Dec 15, 2008|
DTH: The road ahead
Television media is among the fastest growing industries in India. Its value chain consists of three parts -content providers (production houses), distributors (channels) and platforms (cable, DTH or Direct-To-Home). All three are witnessing massive investments and severe competition. In this article, we shall compare the DTH space with the telecom industry in search of lessons for the road ahead.
Telecom and DTH - The similarities
Just around a decade back, the Indian telecom industry
was entering its first phase of growth, the same stage in which DTH today finds itself. Technology plays an important role in both the industries. Both introduced technologies superior to the entrenched players (state owned landlines in telecom and cable providers in media). As a result, both require significant capital expenditure upfront.
Telecom and DTH - Different strategies
According to Michael Porter, there are 2 broad strategies in which a company can achieve competitive advantage - cost leadership and differentiation. In cost leadership, the firm tries to become the lowest cost producer. ‘Economies of scale’ is one of the most important drivers of cost leadership. In differentiation, the firm tries to be unique along some dimensions that are widely valued by customers. ‘Policy choices’ is one of the most important drivers of differentiation. It covers product features, services provided, intensity of advertising etc.
The winning strategy in the telecom industry so far has been cost leadership. Bharti Airtel has achieved leadership through sheer economies of scale. As per its Chairman, Mr. Sunil Bharti Mittal, the company has battled hard to achieve a customer base of 60 m subscribers (February 2008) in India and now boasts of at least 1 bn minutes of traffic flowing through its network each day. He adds that any new player offering talk time of 20 m, 50 m or even 100 m minutes a day can only make losses.
The question is - What will be the winning strategy in the DTH space? We believe cost leadership is not the answer. Providing cheaper set-top boxes will not do. In telecom, successful players were able to reach out and make the service affordable to a very large section of Indians. In DTH, the service is unlikely to ever become that affordable. In telecom, the cost of acquiring a GSM customer is low because the equipment is provided by the handset manufacturers and not the service provider. In DTH, the equipment is supplied by the service provider. In fact, all DTH players provide basic equipment (antenna and set-top boxes) to customers at a loss.
While the subscriber base is likely to grow, it is unlikely to ever reach the levels achieved by the telecom players.
We believe the road ahead for DTH player will require differentiation. Tata Sky and Dish TV have already begun the process of differentiating. Personal Video Recorders (Tata Sky) and mobile antenna (Dish TV) are steps in that direction. In the western world, DTH players differentiate by providing exclusive programming. For example, in the UK, DTH players vie for exclusive sports telecast rights. However, In India, the regulator has disallowed the players from airing exclusive content till the segment reaches some maturity. So, expect different - more product features and add on services like pay per view movies - and not cheaper DTH services in the future.
More Views on News
Aug 14, 2017
The management believes that GST will aid the advertising spends in the long-run.
Apr 26, 2017
Should you subscribe to the IPO of S Chand and Company Limited?
Jun 21, 2017
Should one subscribe to the IPO of GTPL Hathway Ltd?
Aug 1, 2016
Zee Entertainment has announced its results for the first quarter of the financial year 2016-17 (1QFY17). The company has reported 18.5% YoY growth in sales and a 13.7% YoY growth in profit after tax.
Feb 3, 2016
Zee Entertainment has announced the third quarter results of financial year 2015-2016 (3QFY16). While the topline grew by 17% YoY, bottomline fell 11% YoY during the quarter.
More Views on News
Aug 7, 2017
The data tells us quite a different story from the one the government is trying to project.
Aug 10, 2017
Don't miss these proxy bets on growing companies or in a few years you will be looking back with regret.
Aug 8, 2017
Bharat-22 is one of the most diverse ETFs offered so far by the Government. Know here if you should invest...
Aug 12, 2017
The India VIX is up 36% in the last week. Fear has gone up but is still low by historical standards.
Aug 7, 2017
Raksha Bandhan signifies the brother-sister bond. Here are 7 thoughtful financial gifts for sisters...
Copyright © Equitymaster Agora Research Private Limited. All rights reserved.
Any act of copying, reproducing or distributing this newsletter whether wholly or in part, for any purpose without the permission of Equitymaster is strictly prohibited and shall be deemed to be copyright infringement. LEGAL DISCLAIMER:
Equitymaster Agora Research Private Limited (hereinafter referred as 'Equitymaster') is an independent equity research Company. Equitymaster is not an Investment Adviser. Information herein should be regarded as a resource only and should be used at one's own risk. This is not an offer to sell or solicitation to buy any securities and Equitymaster will not be liable for any losses incurred or investment(s) made or decisions taken/or not taken based on the information provided herein. Information contained herein does not constitute investment advice or a personal recommendation or take into account the particular investment objectives, financial situations, or needs of individual subscribers. Before acting on any recommendation, subscribers should consider whether it is suitable for their particular circumstances and, if necessary, seek an independent professional advice. This is not directed for access or use by anyone in a country, especially, USA or Canada, where such use or access is unlawful or which may subject Equitymaster or its affiliates to any registration or licensing requirement. All content and information is provided on an 'As Is' basis by Equitymaster. Information herein is believed to be reliable but Equitymaster does not warrant its completeness or accuracy and expressly disclaims all warranties and conditions of any kind, whether express or implied. Equitymaster may hold shares in the company/ies discussed herein. As a condition to accessing Equitymaster content and website, you agree to our Terms and Conditions of Use, available here
. The performance data quoted represents past performance and does not guarantee future results.SEBI (Research Analysts) Regulations 2014, Registration No. INH000000537.
Equitymaster Agora Research Private Limited. 103, Regent Chambers, Above Status Restaurant, Nariman Point, Mumbai - 400 021. India.
Telephone: +91-22-61434055. Fax: +91-22-22028550. Email: email@example.com. Website: www.equitymaster.com. CIN:U74999MH2007PTC175407