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Chapter-1 Industry Profile 1 1.0 INDUSTRY PROFILE 1.1 Introduction Direct to Home (DTH) is a distribution platform for multichannel TV programmers on (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. 1.1.1 How DTH Work:- Following are the simplified steps on how DTH works: 1. Tata Sky uplinks all channels from broadcasters to its satellite (INSAT 4A). 2. The satellite sends these channels in digital format to the minidish fixed outside your home. 3. The minidish relays the channels to the digicomp which decodes the channels and sends them to your television, giving you an incomparable television screening experience with DVD quality picture and CD quality sound. 2 1.2 DTH INDUSTRY IN INDIA 1.2.1 DTH Players 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 eras every home which The Cable Television Ordinance Law was passed in January 1995. This enabled cable operators to provide channels and later on private companies were allowed to air their own channels and this lead 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. Until few years back there were as many as 1,00,000 VkyTSishAD3 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 players in the industry are Dish TV by Zee group, Tata Sky joint venture of Tata & Star TV, Big TV by Anil Dhirubhai Ambani Group, and Digital TV by Bharati Telemedia, SUN Direct from the promoters of Sun TV. There are some other companies who are contemplating to start their own DTH like Videocon. There is a massive 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. 1.2.2 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 (oligopolistic). 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 suppliers dominate 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 oligopolistic is aware of the actions of the others. 4 1.2.3 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 commercial and free DTH service. Hence we would focus our discussion on private players in the industry. As of now Dish TV, Tata Sky, Big TV, Airtel Digital TV, Sun Direct are in the industry. There are some other players like Videocon, who want to join this highly profitable industry. Since there are only 3 major players and the market concentration is very high Indian DTH industry is oligopolistic. DTH Industry Market Share 2010 Brand Promoter Market Share Dish TV Zee group 53% Tata Sky Tata Sons & Star TV 30% Big TV Anil Dhirubhai Ambani Group 15% Others (Sun Direct, Airtel Sun by SUN TV 2% Digital Airtel by Bharati telemedia TV ) 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. higher the HHI Index the more oligopolistic is the industry. 5 1.2.4 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 direct and stiff competition from various service providers which sends TV signals to homes. National 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. 6 1.3 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 settop box to receive and decrypt the signal. A Cable TV operator poses a serious threat and stiff competition to DTH Industry. Infect DTH industry is trying to eat the market share of cable TV operators. 1.3.1 CABLE HOUSEHOLDS IN INDIA 7 Number of Households(millions) Digital Cable Analogue Y Cable e a r s Conditional Access System (CAS): Conditional Access system was introduced metro cities of India to provide the subscriber 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 to 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. A researcher from Gartner 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 price as digital cable or DTH, so no price differentiation. 8 As the numbers of broadband users are increasing in urban and semi urban cities IPTV can pose serious threat to DTH player in long run. 1.3.2 INTERNET PROTOCOL TELEVISION (IPTV) SUBSCRIBER 4 0.010.030.250.512 Number of Households (millions) 2007 Y e millions a r s 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 this 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.
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