DTH Games begin- Elephants will win

The arrival of the telecom giant Airtel has made the DTH arena crowded and fun to watch. Not only was the Airtel’s teaser used by BIG TV, the offers from early entrants like Tata Sky Dish TV have seen a never before decibel levels.

At stake is the current 6 million household market which is expected to reach 37 million by 2010- assuming a monthly billing of 7 USD, the market (from subscriptions) would be 3.2 Bn USD- and this is only a conservative estimate !

DTH industry has some very peculiar characteristics:

– The installation costs and hardware costs are significant- almost equal to 5-6 months of subscription revenue.

– The “running cost” for an incremental customer is negligible and hence one would assume that early scale is what these players will target.

– However the acquisition costs (largely due to distribution set-up and sales team management) increase with increasing sales targets.

– The current pricing is already at levels where none of the players make money. Also it is expected that barring a few offers,all the 4 players will have similar pricing- so pricing is not expected to be a differentiator.

– All the players merely “distribute” content- hence there is not much content-based differentiation amongst players.

– Few weeks ago, ET carried a detailed article on how pay-per-view(PPV) content could become the key differentiator in this DTH war. It focused on movie as the key PPV trigger, where it is expected that users would pay upto Rs 50-75/-(1 to 1.5 USD)for a movie.

Given the above, what strategy do you think these Big 4 must be working upon?

Well, here’s my take on it:

1.Target Scale at pace: Since the pricing is not expected to go up, scale is the only way the DTH players can recover their fixed costs and start making money.MicroEconomics 101 taught that if MVC was negligible and MR was more than MC, produce more units.

2. Attack the geographic long tail early on: The 2 early entrants are not present in smaller towns , the BIG TV Airtel TV should look at attacking these set of customers early on. Since here the customers would have little choice, one can assume higher conversions and low turnover. Meaning sustained revenue streams.

3. Low cost distribution : BIGTV & Airtel have an enviable distribution network that touches the remotest of places in India- thanks to their Telecom ventures. Dish TATA SKY will not have this advantage and they should look at tie-ups to leap-frog this dis-advantage. A tie-up with Vodafone(telecom),forwarding agents of FMCG co’s could help increase their footprint whithout large scale investments

4. Pricing innovation: While the pricing bands will remain common across players, one could look at coming up with innovative packages e.g. Hindi only channels for the cow-belt, or Malyalam + English for the Mallus in Gods own country etc. But the problem here is that since content is not “owned” by the DTH players, any success in innovative pricing/bundling will be replicated in the industry

5. Focus on category conversion : I remember the King Khan ad on “Dont be santusht!”- and I feel thats the right path to take in terms of the communication positioning. Instead of fighting over a share of current DTH subscribers, why not be the leader who is synonymous with conversion from cable TV to DTH. (you suddenly can speak to 80 million cable TV viewing households). Such a move will help the competition also (as some would convert from cable to the competing brand), but if one can manage to get the biggest mind share of these converting customers, the rate of customer acquisition would be highest.

6. Feature differentiation : True that content is not owned by the DTH players, but they can still do a lot more to woo the customers e.g.

a. Make the box into a poor man’s PlayStation.There is only so much TV that a person watches. And if the quality of audio/video doesnt impress him, make his box a high-end gaming console (if he could “request” games – download and play) he might buy the DTH connection as the Diwali gift for his 10 yr old son.

b. eLearning: This is already being done, but the few users who I know have experienced it have complained about the lack of quality content.

c. True PPV/COD- The current options of PPV are only disguised content-on-demand (COD) coz the user is not choosing from the universe of titles the specific movie she wants to pay for. She gets a calendar of movies being broadcast during specific time slots and has to pay for that. If you ask me, its like paying for watching a movie on the flight in the big screen in front of you- I would never be happy paying for it- coz i can never understand why I should be charged specifically for a broadcast content. So why not give the set-top box the ability to “download” content on demand and give user the true power.

7. Implement offers which dont impact marginal costbr /E.g. two connections in a household for the cost of one (for 6 months). Is pretty clear that not many customers see value in switching to DTH at the current price points. Hence the challenge is to increase the percieved value of benefits at the same price/cost.br /br /br /While these 4 compete to sit on the idiot-box, the only thing I am sure of is that winner will take it all-The elephant will do the victory dance !