Strategic Impact of IT in DTH industry

Group 13

Abhay Kesarwani (401) Arjun A V (413) Ayush Garg (417) Harshit Duggal (424) Saurabh Gupta (451)

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io th n e

Content Pg.

1. History of Indian television and Broadcasting Industry 3 a. The Market Players 4 2. Existing IT infrastructure at Tata Sky 5

3. Value Chain Analysis

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4. Industry analysis using Porters Five Forces

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a. Threat of Substitutes
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b. Industry Rivalry
10 c. Entry Barriers 10 d. Bargaining power of Buyers 11 e. Bargaining power of Suppliers 11

5. Identification of prime objectives and CSFs to achieve those

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a. Vision b. Objectives c. CSFs

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6. CSF Tree 7. Strategic Use of IT 8. References

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History of Indian Television & Broadcasting Industry

Indian Television was launched in 1959, with the introduction of the national television network Doordarshan. From there on the television industry grew without looking back. After liberalization in 1991, the broadcasting industry saw the inflow of a lot of foreign channels and also various domestic satellite channels cropped up in India. With so many channels and private players entering the business, there was a new set of mediators that came into being - these were the local cable operators. They were responsible for providing the network services to the clients and generation of revenues for the channels. But this complex system had its flaws. The cable operators reported a lower number of connections, in order to accumulate profits. On the other hand, the broadcasters demanded a higher rate. This led to an amendment in the Cable TV networks (Regulations) Act in 2002, and in 2003, a new system came into being, called the Conditional Access System (CAS) In the meantime, in 2001, the ban on the use of the Ku band for DTH usage was lifted and TRAI issued guidelines for operating it in the country. DTH improvised on the quality of service being offered in the broadcasting industry. Although, there were a few technical glitches, such as fading of signal due to rain, these were reduced by providing a better antenna with a water proof coating and increasing the transmission power. Television and entertainment industry is about experience. And this is what is the differentiating factor that DTH can provide to its customers and hence has a huge scope of replacing its competitors like Cable TV & IPTV. As reach of DTH is increasing, so is its share in broadcasting industry. Market share of players in the Indian television industry

3%

36% 61%

Cable Terrestrial DTH

The Market Players

The Indian DTH industry has three major players at present:1. DD-Direct+: Owned by Prasar Bharti 2. Dish TV: Owned by the Zee TV Group 3. Tata Sky: A joint venture among Tata and Rupert Murdochs Sky TV

In these major players, DD-Direct+ is a clear winner in the number of people it serves with its 33 FTA channels and 12 All India Radio channels, followed by Dish TV, which is the oldest private DTH service, started in 2004.

15%

DD-Direct+ 53% 32% Dish TV Tata Sky

DTH Market Share. Source: TAM (Television Audience Measurement) Peoplemeter Survey

Other upcoming ventures in DTH market include:1. 2. 3. 4. Sun Direct: By Sun Network Reliance Blue Magic: By Reliance ADAG Bharti Telemedia Videocon Industries 6

Existing IT infrastructure at Tata Sky .

Interactive programming: The NDS VideoGuard conditional access solution provides superior broadcast security and enables Tata Sky to offer multiple programming and pricing packages. NDS's MediaHighway middleware and Value TV interactive infrastructure will allow Tata Sky to offer interactive services to its customers. The platform will offer its the customers a variety of programming choices with interactive features along with superior picture and sound quality. CRM: Siebels CRM software has been selected to support call centre and field operations, customer order management, product configuration and dealer management. Billing: Comverses Kenan FX billing software is used for billing for residential, institutional and commercial customers. The software has been customized specially to support pre-paid billing capability, which is a first in the industry, to allow customers to have a more convenient and flexible payment options. Kenan billing software offers the following functionalities:

Deposit Management Revenue Assurance Bill Formatter Proof of Delivery Payment Gateway Real time balance calculator Package Configuration Tool

ERP: SAPs ERP application suite, has been selected to support the companys materials management, sales and distribution, finance and control and human resources requirements. Servers: Sun Microsystems provides the technology infrastructure to help the 7

company run its IT applications. The servers ensure maximum up-time, fault recovery and load management. Sun also provides Tata Sky with installation, engineering expertise and support.

