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Indian DTH firms bet on premium services, but cost a worry
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The Indian Direct-to-home (DTH) broadcast market is witnessing a flood of premium and add-on services like HD (high definition) and gaming features, but cost remains a stumbling block in efforts to woo customers, industry players say.

In the last six months, major players like Dish TV, Tata Sky and Airtel have launched high-end services like HD and PVR (personal video recording) in efforts to diversify their product in an increasingly crowded DTH broadcast industry, but the jury is still out on whether traditionally cost-sensitive subscribers will take the bait.

"This market will grow, but slowly. There is growth in value added services like games, banking services or matrimony, but when it comes to premium services like HD or PVR's, that will all depend on the cost of these services," says Salil Kapoor of Dish TV, which was the first to introduce HD in the Indian market.

Others are more confident that quality will triumph over cost in a market which is still dominated by cable operators, who provide cheaper service.

"15 to 20% of our new acquisitions have been on the back of HD sets, so we are seeing a response from Sec A and B centres", says Ajai Puri, Director and CEO, DTH, Bharti Airtel.

While the flood of added features are a bonanza for consumers, for DTH companies, already battling competition from local cable operators and MSO's (multi system operators), it also means a higher cost of acquiring subscribers.

A report by consulting firm Pricewaterhouse Coopers says DTH players are bleeding Rs 5 billion annually largely due to increased competition.

Players are facing challenges by having a very high subscriber acquisition cost. This cost is around Rs 2,500 to Rs 5,000 per customer for a few operators and this scenario is likely to continue, the report says.

The DTH market in India is currently at around 20 million subscribers and poised to grow, especially in rural areas, where penetration is presently at 64% as compared to 34% in 2008.

But most rural users are looking for that essentially Indian quality of value for money, making advanced technology an essentially urban need.

"You have to keep in mind that this is a cost sensitive market, and companies are selling services like PVR's at a subsidised cost to consumers. They will have to wait till these consumers get so used to it that they won't mind a cost hike, but I don't think that tipping point will come any time soon," says Timmy Khandari of PwC.

Source: Moneycontrol.com

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