhance the product, new services and technologies can be imbibed like: 1. Common Dish per house for Multiple Television sets 2. Combined Product with Television - Rural Areas , especially and Niche Segment Targeting if Combined with LCDs
3. Connectivity with other digital Monitors like Laptops for Commercial Usage 4. Guide can be displayed in Multiple Regional Languages 5. Voice over in Multiple Languages (Currently limited availability in for some programs) 6. Interactive Video Games (with consol) 7. Inclusion of Radio Reception. Development of Visual Radio service. 8. Variety in Movie Listing with Bollywood, Hollywood and Regional Channels 9. Special channels for Songs Request like Jukebox could be launched 10. Stock Market related interactive service on Active


Price Competition has increased may fold with completion providing freebies and slashing prices. The following price related strategies could be adopted, which may lead to a short term loss but a medium term break even and profit:
1. Free Set Top: Following the line of Dish TV, Set top Boxes can be given free while ensuring lock in

by providing base pack free for limited time duration, thus inducing update to next level.
2. Lock in of 1 year: Ensure long term lock ins by providing incentives for pre payment of long term

charges. Continue with current strategy of providing 2 months free on payment of 10 months services.
3. Multiple Connections: Provide discounts for consumers buying second Tata Sky Connection (up to

50% off)
4. Encourage References: Provide discounts on Monthly charges if reference from existing consumer

becomes a new customer.
5. Regional Disparity: Provide free regional packs in local areas to ensure switch from Cable TV to

DTH service, i.e. provide free south Jumbo pack for customers in all Southern States.
6. Community Dish: Provide Incentives in the form of Free Months charges for first 3-6 months and

reduce the Installation charges per flat.
7. Payment Options: Allow multiple points of payment, ensuring timely payment and convenience to

the customer – Credit Card through Website (implemented), Pre Paid cards from Retail shops to be activated using Telephone (Implemeneted) and Drop Boxes at Societies.
8. Postpaid: Some clients depending upon few background check criteria can be given Billing service

i.e. Payment at end of Month


Place State Maharashtra Gujrat Karnataka Uttar Pradesh Tamil Nadu Punjab Orissa West Bengal Kerala Andhra Pradesh Rajasthan Assam Madhya Pradesh Others Total Share (%) 12.1 10.5 7.2 6.9 6.6 6.4 5.3 4.7 4.6 4.6 4.5 4.0 3.8 18.8 100

Clearly, there is a lot of scope of increase in the number of customers across all the states. Looking at the current distribution system that Tata Sky has adopted:


Including the local cable operators as distributors would be an extremely useful way of reaching out to the target market: a. Staff of cable operators be made the distributors for Tata Sky (familiarity with people)

b. All distributors be given a status of Tata Sky employees c. Attractive options be given to them to become distributors Another focus could be the rural market. A snapshot of the rural market: a. 199 million total household in India b. 119 million (60% of total house holds) TV households c. 50 million are having Cable d. 55 million TV sets in rural area e. Rural TV households growing by 3-4 million each year. f. Only 2-3 % of rural household have access to Cable g. Growing focus towards more satellite channels Strategies for the rural sector can be: a. Customizing offering b. Combination of various national channels with regional channels c. Educational Package d. Appointing the village head as Distributor and the promoter as the villagers tend to listen to village head e. This can be supplemented by giving the connection to village head free for initial period Another avenue that can be explored is Mini – Theatres (Class B towns) a. Setting up Mini – Theatres in rural sector to promote the Product b. Events like Cricket matches, movies etc. c. These Mini – Theatres can be the Point of Sales for Tata Sky


Promotion The promotional strategies suggested are:
1. Packages for Special Events like the cricket World Cup 2. Targeting Tata employees could be a useful way pr promoting the product 3. Give the option of instalments and other promotional schemes to the new users 4. Tie up with real estate developers to target the new constructions

a. The number of old buildings being demolished and being reconstructed are also on the rise. This could be a major target for promotions
5. Door to door marketing should be used to heighten the awareness levels as well 6. Local Games Sponsorships can also be used to increase the awareness levels 7. Another way could be using the prominent part of the Building for placing Hoardings of Tata Sky

Ads a. Finding the strategic building in the locality b. Consideration can be in form of cash payment to the Housing society c. Providing free connections to Households in these buildings
8. Another new avenue that can be explored is the railway stations:

a. Posters on railway station roofs b. Tickers at Major suburban Railway stations 9. Use of Internet- Applications which involve sharing of videos on how one consumes TV, benefits of DTH over cable TV, etc. across social networking sites like Orkut, ibibo, etc.
10. 'Ek-pe-Teen and Do-pe-Paanch' the offer entails three months of free subscription on the purchase

of one connection, and five months of free subscription on purchase of two or more connections.
11. Tata Sky launched an interactive game quiz featured around MS Dhoni to coincide with the

Twenty20 World Cup. In the past, the DTH operator has been test-piloting feature by running several contests around programmes and the interactive features were made available to its customers.


Conclusion - Ansoff’s Matrix Market Penetration Tata Sky can penetrate the market by: 1. Proving Competitively Priced Services 2. Innovative and Superior Technology 3. Interactive Services 4. Customer Support Market Development Tata Sky can enter new markets by entering: 1. Rural Markets 2. Entering Neighbouring Countries (provided license available)
a. Enter Commercial Space – Offices , Coffee Shops, etc.

3. Enter Travel Area a. Long Distance Buses –e.g. Tie up with Raj Travels b. Niche Car Segment Product Development The product can be further developed with evolving time: 1. Combined with TV 2. Combined Dish for multiple Television (Society or Each Flat)
3. Tata Sky Plus is already a step in that direction

4. Target at educational needs in Rural areas where it could be used. 5. Stock Market Ticker and analysis can be included in Active


Financial Impact 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
TATA SKY FY 2007 Revenues Expenditure Operating Income EBITDA Margin Depreciation Finance Expenses (12%) PBT Less: Provision for tax Profit after tax Total Assets Debt Equity 190 365 -175 -92% 100 80 -355 0 -355 1000 667 333 (Rs Million) FY 2008 403 666 -263 -65% 133 106 -502 0 -502 1330 887 443 FY 2009 854 1183 -329 -39% 177 85 -591 0 -591 1769 708 1061 FY 2010 1810 2023 -213 -12% 235 94 -542 0 -542 2353 784 1568 FY 2011 3838 2878 959 25% 300 120 539 182 358 3000 1000 2000

Impact • • • • • Subscriber base expected to increase 1 million each year to reach 8.0 million by 2011 DTH business is expected to grow from Rs 0.19 billion in FY2007 to Rs 3.84 billion in 2011 Likely to achieve EBITDA margins of 25% by 2011, from negative EBITDA margins in FY2007 of Rs. 0.18 billion Funding over the next 4 years – Rs. 20 billion through a mix of debt and equity Break-even expected by FY2010-11


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