DTH subscriber growth story remains recession proof, claims industry

The industry captains, however, refuse to believe that recession is the culprit and term the slump as post festival lull. ?Small ticket buys like DTH connections haven?t been affected quite akin to the FMCG sector, which hasn?t seen any major impact as a result of the downturn,? said Vikram Kaushik, CEO, Tata Sky, the second largest DTH player in the country by market share in terms of subscribers. However Kaushik adds on that the consumer has definitely become more price sensitive, an indicator of which is that Tata Sky is witnessing an increasing number of buyers opting for its cheaper and most basic package. Company officials of Tata Sky, the only DTH player to have launched the high-end product personal video recorder(PVR) also admit that the real demand for PVRs till now hasn?t matched the expected demand but the company is optimistic about the growth potential. It believes that such niche products generally pick-up through word of mouth persuasion which takes time.

Dish TV, the market leader claiming around 5 million subscriber base, also feels that the industry is largely immune to recessionary pressures. Salil Kapoor, CEO, Dish TV said ?We as a company haven?t had a reason till now to believe that the sector has succumbed to downturn.?

Recently, however, while celebrating its reach to 25 million viewers, Kapoor had underlined the company?s strategy of emphasis on subscriber retention along with subscriber acquisition.

?Although our monthly churn out rate of 0.5% is low by global standards, we would like to reduce it further by concentrating on the existing customer base. As the market leader we have reached a point, where we need to change our strategy from only subscriber acquisition and advance it to retaining our customers along with acquiring new subscribers,? said Kapoor.

The industry?s business model is such that we have to heavily subsidise set top boxes and we need to retain our subscribers for a minimum of two to three years to compensate the losses, added Kapoor. While the new entrants cannot afford to focus on retention as they are in a different stage of business life cycle, time has come for us to embrace this paradigm shift, he further said.

According to experts, the churn out rate for the industry stands at around 12% annually. The rate of subscriber acquisition for Dish TV had slowed down in December (along with other players), soon after it announced an increase in the price of set-top boxes.

N Arjun, executive director, Bharti Airtel Ltd also agreed that DTH sector has remained recession proof. Refusing to divulge company?s subscriber growth figures, he said ?We are extremely happy with the acquisition figures. Within six months we have taken our offering from 62 cities to 4100 towns. That should serve as an indicator of our satisfaction level?.

Arjun also said that top 32 metros account for 35% growth in the DTH industry,while the rest of growth is coming from cities and towns of tier II and below. Kaushik also agreed that 30 to 40% share of growth is being accounted for by small towns. Tata Sky claims a subscriber base of over 3.5 million while the ADAG group offering BIG TV claims that it has added 1.5 million customers in last seven months since launch.

The industry was adding about 3 lakh subscribers per month in early 2008 with three players namely, Dish TV, Tata Sky and Sun Direct. It is currently adding 6 to 7 lakh subscribers per month with five players in the market. Big TV and Airtel Digital being the newest entrants.

An Ernst & Young?s projection expects DTH to cross 19 million households by 2010 while the industry believes it will cross the 20 million household mark by 2009- end.