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DTH: Delayed to Home? - Views on News from Equitymaster
 
 
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  • Nov 10, 2000

    DTH: Delayed to Home?

    The government permission for Direct–to–Home (called DTH in popular parlance) has been seen as a positive step and proof of the present government’s commitment to reforms.

    The implications of this move in the long run could be far reaching. For one, it could change the balance of power between the cable operators and the broadcasting companies. So far, it is the cable operator who holds the key to the revenues that the media companies earn in this country.

    This is because while a cable subscriber pays Rs 100 per month to the cable operator, the broadcasting company ends up getting hardly Rs 10 per subscriber. This, as Mr. Naganand, CEO, Convergence, Zee group, explained is due to the fact that the cable operators understate their subscribers.

    Assuming around 30 million cable and satellite homes in the country, the revenue for the industry works out to almost Rs 36 bn. Of this hardly 10% accrues to the broadcasters. DTH could change the scenario with installation of set top boxes which means that a cable operator stops being a gatekeeper and becomes only a distributor. Then the user addressability would allow the broadcasting company to determine how many customers are buying his product. The broadcaster is doing the deal directly; the cable operator is a mere distributor who gets a commission out of that.

    Why then has the industry reaction been so lukewarm when the broadcasters should actually be welcoming it with open arms? This is because between the time the DTH was banned in 1997 and the present time, the face of the cable industry itself has changed.

    It is broadcasting companies who themselves have become cable operators! While Zee has big plans for Siticable, Star has taken a stake in the Rajan Raheja owned Hathway Cable. Similarly, Sun TV’s promoters own Sumangali Cable, down South. These companies have spent huge amounts in setting up cable headends and are still spending more money for offering value added services over their cable networks. Abroad, broadcasters are not allowed to control cable networks but in India the way the industry has developed, this has come to pass. Hence, though the broadcasters complain, of and off, about the moolah being raked in by cable operators, they are now themselves a part of the same industry. Hence it doesn’t make sense for them to pour huge sums in setting up DTH infrastructure.

    They are more than happy in trying to rope in local cable operators and getting control over the laast mile. Possibly, the DTH is a case of Delayed to Home?

     

     

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