The new tariff regime (which allows consumers to pay only for those channels they want to watch) has placed the direct-to-home (DTH) companies such as Tata Sky and Dish TV on a higher pedestal than the cable operators. Despite an erosion of the active subscriber base of cable and satellite homes, which as per the recent KPMG Media and Entertainment Industry report, has shrunk by 12-15 million in the last one year, the DTH companies, saw a marginal growth in their subscriber base from 62 million homes in FY2018 to 67 million in FY2019. The biggest losers were the cable networks whose pay subscriber base dipped from 91 million homes in FY 2018 to 83 million in FY2019.
The DTH companies also had another reason to smile along with their cable counterparts because despite the subscriber base shrinking the ARPU (average revenue per user), which according to the KPMG report, had declined in the first three quarters of FY19 for both DTH and cable operators, increased by 10-25 per cent in the last quarter due to the minimum payouts on account of the Network Capacity Fee (NCF) of Rs 130 plus taxes, especially for phase three and four subscribers whose ARPUs were reportedly much lower before the regime change. So, while the active subscriber base declined, growth in ARPUs covered up a large part of the decline in the subscription revenues, leading to an overall growth of 8.1 per cent for the year FY19.
The DTH operators by virtue of their consumer-friendly approach in the new tariff regime have an edge over the cable operators. "They have done better than cable. DTH has always been about packs, whereas cable subscribers for the first time are figuring out how to use packs," points out Girish Menon, Partner & Head, Media and Entertainment Practice, KPMG. However, with technologies such as 5G and and fibre-to-home becoming a reality (which would mean that consumers will no longer need a distributor to access content), DTH companies are increasingly feeling the need to reinvent themselves. Companies such as Tata Sky have started offering services such as broadband, which is not part of the DNA of its business model. "DTH by definition is not a wired product, whereas cable is a wired product," explains Menon.
Tata Sky has also joined hands with digital platforms such as Hotstar, Sun NXT, Eros Now and Hungama Play to launch their new digital content service, Tata Sky Binge. Priced at Rs 249 per month, Tata Sky Binge also offers 5,000 movie titles from the Tata Sky VOD (video-on-demand) library and catch-up TV content for seven days. Similarly, Dish D2H has launched its own OTT platform, Watcho, which targets young millennials. The platform offers 1,000 hours of library content including movies and short films. It also has short form originals along with user-generated content in Hindi, Kannada and Telugu. The DTH companies are distributing digital platforms in order to protect themselves from not just the platforms per se, but also from the telcos, which have started offering content services by aggregating both linear and non-linear content. "We see India as a traditional and digital market and not a traditional or digital scenario. Considering this, it is important for DTH players to adopt digital models but also to provide the best of both the worlds to the customer using various technologies," defends Anil Dua, Executive Director & Group CEO, Dish TV.
The advent of Reliance Jio's Fibre to home service may further increase the woes of the DTH companies, points out Pankaj Krishna, Founder, Chrome Data Analytics and Media. "Jio is promising 4K TV sets to its consumers and this could create problems for DTH companies in the long run."
Dua of Dish TV argues that there is a role for various technologies to cater to various segments and geographies. "We strongly feel that DTH technology, which has unbeatable reach and ease of installation, when coupled with new technologies and our in-house proprietary innovation puts Dish TV India in a good position to offer the best of both linear and on-demand content to our subscribers."
In a bid to reinvent, are we also going to see DTH companies creating their own content? The likes of Tata Sky already have a host of content offerings (which are not satellite channels). "They may start making their own content, but their focus right now is less on content and more on managing their access issue and what's the offering they are making to the consumer," points out Menon of KPMG.
Krishna of Chrome expects further consolidation. While the first round has already happened with Videocon D2H being bought out by Dish TV and Dish is supposed to be in the final stages of selling out to Airtel, Krishna, in the long run expects the DTH industry to be a two-player market.