Digicomp: Thomson and Humax deliver digicomps customized for the Indian market. The technology allows delivery of multiple programming, pricing packages and interactive services to the customers. Systems Integration: TCS is a systems integration partner for Tata Sky. It supports IT operations in the areas of billing, ERP and other customer care and employee related internal applications. TCS and Tata Sky decided on a service-oriented architecture for the companys IT needs and IBM was selected for creating the SOA platform. IBM's Enterprise Service Bus (ESB) helped Tata Sky in designing a SOA to connect the different systems which allowed multiple applications to interconnect and process information faster thus saving time and money. The SOA framework provided a model to connect and control the underlying IT systems. Service Support: Tata Business Support Services (TBSS), previously known as SerWizSol, provides Tata Sky with three call centers offering round-the-clock support in 11 different languages. Logging and broadcast monitoring: Mediproxy's Enigma v6 broadcast solution enables accurate monitoring and logging service for Tata Skys DTH services. It also allows a large number of users to simultaneously access multiple channels of live and archived content on local networks and the Internet.

Value Chain Analysis of TATA Sky .

From the recent advertisement campaign of TATA Sky it can be inferred that TATA Sky is trying to differentiate in terms of quality and content exclusivity with Aamir khan as its brand ambassador. In the following discussion we would try to elaborate how TATA Sky achieves differentiation and how IT applications help with that. We will use the value chain analysis framework.

Value Chain for TATA Sky

TATA Sky can add value to its product by adding value at every stage of the value chain which can help it by creating a superior high quality product or by 9

differentiating in cost. From the supplies required for TATA Sky we can see that there is not much value that TATA Sky can add at the inbound logistics as it has to depend on ISRO for leasing out its facilities to receive the signal as well as transmit it to its customers. At the operations stage TATA Sky can add value through better coding and smart use of interactive media like games and study tools for kids. Also at this stage it can use different coding for different customers for differentiating its offerings and thus creating more value. At the outbound logistics stage TATA sky offers equipment to its customers (Dish antenna, Set top box and access card) and the customer receives the signal from ISROs satellite. At this stage TATA Sky can ensure high quality equipment as it has high bargaining power with the suppliers of the equipment. TATA Sky has created a brand with higher recall by using creative advertising and using superstars like Aamir Khan and Hrithik Roshan and banking on the brand image of the name TATA. This has led to a high perceived value of the brand TATA Sky in the market. At the after sales service stage TATA Sky can ensure high differentiation from its competitors through better service.

How IT applications help at various stages

Inbou nd Logist ics

Operation s

Outbound Logistics

Marketing & Sales

Service

1. NDS Video Guard 2. NDS's Media Highway Middleware 3. Thomson and Humax digicomps

1. CRM

1. CRM

1. CRM 2. Comverses Kenan FX billing 3. Tata Business Support Services

2. Mediproxy's Enigma v6 broadcast solution

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IT applications at various stages of the value chain

The above listed IT applications have helped TATA Sky achieve differentiation by helping provide superior content (Better coding and better packaging of services) by NDS video guard, NDS media highway middleware and Thomson and Humax digicomps. Mediproxys Engma v6 broadcast solution has enabled TATA Sky to provide superior picture quality also TBSS (TATA business support services) have ensured superior service. Also there are many IT applications that support the value chain such as ERP. TCS also provides systems integration for Tata Sky. It supports IT operations in the areas of billing, ERP and other customer care and employee related internal applications. Also TATA Sky and TCS have opted for SOA architecture which has enabled them to share their information faster and easily thus speeding the supply chain.

Industry analysis using Porters Five Forces .

Threat of Substitutes
The DTH technology is relatively new in the Indian TV market which has been dominated by Cable TV. The number of Cable TV households in India account for 71 million of a total of 130 million TV households in India. The DTH operators are positioning themselves as an alternative to Cable TV. Whether DTH would be able to substitute Cable can be analyzed by looking at:

1. Buyers Propensity to substitute: The buyer has very low propensity to

substitute to DTH from Cable TV as trials are not possible in case of TV subscriptions and decision to switch cannot be reversed easily. But with CAS being mandated in some parts of the country the consumer would be more willing to switch to DTH platform.

2. Price performance: The monthly subscription rates of Cable TV vary from 100
to 250. The average monthly subscription is about Rs. 125 ]. The average monthly subscription for DTH can be assumed to be Rs. 200. Performance can be measured in terms of following parameters: a) Number of Channels: Currently with majority of India viewing Cable TV under unconditional access the number of channels available to a viewer is more in case of Cable TV. b) Quality of Service: The quality of service is better in case of DTH operators as they offer superior viewing experience (MPEG-4 compression which 11

offers DVD picture quality) and better customer support with dedicated service centers and customer helplines. We assume that Number of channels is a more critical parameter for Indian viewers so the Price-Performance proposition is better in case of Cable TV.

