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Everything is fair in love of DTH war
"The quickest way of ending a war is to lose it," is what George Orwell once said. But this logic is certainly not applicable to the ongoing war in the Indian direct-to-home (DTH) sector. The little dish antenna sticking out of the balcony with the de-scrambling box on the television that allows you to eliminate the cablewallah is not as simple as it looks.

The current industry estimates peg that there are about 10 million direct-to-home (DTH) subscribers who have adopted this new technology, but the market right now is growing at an exponential rate and India has already surpassed Japan to become the leading DTH market in Asia.

Interestingly, from an Indian point of view, the market right now is still considered to be at a nascent stage and there are already six major players in this market who are looking at expanding the market further at an exponential growth rate.

Industry experts believe that the satellite TV market would be nothing less than 25 million by 2012. What's more, it is expected that apart from Videocon, one can expect another 2-3 players to enter this industry in the near short-term.

And this is not forgetting the fact that there is already a gruesome tussle amongst the current five players (not including DD Direct) that are actively looking at how to topple each other and bag more subscribers in their kitty.

From doing blatant comparative advertising to ground level tactics, the mud-slinging has gone to such an extent that the companies have even gone to steal the teaser ads of their arch rivals.

One would remember how Airtel Digital had designed a teaser campaign to announce their arrival, where the ad had a plush red sofa landing with a thud and the tag line at the bottom reading – 'See you at home'.

One would also remember that even before Airtel Digital could break the campaign or get it to its envisioned end, Big TV (from the ADAG stable) hijacked the teaser by floating their own campaign with a similar plush sofa falling with a more similar (and hurting) thud.

And this war is getting more intense with every passing minute. The reason for this is very simple – in most developed countries, including America, DTH competition is mostly into providing niche content; that is, all the big networks either have their own DTH services or they form exclusive agreements with specific DTH providers, encouraging customer to choose which channels they would want to watch and which they would rather give a skip.

However, this is not the case in the Indian market as the Telecom Regulatory Authority of India (TRAI) has clearly mandated that no broadcaster can offer content exclusively to a specific DTH player or have their own channels that would not be available on the other platform.

The logic given by TRAI is that right now, the market is in too early a state and it is only when there would exist perfect competition that one can look at allowing content differentiation. Admittedly, some players in the industry do not agree with this point of view.

Vikram Kaushik, managing director and CEO, Tata Sky, firmly states, "With so many players already in the market, I see no logic as to why we should not be allowed to offer content differentiation."

Justifiable? Perchance, as it is true that in the entertainment industry, it is the content that reigns supreme; not so in the Indian context. Leave alone channels, even the movies that are available on the pay-per-view option of various DTH operators is most of the times exactly the same.

Technology, what could have been the other differentiator in this industry, also does not hold its weight in water, as most operators are operating on the same technology platform.

If one considers market dynamics, Tata Sky logically has been in an advantaged position to cater to the la-crème of India as it is the only DTH provider to offer a separate set-top box that enables consumers to pause/rewind live TV, apart from even allowing them to record their favourite programmes.

But even this so called 'differentiation' is quite temporary, Big TV and Sun Direct are offering similar set top boxes. To that effect, Sun Direct is still quite tight lipped about its venture in this field, but insiders at Big TV have already revealed that their pricing for a similar service would be around half the cost of Tata Sky.

Applying similar strategic think, with competitive rivalries expected to go astoundingly high, most players in this sector have chalked out large advertising budgets, and even cornered many celebrities as brand ambassadors.

Dish TV, the market leader in the DTH pace, has recently extended its brand association with Bollywood actor Shah Rukh Khan for another 18 months. As brand ambassador, Khan will play a key role in product communication on television, in print and outdoor media. The company had first tied up with Khan in 2007 to endorse its DTH service.

Salil Kapoor, chief operating officer, Dish TV, said, "SRK appeals to a universal audience just like our products and was therefore a natural fit for the brand. We believe his endorsement of Dish TV reinforces the attributes of the brand. Having established our leadership, Dish TV is now poised to scale new heights."

Also as a matter of fact, Airtel Digital had as many as 10 celebrities in their launch ads; and the company has set an ambitious target of grabbing a market share of 20 per cent in their first year of operations.

And the claimed USP? N. Arjun, executive director, Bharti Telemedia, says, "Airtel is a well-established brand in the Indian market and as 80 million of our customers have already experienced our services, it would be easier for them to draw some kind of a connect."

Bharti Airtel also believes that it has a tactical advantage as it is the only DTH provider offering World Space Radio. But given the recent negative bankruptcy news about World Space, this tactical claim seems quite presumptuous.

In summary, what gives in this sector is finally the price. Companies, unable to differentiate on either quality, service, style or technology, or attempting to skim the market with quite simplistic price leadership strategies.

Earlier in the year, we had the first entrant in the DTH segment, Dish TV, announce that on a payment of 12 months subscription, one would get a set-top box for no cost. This was followed by the entry of Big TV, which used the straightforward tactic of offering its services at the lowest per month subscription.

However, the fuel in this fire was provided by Sun Direct, an 80:20 joint venture between Maran Group and Astro; Sun is a very dominant player in South India and has now made an aggressive entry in the northern part of the country, which offered set top boxes free to the consumers with no conditions attached.

"We are the only ones in the market that not just offer competitive prices at the entry level but also have attractive regional packages," states Tony D' Sliva, COO, Sun Direct.

Add all this, and you get a Russian goulash that looks deep red in colour, especially in the loss statements of the players. DTH is clearly a long term game. Most analysts even feel that in the coming 2-3 years, subsequent to the bloodbath, there would be some players looking at making an exit and some form of consolidation would take place.

Dish TV has had the first-mover advantage, but, for the DTH company it's a big money game likely to bleed some of them to death. The DTH venture has burnt a Rs 500 crore hole in the Essel Group's 2007-08 bottom line.

For Dish TV, DTH was obviously a huge investment arena and the impact on the company has been also very large. Little wonder Dish TV has been spun off into a separate company so that its losses don't impact the main television and broadcasting business of the Essel Group.

Like Zee, for Star TV R too it has meant sinking money into an ever expanding trough. In the abortive 1999 round when Star tried to launch its DTH service. that saw many heads roll. the rentals for the transponders booked on the PanamSat– 4 satellite cost the company about Rs 170 crore. The salaries and other logistics that had been put in place before then I&B minister, Jaipal Reddy, kayoed the project would have cost Star another Rs 150 crore.

Anand Shah, telecom analyst with Angel Broking, comments, "There is going to be a fierce battle as all the players have deep pockets. Dish TV would surely have some advantage from the fact that it was the first player; though even Big TV and Airtel Digital have a fair chance."

But contemporary analyst thought does portend that India being a very unique market with each state/segment quite different from the other, there would not be any one leader on a pan-India basis; and there would be geographic leaders – like Sun in the South.

That means that instead of attempting to focus on the country as a whole – and spreading out limited resources – companies in this sector should attempt to target specific markets where they can leverage their distribution network much more optimally than competitors.

Add to this the focus on switching costs. The higher the switching cost for the consumer (to switch to another provider), the higher will be the number of retained customers. But that, as they say, is easier said than done, as consumer loyalties seem to be as fickle as a roulette table's guarantee of giving back money.

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