There is a new mirth, laced with a hint of snigger, pervading the Dish TV office in Film City, the one in Noida, on the outskirts of Delhi. It has been there ever since TAM Media research, the agency that measures television viewership, said the channel share of Zee Interactive 999 was higher than that of CNN-IBN, CNN, UTVi, NewsX, and a few niche channels. The four mentioned here are well-known news channels, while 999 is the default channel of Dish TV, an interactive one that tells the users how to use the service and also works as a programme guide. Dish TV, the direct-to-home broadcast vehicle of Subhash Chandra’s Zee Network, is sufficiently enthused by the TAM data to think of monetising 999. “We will go out and sell air time on it,” says Salil Kapoor, the company’s chief operating officer, who became a recognised face in his earlier avatars as the head of sales for consumer goods major Samsung Electronics India and before that as the head of marketing for Samsung’s rival, LG.

This is among a torrent of new revenue streams that Dish hopes to open. For some reason, DTH services prefer the moniker, Active, for their value-added channels — which air things other than the usual television programmes, such as, gaming, education, virtual pilgrimage, and so on. But Dish, in addition to the others, has ICICI Active. It is a co-branded channel that tells you all about ICICI Bank, the country’s second-largest lender after State Bank of India, and its services, including an EMI (equated monthly instalments) tracker. Some of Dish’s channels show movies on demand and go by the somewhat obvious nomenclature of MOD, or Movie on Demand. Users can pay a small amount, which is smaller than the rental for a DVD, and catch the movie at any of the six or so slots during the day, or every time if they so desire. These films are shown without a break for commercials. That will continue. The change Dish has planned is to take sponsorship for these movies; sponsors’ advertisements can be aired before the film begins and after it ends. It has already started charging a carriage fee from channels, just like cable operators do, which ranges between Rs 3 crore and Rs 6 crore a year. The company believes that the new revenue streams will help it stay ahead of the pack in the direct- to-home slugfest, which has well and truly begun with Reliance-ADAG’s Big TV DTH and Bharti Enterprises’ Airtel Digital joining the battle which already had players like Tata Sky, a joint venture between the Tata Group and Rupert Murdoch’s STAR TV, and Kalanithi Maran’s Sun Direct, which has just ventured out of its cocoon in the South to spread its wings across the country. Government-owned Prasar Bharti’s DD Direct has been there for a while and boasts of a large number of subscribers, but is a non-commercial venture and therefore left out of this article. First mover When a segment opens up to unbridled competition, the incumbent generally suffers because consumers recall the arrogance of the old days and switch to the newcomers. The prime examples are Bharat Sanchar Nigam Ltd and Mahanagar Telephone Nigam Ltd in telecommunications. However, Dish was not an incumbent in that sense. For one, both BSNL and MTNL were — and continued to be — owned by the government and enjoyed monopoly in an area in which private participation was not allowed. The many experts the strategist spoke to liken Dish’s position with that of Maruti Suzuki in the 1990s. The car market leader was a near-monopoly at that time. It had 80 per cent of the industry’s manufacturing capacity and the same proportion of the market. The rest was divided between Premier Automobiles (think Padmini) and Hindustan Motors’ Ambassador. In the second half of the 1990s, nearly every global car manufacturer entered India, striking at the bastion of Maruti, which was caught in a bruising battle between its two principal shareholders. Once the fight was resolved in 1998, the company came back with a number of new models and a sharp focus on customer service to recoup its market share. Dish started its service in 2002, though the official launch happened the following year. At that time, it showed mainly the Zee bouquet, many of Doodarshan’s channels, and some regional ones. The STAR family, of which STAR Plus had become the leader in general entertainment by a long mile, and Sony, which was still popular, were missing from its offering. This limited its appeal and Dish focused mainly on areas that did not have cable connections, which in industry jargon are called cable-dry areas. These included some of the remotest parts, including Drass in the Himalayan range. Since DTH needs limited infrastructure — if you have a source of power, a television and a set up box, you are connected — Dish became an alternative for viewers whose options were otherwise limited to Doordarshan’s terrestrial service. With time, some popular non-Zee channels, like HBO, came on the Dish platform, but by 2006 it still had no more than a million subscribers. That was when Tata Sky started and STAR, the 20 per cent partner in the venture, was forced by regulation to make its channels available to Dish. “For the first two to two-and-a-half years of our launch, STAR and Sony did not give me their bouquets. So I spread myself in cable-dry markets in the remote areas. The government did not help, as there was no regulation on content. TRAI (Telecom Regulatory Authority of India, which is also the broadcast media regulator) used to say it could not frame regulation since there was just a single player,” says Dish TV managing director Jawahar Goel. Kapoor echoes the view. “In a way, we can say that the commercial launch of Dish TV took place at the same time as Tata Sky’s.” While that may be the case, the newer players came armed to challenge Dish. They are on MPEG-4, the latest version of the Moving Pictures Expert Group, which offers higher channel capacity per transponder using digital compression.

