The consumer truly is king in today’s day and age with multiple avenues of content consumption spoiling her with choices. As if television networks and OTT (over-the-top) platforms were not enough, direct-to-home (DTH) players too have made a splash in the content arena.
DTH operators have been directing their energies on value-added or interactive services for some years now. But as the consumer base expands to newer markets including rural, players are stepping up their game. In fact, all major players of the hyper-competitive Indian DTH industry, including Dish TV, Airtel Digital TV, Tata Sky and Videocon d2h, have a plethora of interactive and VAS offerings across various genres ranging from music, movies, gaming and learning. In addition, they have also launched apps on mobiles and tablets through which subscribers can watch live TV, catch up TV and video on demand (VoD) for an additional monthly fee. While there are several players along the media value chain who have launched online platforms for on-demand content to capture the surging viewer base, DTH operators have a key advantage in monetising these viewers through their ‘TV Everywhere’ apps, given their already existing payment relationships with subscribers.
Like telecom, subscribers don’t opt for a DTH service for its VAS offerings; these are just add-ons to engage the customer. It may attract her but will not be the main reason to retain her. But these value-added services, priced between Rs.5-60, can help players increase their ARPUs (Average Revenue per User) moderately to significantly.
All these make DTH a formidable opponent of cable TV. While digital cable TV may also provide interactive elements, the problem is that MSOs (multi system operators) are not directly dealing with the end subscriber and there are LCOs (local cable operators) in between — a sector which is highly unorganised. As cable TV digitisation faces hiccups, are DTH operators poised to gain an edge with VAS?
A plethora of possibilities
Historically, interactive services in India predominantly focussed on genres like music, kids, religion and English learning. Some DTH players toyed with services like pizza delivery and movie ticket booking but withdrew these later due to insufficient traction.
Globally, niche content acts as the core differentiator but in India the regulator has ruled out content differentiation, so VAS has become the differentiator. The DTH sector presently has a good consumer base in the range of 45-50 million, thus prompting players to spice it up further with value-added services.
Adds Harit Nagpal, MD and CEO, Tata Sky, “The digital medium offers choice. In a way, analog is a buffet service while digital is à la carte.” Tata Sky has 14 interactive services presently and the basket is growing. Each of these services has various price points that range between Rs.30-50.
VAS in DTH has found good acceptance among premium consumers due to their ability and willingness to pay and as a result, they are looking for additional services over and above regular broadcast channels.
Nagpal adds that from Tata Sky’s customer base of 12-13 million net subscribers, no service will contribute more than 3-4% of the base. So, one needs to have a large number of these services. Presently, about 30% of its base is subscribed to these services and a third is subscribed to at least one or more.
Hiren Gada, director of Shemaroo Entertainment, which provides a large amount of content to DTH players, says, “Most DTH players have some free and paid services. The ones that are free are more like a retention strategy and others are the premium paid revenue oriented services. DTH is digitally addressable so it has been able to provide these services, giving them an edge.”
Another promising trend is that operators are able to increase collections from customers by providing additional services like HD channels, premium channels and VAS. The content providers that DTH players are currently working with include Hungama, Disney, Visiware and Shemaroo. Typically, the deals are revenue sharing so the content, packaging and creation/aggregation are the content provider’s responsibility, while marketing, distribution and revenue lie with the operator.
“The services are doing well, with many subscribers trying out any new service that we launch, and a majority of them staying on. Most of these subscribers come from smaller towns and cities as this is where choices are limited and broadband is a concern,” says Arun Kapoor, CEO, Dish TV.
In fact, Dish TV has just launched a VAS offering for kids at `9 per month for a period of 60 days. Kids can play games on the platform besides accessing movies, shows, stories and rhymes.
Similarly, with the summer holidays on, Tata Sky has also launched a new kids’ service titled Kids Showcase featuring movies and shorts from across the globe. The
service is complimentary to subscribers that already have an active kids pack; for the rest, it is priced at Rs.3 per day. Available ad free in HD and on the mobile app, it has over 30 animation and live action films in various languages.
Hungama too is working on launching a service on Videocon d2h in the next few weeks and has plans to launch three more services in FY17. Siddhartha Roy, CEO, Hungama.com, says, “We looked at this opportunity with Tata Sky because it was about providing content curated completely for the user with no advertising, which as a result, worked as a big pull factor. Since these are premium and paid for services, we work closely with the DTH player to go out and acquire customers. It is an interesting business line for us.”
Gaming is big among the interactive services, too. In fact, Hungama created a game revolving around the movie Airlift on Tata Sky. It presently has four games available on Tata Sky and Airtel, which are refreshed every month.
DTH players state that though the contribution of VAS in its revenue would be negligible, the usage is growing at a very fast pace. Also, these services act as differentiators as no two players can have the exact same service, even if they are catering to the same genre.
After three-five years, as volume growth in the industry starts to taper, operators will have to focus on enhancing ARPU and that is where investing in VAS will actually help bring in some degree of product differentiation. Currently, the ARPU in India is at Rs.180-240, which is less than half compared to international markets.
An Airtel Digital TV spokesperson mentions, “What adds to customers’ stickiness is the fact that these services are ad free and are addressing certain focussed requirements of the customers. Moreover, these services help us differentiate our product.”
Not a rosy path
Although VAS has the potential to be big in the near future, everything comes with its own set of challenges. VAS products typically entail higher investment as DTH players do not create the content, and have a longer payback period as customer education and adoption takes time. There is also a need to continuously refresh the content and stay relevant to the customer.
“Presently, these services are not a game changer for the DTH players. Approximately 8-10% of the revenues are garnered from these services,” admits Nagpal. “It is more about giving the customer choice and growing the topline presently. However, on the basis of the net of cost, it is profitable.”
Although efforts are on, DTH players still need to enhance customer education through ATL and BTL measures. With over half the country below the age of 25 and therefore adaptable to change, there is a latent demand for VAS, which will become apparent once a plethora of options are available.
“There is lots of work in progress as far as market development is concerned, as such services have only started proliferating in the last 6-10 months,” states Gada. As a result, one needs to give consumers time to experience the product. Industry experts believe it is going to be a long-term game and will take minimum two to three years to attain critical mass. Another challenge is, not all subscribers are willing to pay additional monies from their pockets, especially in India, where subscribers still look at under Rs.300 per month as the benchmark for what they should pay to watch television.
Ashesh Jani, partner, Deloitte Haskins & Sells, states, “The subscription model has limitations and with this being a volume business where you need numbers, if a player has VAS, the expectation is that when 4G kicks in it will be easy to stream selective content, giving additional revenue to DTH.” He admits that VAS has not taken off the way it could have and is an added cost presently. Then there is the cost of maintaining a library, apart from the technology cost of servers.
VAS in DTH has the potential to become a strong acquisition/retention tool — in addition to being an ARPU enhancer — provided DTH players adopt a clear segmented approach to launch products based on customer insights.