3. Switching Costs: The switching costs are significant as the cost of end-user
equipment (Set-top box, access card, and dish) is transferred to the user. Currently the upfront costs are around Rs. 3000-4000. The significant switching cost is one the biggest factor hampering the growth of DTH in India. Innovative schemes are being offered by DTH operators to counter the high upfront costs. 4. Product differentiation: DTH operators are trying to differentiate their products in terms of: a) Content Differentiation: Exclusive programming through collaboration with major broadcasters, Movies on Demand. b) Value Added Services: Exclusively designed interactive games, tutorials, quiz, astrology.

c) Customer Service: DTH operators offer customer support through

dedicated service centers and customer help lines. These differentiating factors are not strong enough for customers to switch to DTH from Cable TV. Thus till customers see some major differentiating factors they would be reluctant to switch. From the above points we see that Cable TV is still a major force in Indian TV households and it would be difficult to penetrate in this market unless DTH operators differentiate their products. Thus, threat of substitutes is VERY HIGH.

Industry Rivalry
DTH licenses have been offered to 7 players: 1. Tata Sky 2. Dish TV 3. DD Direct 4. Airtel Digital TV 5. Sun TV 6. Reliance Blue-Magic (ADAG) 12

7.

Videocon Industries

Tata Sky and Dish TV are the major players currently with Dish TV having more than 3.4 m subscribers and Tata Sky about 2.7 million subscribers. Some of the players lined up to enter this market are: With the entry of expected players the industry is going to be fiercely competitive because of the following factors: a) Size: The size of the players is very large with players belonging to biggest business houses of India. Players with deep pockets would mean fierce competition to gain market share. b) Economies of Scale: By gaining a considerable market share, the operators would be able to exercise a sizeable amount of power on suppliers and would be able to reduce their costs significantly. Also they would be able to exercise power on advertisers and broadcasters on the basis of market-share.

c) Growth of Industry: The industry is expected to grow at a very fast pace with
number of subscribers growing to 40 million by 2015 from about 8 million currently. d) Exit Barriers: Entry into DTH arena requires huge investment in leasing of transponders and license fees. Huge expenditure is also incurred in maintaining of customer service centers.

Entry Barriers
With the entry of the expected players, the DTH space would become very crowded with 7 major players. Non-availability of transponders and broadcaster power would act as another major entry barrier. These factors would make the entry of new players almost impossible. Thus, the entry barriers are VERY HIGH.

Bargaining Power of buyers

Traditionally buyers had just one option of Cable TV but with the launch of DTH and IPTV, buyers have large number of options available to them. The subscribers are generally reluctant to switch to these new technologies because of the following reasons: 1) Upfront Costs of Equipment is to be borne by the user 13

2) No significant benefits in switching to these platforms in terms of costs or services 3) Lack of awareness about these technologies DTH operators need to differentiate their offerings in order to make customers switch from Cable TV to DTH, until then the Bargaining power of Buyers with respect to DTH operators is HIGH.

Bargaining Power of Suppliers

DTH operators require 3 kinds of supplies: 1) Equipment: This includes dish, set-top box and access card 2) Transponders: Requires Ku Band transponders in the satellites 3) Content: Broadcaster content and value add services like games, movie on demand etc. Equipment: Generally referred to as CPE (customer premise equipment), the equipment is procured from manufacturers in Korea and Japan. With the increasing volumes of DTH subscribers the bargaining power of equipment manufacturers is LOW. Transponders: The transponders are leased from space organizations. Currently ISRO leases transponders to DTH operators through its commercial wing called Astrix. The availability of transponders is going to be a major issue with the increase in number of players and increase in content. Each transponder can support about 15 channels. DTH operators would have to approach external space agencies for leasing of transponders. This makes the bargaining power of suppliers VERY HIGH. Content: Currently there only 5 million DTH subscribers out of a total of 73 million Pay TV subscribers, so the market power of DTH operators is miniscule as compared to the Broadcasters. The pricing and content is decided by the Broadcaster so the bargaining power of broadcasters is HIGH. But Tata Sky is collaboration between TATA group and STAR TV network, so it can leverage the exclusive STAR TV content to exercise greater market power. The content in terms of value added services is outsourced and the large number of suppliers available makes the bargaining power of suppliers is VERY LOW. On the whole, we can say that the bargaining power of suppliers is quite HIGH.

