The journey of Indian Television industry so far has been very interesting and has witnessed exponential growth. Starting with one channel Doordarshan, liberalisation in 1991 opened the Indian television market. Today there are close to 800+ channels and still counting. With the growing demand for cable from subscribers, there was a huge leakage in tax revenues to the government due to unaccounted or under reported subscribers in the cable distribution.
To curb the leakage, TRAI in 2012 issued a mandate to digitise the entire Indian cable TV distribution in a phase-wise manner.
Hence arrived the set top boxes. This was the second biggest game changer in the Indian television market. There was a shift in power and monopoly from Local Cable Operators (LCOs) to Multi-system Cable Operators (MSOs). Simultaneously there was strengthening of Direct to Home (DTH) players in the TV distribution industry, emerging as a competition to the cable players. So the question that looms is can DTH replace the cable MSOs?
The rise of DTH players in early phase of digitisation:
DTH players have predominantly concentrated in the rural areas where the cable MSOs have limited reach. With the onset of digitisation, DTH players got an entry to the urban markets in the early phases of digitisation. Urban subscribers now have an option to choose either from the set top boxes from the local cable operators or DTH players. In India, there are a total of 6 private and one national DTH players. During this time, we saw an increased marketing and advertising spending from the DTH players in their pursuit to increase their market share in the urban markets.
Can DTH replace the cable players:
The answer is a big NO. While the DTH players emerged in the digitisation phase I and II of the cable market in India, cable MSOs still have an edge. According to the set top box seeding status of phase II released by government, DTH players in India could grab about 30% of the market share while the rest remained with the Cable MSOs. Hence we see slow adoption rates of the DTH in India. The reasons for the same would be a discussion for another day.
Phase III and IV digitisation scenario:
We are currently in the phase III of digitisation, which is considered to be tough since the market is highly fragmented. Some of the key trends to look out for are:
- Extensive competition from the DTH players since this has predominantly been their market. In this market, DTH players score over cable MOSs since they can make use of the existing infrastructure to reach the subscribers without the added burden of infrastructure
- Slow adoption rate by the sub-urban and rural population, since the initial set-up costs will be high
- Huge investments from the MSO to develop the distribution infrastructure in these markets
- Consolidation of the fragmented local markets through partnerships and acquisitions of the local players
- Lower Average Revenue Per Users (ARPU) from this market in the initial phase since the subscribers would be sceptical in the early adoption
- Since this market holds huge volumes, this market will play a major decision maker in the market share. But the addition of high volumes would not reflect in increased revenues
Key trends to lookout for in the national markets:
In the national market the key trends that would be observed are:
- Consolidation of the MSOs at the national and regional level. Today there are 6000 MSOs and 60,000 LCOs. Consolidation could lead to emerging of 4-5 MSOs at the national levels. Majority of the consolidation will occur through acquisitions
- Offering of multi-play opportunities by the MSOs. Currently some of the prominent national cable operators like Hathway provide cable and broadband services. This will extend to multi-play opportunities where by the cable MSOs will provide along with TV and broadband, VoIP and other services
How MSOs can increase their ARPU:
On one hand, while MSOs are busy acquiring customers and ramping up their market share, they also need to think of ways in which they can increase their ARPU and grow profits. While MSO have very low differentiation amongst each other, they will need to focus on customer experience to keep the subscriber churn numbers in check and differentiate themselves from competition. Cable MSOs should:
- Analyse the consumption patterns of the customers and up-sell the offers and packages in real-time
- Target the high value segment of customers and provide them with personalised offers
- Provide small bundles and top-up offers in the rural market to increase the consumption from this market similar to the sachet selling by Fast Moving Consumer Goods (FMCG) players in the rural markets
- Increase the adoption of internet adoption in the rural markets cable MSOs should offer free introductory trial packs clubbed with the cable TV. Consumption of internet can be increased by giving attractively bundled offers
- Diversify and invest into the enterprise markets which would earn higher revenues compared to the retail markets
- Foray into the digital markets like Machine-to-Machine (M2M) which will drive the growth in the future.