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Help ‘Hyper-competition has made DTH grow fast'
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#1
It's Vikram Kaushik's last month at the helm as MD & CEO of direct-to-home TV provider Tata Sky. Kaushik, who took over as founding MD of the DTH operator in early 2004 from Colgate-Palmolive, turned 60 in September (though he looks years younger!) and continues till the year end, after which Harit Nagpal, who is now MD & CEO-Designate, takes over. Kaushik, after six years at the helm, leaves a satisfied man, even though, he says, a corporate's agenda is never done. “What gives me satisfaction is that Tata Sky is clearly a premier DTH platform in the country — in terms of the standards we have set for product, service, branding and reputation. Also, we managed to build a management team which is very competent and understands the business well. When you enter a new category, you have to as much define the rules and help make the rules and set standards,” he says. In Chennai on a round of farewell visits before he lays down office, Kaushik, along with Nagpal, met BrandLine for this extensive interview on the growth of the DTH industry and how Tata Sky is innovating to be different in an industry in which so many competitors have popped up. Excerpts:

You've been six years at the helm of Tata Sky. Did you expect the rapidity with which the industry (DTH) grew? And what was the tipping point?

I believe the industry has grown in numbers much further than one would have expected it to grow. And the reason for that is that there has been hyper-competition. More people have come in than we expected ... and the degree of competitive participation and activity has spurred growth. And, it is interesting that a lot of these new-age industries, whether it is mobile telephony or IT and subscriber-based businesses such as satellite television … all these display very similar characteristics — where the value being offered to consumers is unprecedented. As among the lowest priced services, consumers get phenomenal value. I think this has been the key growth driver. On the other side, considering the economics of it, the cost of development was way beyond what one would have expected it to be.

How does it compare with other markets in its growth?

It's interesting. If you put a global perspective on it, worldwide, digitalisation is a process governments are paying for and they subsidise. If you take Japan, which goes 100 per cent digital in January, this has been subsidised by the Government, including the boxes that are going to be distributed to subscribers. There will be no analogue system in Japan after that. However, the ARPU (average revenues per user) there is around $15-16, though everything in Japan is at least three to four times more expensive than anywhere in the world. That's because the role of television in Japanese life is very limited. The quality of content is also not so great. Whereas in India the television content is fairly vibrant — and yet the prices this content is available for are very cheap.

And the process of digitalisation has been done by the private sector companies. For example, the thousands of crores spent on building this DTH platform, the Government is only sitting and collecting a share of the revenue. Instead of facilitating the process, it's creating hurdles. For example, the revenue share is punitively high. Taxation levels continue to be irrationally high. State Governments have become greedy and started charging entertainment tax. So if you look at the total basket of taxes on the DTH industry, it exceeds 50 per cent. And even this Rs 120 ARPU that the industry makes — half of it goes to the Government by way of taxes and revenue shares, and the balance is taken away by the channels.

Have subscriber acquisition costs come down?

The subscriber acquisition cost includes the cost of the set-top box, cost of the engineer who goes to the consumer's house to install the system, cost of setting up a system at the back-end when you register a call ... the entire call centre system, cost of marketing and advertising. This subscriber acquisition cost is significantly high. And the relationship between that cost and the revenue you earn, which is ARPU, is central to the health of the business. And what has happened in India is that a lot of new players who came in have a higher subscriber acquisition cost and lower and lower ARPU. For the sake of argument, if someone's subscriber acquisition cost is Rs 4,000 and his ARPU is Rs 150, how many years will he take to recover his acquisition cost? In addition, if 25 per cent of your subscribers churn … so financially speaking it's a very dicey game.

The Metro as a lifeline Bringing energy-saving to light ‘Hyper-competition has made DTH grow fast' ‘There's room for growth, but it should be remunerative' Hatching a new game plan An ad that comes alive Another logo bites the dust! Three features of tomorrow's brands Winter gloss Sugar control Brush-o-matic Resplendent you Smooth ride

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Yes competition have also helped bring down the price in a significant way.
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