The rural market seems to be emerging as a larger revenue generator than the urban areas.

India is poised to become the world's largest direct-to-home (DTH) satellite pay TV market with 36 million subscribers by 2012, overtaking the US. India's DTH subscriber base is expected to touch 45 million by 2014 and 58 million by 2020, according to a study by research firm Media Partners Asia. India's DTH opportunity is more positive than ever before, especially when anchored to consolidation and improved pricing power with continued growth.

Market dynamics

The DTH market in India has been taking rapid strides. Currently, 15 percent of India's pay TV homes have at least one set-top box; this number is expected to grow to 38 percent by 2014 and almost 50 percent by 2020 with HDTV gaining more traction after 2010, driven by DTH satellite networks. The pay TV penetration in India is expected to reach more than 90 percent in the long-term. The future, of pay TV in India, will be driven by media owners and distributors expanding market share with an eye on profits, rather than at the expense of profits.

With Big Digital TV DTH (from RComm) going national, the cable and DTH viewers are set to get a wider choice. Big Digital TV DTH has set itself a target to capture a substantial share of the market.

DD Direct Plus is also on an aggressive stance. The public broadcaster aims to challenge the dominance of the six private DTH firms (Tata, Bharti, Reliance, Videocon, Zee, and Sun) that currently command 22 million subscribers. The ministry has decided to pump in `81 crore in DD Direct Plus. The public broadcaster is aiming to double its existing subscriber base to over 12 million within next fifteen months, backed by financial support, upgraded technology and a comprehensive pan-India distribution strategy.

Prasar Bharati plans to acquire 300,000 subscribers every month beginning early 2011. It has decided to go for a mix of direct sales and free distribution of its set top boxes and antennae. DD Direct Plus is expected to increase its channel offerings to 97 by the end of 2010, and to 200 in the next twelve months. Several pay channels may turn free on DD Direct Plus.

In order to compete with the private DTH operators, DD Direct Plus will also upgrade to the latest video compression technology'MPEG 4, DVB S-2'used by most private DTH operators currently. This will provide the latest digital video and audio services to the subscribers. In order to measure its subscribers, currently not tracked by Prasar Bharati, DD Direct Plus will launch its own subscriber management system backed by a call centre. Currently, DD Direct Plus is estimated to have a subscriber base in excess of 6 million, second only to the leading private DTH operator, Dish TV.

Higher FDI limit

The Telecom Regulatory Authority of India has recommended that the FDI limit in DTH, teleport and national and state-level cable network operators be hiked to 74 percent from the current 49 percent. Also, the FDI limit in local cable operators (LCO) has been recommended to be reduced to 26 percent from the existing 49 percent. It has also been recommended that the limit for IPTV and mobile TV be set at 74 percent. The increase in the FDI limit from 49 percent to 74 percent in broadcast carriage services is expected to bring in consolidation. Further, more investment in this vertical will help upgrade technology.

Rural sector boosts revenues

The rural market seems to be emerging as a larger revenue generator than the urban areas. Currently, of the 22 million DTH subscribers, 60 percent reside in rural areas and small towns. Rural viewers continue to generate revenue for all the six private DTH operators. Higher disposable income coupled with aggressive push by the DTH service providers is proving to be successful. Also, the availability of regional language channels at low cost is attracting the rural consumers to DTH.

Rural and semi-urban areas account for 65 percent of the new subscriber base for Airtel Digital TV, Videocon D2H and Reliance Big TV. For the established operators like Dish TV, Tata Sky and Sun Direct DTH, the ratio between urban and rural subscribers is almost equal. Tata Sky DTH is seeing growth in the rural markets. On the other hand as Dish TV has recently become aggressive in semi-urban and urban markets, currently 40-45 percent of its sales are from the rural markets, as compared to a previous figure of 70 percent.

Future outlook

Even though the DTH subscribers are forecast to reach 45 million by 2014, and 58 million by 2020, the six-player DTH market is quite untenable. Consolidation is predicted, with the market being consolidated to four platforms within three to five years, and ultimately be confined to three big players.

With the top four players making money at the EBITDA level by the financial year 2013, the DTH industry is expected to become profitable. However, the DTH business model merits an urgent review. The average revenue per user (ARPU) in India has to improve vastly to expedite profitability.