At around Rs 134 cr in March 2014, DD's Freedish is the smallest entity by value, but has the best margins in the business

It doesn't have a brand name anyone remembers, neither a call centre nor an electronic programming guide and no fancy marketing campaign. Yet in its 10th year, DD Direct Plus, recently renamed DD's Freedish, has become India's largest direct-to-home, or DTH, service. At an estimated 18 million homes, it is bigger than Zee's Dish TV or Tata Sky.

The Rs 1,553-crore state-controlled Prasar Bharati Corporation, which owns the service, has now woken up to its potential. "We will launch 120 channels (an addition of 60 channels) from July 1, 2014, encrypt them and move to the MPEG4 format," says Ranjan Thakur, additional director general, Doordarshan, and the man running DD's Freedish. These changes will mean more capacity and the ability to track its subscribers, something that was not possible so far because the signal was unencrypted. The tracking will help push up the prices channels have to pay to be on board. At around Rs 134 crore in March 2014, DD's Freedish is the smallest entity by value, but has the best margins in the business. Every other DTH player makes a loss (see box). In the next two years, as the service shifts satellites, Thakur reckons DD's Freedish will offer over 250 channels.

DD's Freedish could end up becoming the biggest game-changer in the Rs 40,000-crore Indian television industry. That's because it is the largest and only player in the free-to-air, or FTA, market focused largely on small-town and rural India. "The DD's Freedish household's value is very high because it is equal to a terrestrial household, which is the target for FMCGs, white goods, insurance and other major advertisers. So far the only option to reach these homes was DD, now there are FTA options," says Bharat Ranga, chief content and creative officer, Zee Enterprises. Adds Gaurav Gandhi, COO, Indiacast, Viacom18's distribution arm: "DD's Freedish is very relevant beyond the top 40 towns." And affirms Prasanth Kumar, managing partner, South Asia, central trading group, GroupM, a media buying firm: "If an advertiser is looking at Tier II and III markets, then FTAs are critical."

In 2013, FTAs got 4-9 per cent of the total viewership of television and more than 20 per cent of the Rs 18,000-crore ad money spent on the medium. And this figure has been growing in double digits year-on-year. This explains why more than 30 channels, such as Zee Anmol and Star Utsav, pay between Rs 3.25 crore and Rs 6 crore a year to be on DD's Freedish. "The cost is well worth it," says Ranga.

In a heterogeneous market like India, ignoring the FTA market is a risky strategy, say analysts. In the UK, Freeview, a free DTH service in 11 million homes, gives BSkyB and Virgin a run for their money. At 13-14 million homes, PSI in Thailand, which is free but privately run, "has proved very disruptive to pay players," says Vivek Couto, executive director, Media Partners Asia, a consulting firm.

How the cookie crumbles
Unlike PSI or Freeview, DD's Freedish is a state-owned brand that has become big despite, and not because of, what its owners did. And as Prasar Bharati starts to pay attention to it, three questions crop up. Can it take on DTH and digital cable players on a level playing field? What happens to its subscribers when they want to upgrade? Will its revenues go down if it increases capacity?

A quick look at history is critical to the answers. The free-to-view service was launched by Prasar Bharati in 2004. However, for reasons that are still unclear, DD chose not to publicise it, brand it or own it. To get it, you have to install a set-top-box from an electronics dealer for Rs 1,000-1500, which allows you access to DD's Freedish's 60 channels. "It is almost impossible to ascertain the total number of connections because we have never marketed the dish or set-top boxes. More than 90 per cent of the boxes are from the grey market," says Jawhar Sircar, CEO, Prasar Bharati,

Of India's 234 million homes, television currently reaches 153 million. It is the remaining 81 million homes that DD's Freedish has targeted. According to estimates, more than 70 per cent of the homes that the service reaches are ones that never had television in any form. "These are homes and towns that Zee, in spite of being around for 20 years, has never reached," says Ranga. He cites places such as Phulpur, Shahjahanpur and Jhunjhunu - towns with populations of around 40,000 but outside the ambit of TAM's coverage of towns with one-lakh plus inhabitants. That is why advertisers, desperate to reach small-town India, love it.

Now, to answer the three questions raised above. Harit Nagpal, managing director and CEO, Tata Sky, points out that most private operators break even on a consumer in 3-4 years; they pay taxes on set-top boxes costing around Rs 5,000 and then subsidise them for consumers. DD's Freedish, on the other hand, lives off carriage fees on a service it barely acknowledges. What happens if DD's boxes have to carry the same taxes and costs as the private ones? Thakur thinks costs will go up by about Rs 300. The option of taking only 60 channels on a non-addressable box will always be available - to both old and new consumers.

Then, as the audience upgrades, it will want access to pay channels. Would consumers stick to an unbranded grey-market box with no service or premium channels? "Our USP is that we are free and our audience is, largely, bottom-of-the pyramid. Users wanting pay channels can find options in the market; we cannot compete in that market," Thakur emphasises. He, however, adds, "We will launch call centres and ensure that customers get a one-stop solution for purchase and service concerns."

Finally, will more capacity mean a lower carriage fee? Thakur doesn't think so. "Our price will range from Rs 3.25 crore to Rs 4 crore and we will offer channels the option of paying in installments," he says.

For many Indian homes, the "first experience of TV is DD's Freedish", says Couto. He feels that in future phases of television digitisation, which will targets small-town India, DD's Freedish will become critical. "There are households with Rs 50-100 ARPUs (average revenues per user). I don't think there is a substitute there," he says. That is because the other DTH or digital cable operators do not find it viable to reach these areas. But as the ad outlay to these towns keeps rising, one of the pay operators might just launch a free service. That would indeed change the game.