Most viewers seem to be preferring direct-to-home (DTH) to view television. However, cable (digital) will still be an important broadcast mode. This observation has been made by a FICCI-KPMG report on media and entertainment.
The number of DTH households in the country is set to go up from 37 million in 2011 to 86 million by 2016.
Digital cable, on the other hand, would see its subscriber base explode from 6 million to 75 million over the same period.
Not surprisingly, analog cable, which connects most households currently, would shrink from 68 million in 2011 to just 4 million by 2016.
A major reason for these trends is the fact that the telecom regulator (TRAI) has mandated compulsory digitisation of analog cables across the country. The four metros will have to finish this process by June 2012. As many as 37 cities will have to digitise by March 2013. The rest of India will have to follow suit by December 2014.
This means that a subscriber, currently on the normal analog cable system with no set-top box, has two choices. First, to move to a digital cable operator who provides a set-top box and a fresh cable system. The other option is to move to a DTH player. The regulator made these moves to check the rampant under-reporting of revenues by local cable operators (LCOs) under the current analog cable system. This causes huge revenue loss to broadcasters and potentially lost tax revenues to the government.
Dish TV, the largest DTH operator in the country, estimates that by March 2013, potentially 27 million subscribers would be up for acquisition by service providers. Both the DTH and digital cable network providers would be vying for the opportunity.
The DTH market has six players with the prominent ones being Tata Sky, Airtel Digital TV and Sun Direct. Videocon and Reliance Big TV have smaller market shares.
The digital cable market has just two players — Hathway Cable and Den Networks — which have presence in several states in India. There are some regional players such as SCV. That digital cable would provide significant competition is also evident from Dish TV's and Airtel Digital TV's reported numbers. Subscriber additions which were in excess of one million a quarter, a year ago, is down to 3-4.5 lakh over the past two quarters.
The other key aspect about digitisation is the substantial increase in average revenue per user (ARPU) that is possible through this mode. The likes of Dish TV and Airtel Digital TV generate ARPUs of Rs 152-160. The FICCI-KPMG report estimates ARPUs for DTH players to increase from Rs 160 to Rs 253 by 2016.
In the same vein, the same ARPU is also predicted for digital cable players as both would target the same subscriber base.
Subscriber acquisition costs vary from Rs 2,200-3,000 across the industry on account of expensive set-top boxes. So operators — DTH and digital cable — would be hard-pressed to undercut.