Breaking all previous projections and estimates, the six-year-old direct-to-home (DTH) sector has crossed 22 million subscribers mark recently, spread between the six private DTH operators. But it does not stop here. The DTH industry is set to double itself in less than four years from now, experts say, making it the most dynamic and growth-led domain in the media and entertainment space.
However, on profitability and financial viability front, the DTH sector is marred by losses due to high cost of customer acquisitions and lower average revenue per users. According to the industry estimates, the combined loss of the DTH operators in last fiscal was in excess of Rs 4,500 crore on overall revenue of close to Rs 3,000 crore.
?This sector can only become profitable once an operator acquires over 8-9 million subscribers,? said Jawahar Goel, MD, Dish TV. And most operators, barring Dish TV are far from acquiring 8-9 million subscribers for now. According to industry experts, the total number of DTH subscribers to be added in 2010 will be close to 8 million while overall, the sector will see over 44 million subscribers by 2014.
However, the intense competition between the six operators is likely to put the Arpus under pressure this year. DTH Arpu in 2009, according to experts, came down compared to 2008 due to intense competition amongst existing players. The current Arpu levels in the country vary between Rs 85 to Rs 450 per month across platforms and user groups. Industry experts predict that by 2014, the DTH Arpus will cross Rs 200 per month and comparable to the cable Arpus.
Media Partners Asia (MPA), an international media research agency predicts that most DTH firms will only make money after 2014. In its report published some time ago, MPA said most DTH operators like Tata Sky and Sun Direct tend to lose over $500 million each year, respectively. But with each new customer acquisition, the problems for the sector are also mounting. It is among the most heavily taxed sectors attracting an aggregate of 45-50% taxes. It is the only sector that pays for entertainment as well as service tax to the government in addition to 10% of its annual revenue to the government as a licence fees.
Additionally, the issue of interoperability of set top boxes threatens to increase the costs for all operators. While the Competition Commission of India is already batting for interoperable DTH boxes, recently at the behest of a Chennai-based NGO, the Telecom Disputes Settlement Appellate Tribunal issued notices to all operators to respond to interoperability in DTH boxes. So far, consumers get only a proprietary DTH set top box when they opt for the services. This means, if consumers of an existing service provider want to switch, he cannot without having to buy a separate set top box of the new DTH operator. While government norms for DTH support technical interoperability, it has not been able to enforce it upon the players.
However, experts say DTH has several inherent advantages that makes it grow at such a break-neck speed. DTH, according to experts, has played the biggest role in digitalising the country?s analogue cable distribution platform that reaches around 90 million homes. The advantage of DTH as a platform includes a user-friendly interface and a large number of channels as compared to the analog platform. It is likely to continue to increase penetration. ?We estimate that the DTH subscriber base could reach 43 million by 2014,? says the latest Ficci-KPMG report on media and entertainment space.
According to Tony D?silva, COO, Sun Direct, digitalisation, equitable pricing and level playing fields in the DTH sector could change the scenario for growth of DTH in India. The good news for DTH is that subscribers are coming from states with class II and III towns and not just metros. For example, in Rajasthan and Maharashtra, the platform has found acceptability in a lot of small towns and cities, states the Ficci-KPMG report.