by Shyamanuja Das

For close to two decades, analog cable was the only television distribution mechanism available in India. Direct satellite TV or Direct to home (DTH) came as the first digital alternative in the early 2000s.

Initially attracting only players having a strong broadcasting and cable distribution background, the DTH business, post-2008, saw the entry of players with no previous experience in the area.

As of today, there are six commercial DTH service providers in India. Three of them –Dish TV, Tata Sky and Sun Direct—come with a strong background in broadcasting as well as cable distribution. Three new players –Airtel Digital, Reliance Digital (BIG TV) and Videocon D2H—have no such experience.

It is not difficult to notice that what they have in common. They are all are promoted by companies that have strong footing in telecom services.

That virtually splits Indian DTH service industry halfway into two segments—one set of broadcaster-backed DTH players and the other of telco-backed DTH players.

Yet, there is no major research available—either by academic community or by commercial research agencies—which compares these two “logically distinct” sets of players.

This brief foray into both does exactly that. It analyzes how these two sets of players are collectively performing in comparison to each other and then tries to understand the telco-backed players better by comparing the dynamics of the two larger players in this segment.

A basic analysis of the competitive landscape reveals that these new telco-backed players have steadily taken away market share from the older set of broadcaster-backed players. Between 2011 and 2014, the combined market share of telco-backed players has increased from 30% to 41%. They have grown at an average rate of 48% in this period, which is close to double the growth of broadcaster-backed players, who did register a fairly healthy 25% grown during the same time period.

graph2This is significant considering that the commitment of telco-backed players to DTH business had been questioned earlier—and not exactly without reason. Two of them (Airtel and Reliance) had tried to offload their stake in DTH business in the past; the third one, Videocon D2H had shelved its plan to list in the stock market. Surely, things were not going too well for them. And unlike the broadcast-backed players, whose interest in the business goes beyond the stand-alone performance in DTH segment, they had no reason to stay put if the business was not viable.

Seen in that context, the increasing market share in the last 4-5 years is nothing short of a “comeback” for them. The newest of them, Videocon D2H, recently became the first domestic private company since 2000 to list overseas issuing American Depository Receipts (ADR) worth $325 million to the public.

Globally, telcos performing well in television distribution business is not new. But almost always, that has been possible by using newer converged channels such as IPTV and mobile TV. In India, thanks to both the market and regulatory conditions, convergence has not been a major factor in India—at least not in the DTH business. So, the recent success of telco-backed players in DTH cannot be attributed to their owning telecom infrastructure and/or “core competence in technology”.

There is “something else” possibly. In any consumer business, as markets become more mature, the “hard” differentiation among players—such as technology and hardware product quality—becomes less and less and “soft” differentiations such as customer service and emotional connect with the customers become more and more important.

It can be argued that telco-backed players have more of these “soft” differentiators compared to broadcaster-backed players. The broadcasters have no direct experience of customer handling, even though they own cable distribution business. That is because, in India’s multi-layered cable distribution industry, customer is acquired, managed and serviced by the local cable operators, who often boast of “owning” the customer. Telcos, on the other hand, manage their customer directly.

This gives telcos two distinct advantages.

One, it gives them a huge experience of dealing with customer service—marketing, customer segmentation, customer experience management, logistics of customer query and complaint handling etc.

Two, it also gives them the emotional connect with the customers and immense brand recall. Telcos are one of the two top spending segments among advertisers in India.

However, if this ‘soft’ aspect has not been examined at all by the academic or the professional research community, it could be because sectoral analysts and media researchers attach a much lower priority to these factors as compared to regulatory, technological, competition or ownership issues in their analysis. On the other hand, being a small industry, DTH is yet to attract the marketing community to undertake serious research about the industry. The paper concludes that this could be the reason why little research has been done to study the difference between telco-backed players and broadcaster-backed players.

While the standard broadcasting industry issues and DTH industry issues around regulation, license fees, content partnerships etc have been studied by various researchers, negligible work has been done to study the telco-backed DTH players, the genesis of their DTH business, their reasons for entering the business, their motivation for continuing with it and so on.