* BPO employee Manjeet Singh found a match in Gurpreet Kaur, not by leafing through the matrimonial columns of national dailies, not even by surfing marriage portals. All it took was the some fiddling with his remote.

* Kakoli Sen an astro-addict and TV buff doesn?t bother to scan newspapers daily to check up on her fate anymore. She simply clicks on the horoscope special service on her TV screen, the new value added service that her DTH operator has started offering.

The direct-to-home (DTH) industry in the country is emerging as one of the most hotly contested business spaces with its price wars, freebies and value-added services growing faster than a greased leopard. And in an interesting departure from international norms, where two to three rule a single market, the Indian DTH space in India is expecting at least seven players rushing in to secure their positions.

While there are just about two commercial players at the national level?Tata Sky (a Tata Group and Star joint venture) and the Subhash Chandra-owned Essel group-promoted Dish TV?many others are getting ready to flex their muscle. Take Sun Direct. Having made its presence felt in the southern region, it is finalising plans to scale up operations in the northern market. Then there is the non-commercial DD DTH, the largest player in the segment in terms of the number of subscribers.

But that?s not it. There is a whole line-up of players knocking on the DTH door. Reliance ADAG?s venture, alternately called Blue magic and

Big TV, Bharti group?s offering branded Bharti Telemedia and Videocon?s proposed venture are almost ready for launch.

Interestingly, the three commercial players from the first wave have one common link?their parents are lead broadcasters: Star TV in the case of Tata Sky, Zee TV in case of Dish TV and Sun TV in case of Sun Direct.

Unlike in the first wave, in the second round, at least two of the three proposed DTH ventures will be floated by telecom players. No prizes for guessing who we are talking about.

For one, Vikram Kaushik, CEO, Tata Sky, is upbeat about the potential of the market. ?With the entry of new players the customer base will only increase. The real winners will be consumers who will get immense choice,? he says. Jawahar Goel, managing director, Dish TV echoes the sentiment when he says, ?Multiple players will hasten the adoption of category. Dish TV has grown faster in a dual-player scenario than when it was the lone player in the category. The major players have already increased their advertising and communication budgets. This has improved awareness levels and helped consumers understand the category, its benefits and the value it adds to their entertainment needs.?

In sharp contrast to the optimism of the industry leaders portray, the Media Partners Asia Report (MPA) predicts consolidation in the DTH market. Out of the six DTH players on the prowl, only three will survive by 2012 when the DTH subscriber base will touch 25 million (against 3.2 million in 2007), says the report.

Star wars

Like in the telecom space, the DTH market is in the throes of an intense price war between Tata Sky and Dish TV. The war for competitive pricing culminated in Dish TV announcing a free set-top box (STB) offer in one of its commercials. Tata Sky went to the monopolies and restrictive trade practices commission (MRTPC) and High Court charging Dish of using deceptive advertising wherein it doesn?t clearly mention that the STB is free in only one of its several schemes. While the final order of the MRTPC is awaited, Dish charged Tata Sky of misleading consumers with a price slash which it did by removing ESPN and BBC from its basic offering.

In the absence of other differentiators like content exclusivity that act as the deciding force in global markets, price ward and mud-slinging is expected to intensify as new entrants with deep pockets invade the space.

Then, much like the celebrity-driven proxy wars fought by cola giants, DTH players have pitted Shah Rukh Khan (Dish TV) against Aamir Khan (Tata Sky) to get the message across to consumers. ?In 2007-08, we spent upwards of Rs 100 crore on promotion. In the 2008-09, we plan to increase it substantially for customer retention and new customer acquisition,? says Dish TV?s Goel. It is anybody?s guess if the new players will take on the two Khans available?Salman and Saif Ali?to compete on the aspirational level or adopt a completely new differentiation strategy.

Core differentiators

Globally, niche content acts as the core differentiator but in India the regulator has ruled out content differentiation as USP till the DTH market matures. Despite that, the existing players have experimented boldly by investing in value-added services (VAS). Says Kaushik, ?Tata Sky has been the first DTH company across the globe to launch interactive services that cater to the interests of all age groups. We have eight interactive services under the Active umbrella.? On its part, Dish TV has launched Live TV aboard aircrafts, mobile vehicle, buses, ships, and computer and has recently announced few more VASs in the astrology and matrimony verticals. Analysts say the next big thing on the DTH platform will be the personal video recorder (PVR). PVR is something like VCRs of yesteryears, which allows the consumer to record and watch programmes according to their convenience. All major players have announced their plans to launch PVRs within a year?s time.

Financial goals

DTH, as a business, has a long gestation period and none of the players have broken even till now. Goel expects Dish to be EBITDA (earnings before interest, taxes, depreciation and amortisation) positive by mid 2009. The MPA report expects Tata Sky to break even by 2012. The average revenue per user per month (ARPU) calculated by Kotak Institutional Enquiries in mid-2007 was $2.7. ARPU for most big DTH players in Asia Pacific hover at $21.