Airtel Digital users can use the same remote to operate the set top box as well as the television. Tata Sky, on the other hand, seems to have found favour with consumers in the metropolitan cities. So, shorn of the traditional first-mover advantages, how does the market leader deal with the situation? The stakes are immense. DTH is perhaps the fastest-growing consumer segment after mobile phones, defying the slowdown by adding nearly a million subscribers in October and then again in November. That’s nearly twice the number added in May-June. Even if the addition rate falls a trifle, the DTH subscription base, about 9.5 million now, could cross 20 million by the end of 2009. Of the current market, Dish claims to have 4.7 million, which translates into a share of nearly 50 per cent, Tata Sky 3 million, Sun Direct 2 million and Big TV a million. The growth potential remains huge. Of the 220 million households in India, 125 million have a television set. Of those, only 85 million have cable connections and 9.5 million have DTH. “We are an alternative to the cable operator. The growth will come from the cable-dry areas as well as from the cable-frustrated consumers,” says Kapoor, whose group also has a cable operator in Wire & Wireless India Ltd. However, the industry is creaking under a loss burden; the total figure may cross Rs 2,000 crore this financial year, double of what it was in 2007-08, when the market was serviced by only Dish and Tata Sky. Hong Kong-based international media research agency Media Partners Asia says these two and Sun Direct will have combined losses of $350 million, while Big TV and Airtel DTH will have $100 million. Given that the increased competition has halved the initial cost to the consumer to Rs 2,000 and under, the average revenue per user, or ARPU, languishes at an industry average of about Rs 180. The industry is ridden with service tax, value-added tax, licence fee per subscriber, and entertainment tax, which together take away 40 per cent of the price paid by the consumer.

Monetisation and more “Merely being there is not enough. As the first mover, what are you locking up that the next guy can’t have?” asks market strategist and consumer behaviour expert Rama Bijapurkar. “Nothing,” says Goel. However, Dish still considers itself in an advantageous position vis-à-vis the rivals. “As on March 31, 2008, Dish had a loss of Rs 600 crore. But our rivals had three times as much. Our advantage is that we grew our infrastructure as we grew in volume. The others came in with huge investments in infrastructure and technology. Their technology and set top boxes are more expensive but not necessarily better. You have to buy smarter. So some of our rivals make huge losses as they have chosen expensive vendors,” says Goel. His company has the largest number of channels on offer, 225, compared to 150 or so that the others have, and says it is poised to increase the number to 450 with some incremental investment in transponders. It believes itself to be in a position to fight the competition on the two critical fronts of depth and width. “We provide the most languages and genres as well as the most channels in each language and genre. We have so many things to look at it’s not funny,” says Kapoor. The serious thing is to monetise this depth and width, which, as described in the beginning of this article, has already begun. Kapoor is quick to dispel the technology advantage with the new entrants. “It is true that MPEG-4 needs fewer transponders and therefore saves some cost. But its set top boxes are costlier and, since they have to be subsidised, offset the savings on transponders. The operator does not benefit and the technology makes no difference to the consumer because it does not provide for better picture or sound quality.” Still, there seems to be the general impression that Tata Sky is the service provider of choice among upmarket consumers, a factor that may have played a role in the company’s decision to start Tata Sky Plus, whose set top box costs Rs 10,000. “When Tata Sky came in, it saw a need gap in terms of the quality of service. So it positioned itself on that plank and started going for the creamy layer. It has always focused on service quality and went on to market and promote its brand in a big way – something Dish hadn’t done until now,” says an analyst with PricewaterhouseCoopers. Tata Sky revels in this perception. “Dish TV had a lead of two years over Tata Sky. But I do not think the incumbent had any advantage. Dish TV also grew when we launched as the entire category grows when competition comes in. When we launched, Dish TV was focusing on the smaller markets and rural markets. We launched majorly in the metros,” says Vikram Mehra, its chief marketing officer. To that, Kapoor’s response is a shrug of the shoulders and: “They have their own figure and we have our own. The key thing is that we have 50 per cent more subscribers than them.” Goel believes that starting in the remote areas was actually an advantage. “Today,” he says, “I have a pan-India presence and my subscribers are from everywhere. The advantage of starting with the remote areas first is that we have deeper penetration.” And then comes a statistic: Since the launch of Tata Sky, Dish has added 3.7 million subscribers, while Tata Sky has added 3 million.