The sunset of analogue cable TV in smaller towns of India should act like a shot of adrenalin to DTH growth. Just how positive the mood is among the direct-to-home (DTH) operators is best reflected in a statement of Dish TV managing director Jawahar Goel: “As cable is not aggressive and struggling with its own on-ground issues, there is an increase in demand for DTH.”
Goel also feels that the content cost for multi-system operators (MSOs) is set to climb due to Star India’s RIO (reference interconnect offer) policy. DTH will be able to raise subscription prices, thus leading to higher average revenue per user (ARPU).
In an interview with Sibabrata Das, Goel also talks about content deals, carriage revenue, TRAI’s 8 per cent AGR recommendation, licensing policy, set-top box (STB) manufacturing and Dish TV’s growth plans.
Q. The DTH sector has seen strong subscriber growth in 2014. Where is this growth coming from?
DTH already has a strong footing in Phase III and IV DAS [digital addressable system] markets. And owing to the extension of the DAS deadline, there is a strong uptake for DTH from consumers in these markets. As cable is not aggressive and struggling with its own on-ground issues, there is an increase in demand for DTH. Also, consumer confidence is back with the new stable government.
Dish TV expects to add around 2.5 million gross or 1.5 million net subscribers in FY15. We are already on track to achieve our target. Overall, the DTH industry is expected to mop up around 10 million subscribers in FY15.
Q. With the sunset date for analogue cable in Phases III and IV being extended, will DTH gain at the cost of cable?
Dish TV has already started targeting those markets with its product Zing, which is tailor-made to cater to the demands of regional subscribers. With the pushback of digitisation for cable, it is a fair opportunity to put their house in order with the timeline given to them.
Q. Star is offering its channels only at RIO rates to the MSOs. Following this, MSOs are hoping to increase the consumer ARPU as their content costs are going to rise. Will Dish TV and other DTH companies increase their subscription prices?
Yes, we look at this as a positive development as DTH is a premium product and commands 10–15 per cent price premium than cable. In the distribution industry, it is a huge anomaly that 60 per cent of the subscription revenue comes from DTH and just 30 per cent comes from the top 5–6 MSOs of the country. With the RIO model, ARPU is going to increase as the content cost will go up for MSOs; they will be forced to increase their pack prices. This will give DTH a headroom to increase subscription prices and, thus, ARPU.
‘With the RIO model, ARPU is going to increase as the content cost will go up for MSOs; they will be forced to increase their pack prices. This will give DTH a headroom to increase subscription prices and, thus, ARPU.’
Q. Dish TV had earlier taken the IndiaCast-distributed channels on RIO and stated that this would drive down the content costs. Content costs fell by what percentage?
This is too specific a question. However, to give an answer, we were able to achieve what we wanted not only with IndiaCast, but with the other broadcasters as well. We have already signed a deal with Zee and Star and the increase in our overall content cost is going to be in single digit.
Q. Why didn’t Dish TV follow the RIO structure in its content deal with other broadcasters?
We are following a balanced approach. Content deal negotiations are going to be a mix of CPS (cost per subscriber) and fixed fees. The idea behind this is to make the broadcaster a partner than a mere service provider so as to collectively drive the ARPU.
Q. Content cost will go up by what percentage in FY15?
Our content cost guidance for FY15 is a single-digit increase year-on-year.
Q. Will DTH be able to drive in carriage revenues the way cable TV has done?
There is a negligible scope for carriage fees in a digital environment.
Q. How has churn behaved for the DTH industry in 2014? Will you see that getting arrested as cable TV introduces digitisation in its full sense?
We are at a very comfortable churn level of 0.7 per cent per month, which came down from 1 per cent per month. Apart from Dish TV’s initiatives to reduce churn, this has been possible due to digitisation in cable TV networks.
Q. How much is Zing contributing in terms of incremental growth?
We have a clear strategy of positioning Dish TV as the key choice for HD and recording for consumers, whereas Zing is the preferred choice for regional content. Zing contributes 12–15 per cent to our incremental growth.
‘DTH already has strong footing in Phase III and IV markets. And because of the DAS deadline extension, there is a strong uptake for DTH from consumers in these markets. Dish TV has already started targeting those markets with its product Zing, which is tailor-made to cater to the regional demands of regional subscribers.’
Q.TRAI has recommended an 8 per cent AGR but the government is yet to accept that. If it happens, how much will Dish TV be able to benefit?
If that happens, DTH will gain a clear 2.5 per cent advantage on the EBITDA.
Q. Dish TV is planning to float a subsidiary company and the STB side of the business will reside in that. Will this benefit Dish TV on the tax front?
Benefits are expected to flow through due to a more focused approach to the core DTH business. There is also going to be an expected saving on licence fees as the non-core business gets transferred to the subsidiary.
Q. Is Dish TV going to manufacture STBs? Will it be done in the subsidiary company?
It is too early to comment on this as the entire scheme is being worked upon. We would be able to throw more light on this in the first quarter of the next fiscal.
Q.TRAI has come out with a DTH licensing regulation that mentions cross-media restrictions. If government accepts that, will Dish TV be impacted as Essel Group also owns Siti Cable?
The licence was extended and the government is working on the renewal policy. The ball is in the government’s court.
Q. When is Dish TV launching its Sri Lanka operations? How much investment will be made in that?
We have already received the required licence for Sri Lanka operations. Investment is in the range of $3–4 million. We don’t think there is any requirement of a price war as our offerings are going to be unique and we would stand out from our competitors.