Today, the ARPU for pay-TV subscription doesn?t exceed $4 to $6 a month, 10 to 12 times lower than the developed markets, points out an analyst. According to an industry analysis by Sivasundaram, the operating costs command 50% of the total costs of a DTH venture. Of this operating cost, 69% goes to content acquisition; for players who don?t have an association with major broadcasters, this may shoot up further.

Given this, players are devising innovative strategies to earn more revenues from advertising. Goel sees advertising becoming a major money earner in the near future, ?We are working on a model where a channel can give us clean feed and we will sell the airtime ourselves on a revenue sharing basis,? he says. ?Dish TV will let its consumers respond to these ads with the click of a button. They will be able to get additional information on their television screens immediately.?

Commenting on the model that Tata Sky is working on, Kaushik says, ?In the past, Tata Sky has provided exclusive space for advertisers on its interactive applications to talk about their products, features and costs over 2.3 million to subscribers directly. This is a huge opportunity for advertisers as the SEC A and B class target the audience readily available with their demographic details. The advertiser has the exclusive right to profile their product 24X7 for a stipulated time period without any other competitor eating into its space. Second, the viewer can watch the ad message on opt-in basis unlike the conventional TV advertising. Third, the advertising message on Tata Sky is available on all-day basis unlike the 30-second ad on television. Companies like Samsung, Tata Indicom and Whirlpool have booked the space already.?

Carriage fee from broadcasters is another source of revenue for DTH players. Dish has built in Rs 60 crore to be earned from carriage fees this fiscal while Tata Sky doesn?t comment on the issue as a matter of policy.

Teething troubles

A technology issue is simmering in the DTH backyard. In the event of Trai holding that STBs should be technically interoperable, players have to comply, and do it fast. The commercial players, with the exception of Sun Direct, use MPEG 2 compression technology, while those in the wings are expected to come in with MPEG 4 technology, which will allow them to carry a larger number of channels. The new players say that MPEG 4 will also enhance picture quality; expectedly, the existing players pooh-pooh these claims. Also, interoperability will not be possible for customers on MPEG 2 technology. Trai feels market forces will ensure the old customers to get the benefit of interoperability too.

In the backdrop of weak financials, 2008 saw all private DTH players forming an umbrella body, DTH Operators Association of India, and asking the government to address the pressing issues. ?The DTH industry is taxed so much that up to 56% of the fees from subscribers goes away as tax,? said Goel. Apart from this, the lack of content exclusivity, interoperability issues, weak financials, the unavailability of transponders, poor services during rains are some of the challenges before the DTH players.

Road ahead

Despite the attendant problems and impending competition from services such as Headend in the Sky (HITS), IPTV and existing cable in analogue mode, the MPA report bets on DTH. It feels DTH service providers have a direct relationship with both content providers and customers leading to stronger brand recognition, greater scale, and therefore, a more viable business proposition. The pedigree of new players, that hope to be backed by their parents financially, portends well for the sector. So let?s wish Manjeet and Gurpreet a happy married life and Kakoli some fruitful star gazing on TV. And the next time your go hunting for a match for yourself or for someone else in the family, you know which button to press.

How it all began

The DTH story in India began due to conditions much different from other television markets in the world. With cablewallahs reporting much lower number of connections than what they were actually serving-to save on the fee they were paying to broadcasters-the government set on the path of digitisation. The aim was to capture the number of households being served with some degree of accuracy. The process had full support of broadcasters who were seeking higher rates from potential advertisers.

To make the non-addressable system addressable, the conditional access system (CAS) was rolled out in Chennai in 2003 and later in Delhi, Mumbai and Kolkata, following the guidelines of The Telecom Regulatory Authority of India (TRAI).

The real potential of DTH will be realised as CAS rolls out in other cities. According to industry estimates, there are about 129 million TV homes currently, of which around 78 million have a cable connection. The number of DTH households is 8 million plus, with Dish TV and Tata Sky accounting for around 2.5 million and 1.5 million net subscribers respectively. Sun Direct, which started commercial operation in January 2008, had added 3 lakh in its kitty by March 2008 (MPA report). And DD Direct ruled over the rest.

By 2010, about 16% of an estimated 100 million conditional-access households are expected to migrate to DTH. And by that year, according to Ernst & Young projections, there will be around 19 million DTH homes. ?The Indian market has a very large untapped consumer base. This is coupled with large diversity in terms of language, socio-economic status and geography. This provides immense opportunity for multiple players,? said Jawahar Goel, managing director, Dish TV.

DTH provides subscribers the advantage of geographical mobility. In other words, once a customer purchases DTH hardware, he/she can continue to use the same unit anywhere in India.