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Fig: Porters five forces Model for DTH industry

Identification of prime objectives and CSFs to achieve them ..

Vision
Tata Sky aims to revolutionize Indian entertainment by offering superior DVD quality picture and CD quality sound. Tata Sky envisions: 15

Connecting every television home empowering every television viewer Revolutionizing home entertainment

Objectives
a) Reaching out to maximum number of customers: Tata Sky has set a target subscriber base of 8 million by 2012 which means 8 fold growth in next 4 years. Despite the economic slowdown in the global industry, the Asia pacific market seems to be in better health.

b) Offer superior quality of cable service to customer: DTH industry has its competitors in cable industry, Doordarshan and IPTV. It can only presume to succeed in the television service provider industry if it provides better quality of services. Digitization of services helps in providing better quality of picture and sound. Thus heavy investment is required in acquiring state of the art technology and to support the infrastructure required to provide digital transmission. Digital transmission is the key to providing better picture quality and sound quality and would be a critical success factor in determining successful run of Tata Sky in DTH industry.

c) Empower Indian viewer with choice, control and convenience: For long Indian TV industry has been dominated by Doordarshan. With the onset of DTH players households will be provided with more choice and control. Convenience of larger number of channels to choose and pay from, recording of TV serials and shows, facility of ordering movies and playing active games offers various choices for the consumer who was a victim to the unstructured nature of the industry.

CSF for following objectives 1, 2 & 3:

1. Reaching out to maximum number of customers

a) Country wide infrastructure and technology: To reach every nook and corner of the country to capture the unexplored market that has been stronghold of Doordarshan so far. Doordarshan is worlds largest Terrestrial broadcaster with over 1400 transmitters and covering 88% of India 16

geographical area. They offer Digital service in collaboration with BBC resources. This wide reach and low cost approach has helped it capture large chunk of the industry. Adopting the same approach by sharing resources can help Tata Sky capture this market because of its better product and services.

b) Due importance to price sensitive customers: In India a large portion of the population still comes under middle average income group. The product offerings have to be so developed that they are affordable by the large portion of the population. This is possible through offering various packages for different viewer segment with segmentation being done on the basis of income as well as interest of the customer group. So far Dish TV has the lead in providing services at lower costs because of the first mover advantage but with time these costs shall reduce.

c) Use of media for promotion: Collaboration between media players such as production houses and DTH service providers is a good example of increasing synergies between the players. Employing actors from the entertainment world i.e. actors from movies as well as television serials can help a great deal in promotion of Tata Sky. This can be seen as dual advertising strategy where television serials as well as Tata Sky would be promoted through the same advertisement.

d) High Quality of service to customers: Addressing customer grievances as well as Service Support is one of the key factors in retaining key customers in times of low switching costs and presence of other players. SerWizSol provides Tata Sky with three high-end call centres offering round-the-clock support in 11 different languages at Pune, Hyderabad and Mohali.

e) Improvement in customer relationships: This again becomes important in face of low switching costs. This is a service industry and like any other service industry involves direct customer interaction. This experience of the customer decides the future business. Tata Sky has selected Siebel, leaders in Customer Relationship Management (CRM) software, to support operations across the areas of call centre and field service operations, customer order management and product configuration. Also Tata Sky has established an extensive customer service network across the country. It has engaged a field force of approximately 3000 service engineers who are complemented by high-end 24x7 call centers, manned by multi-lingual customer service 17

associates, trained to solve all customer problems. Tata Sky takes direct responsibility for installing and servicing the hardware at every subscriber's home, thereby ensuring the highest levels of customer service. f) Billing facilities: It has been difficult in the industry to latch on to the end customer database because of the intermediate service providers. They have the incentives not to disclose information as well as revenue from DTH and cable players. With proper billing system in place, ensuring various alternatives to the customer which could be traced back to the end customer, higher profits for the companies as well as lower costs to the end customers is made possible. Tata Sky has chosen Comverse's Kenan FX billing software to support billing for all residential, institutional and commercial customers. The Kenan software has been enhanced specifically for Tata Sky, to support pre-paid billing capability that provides subscribers with the convenience of paying as required. Similar to the prepaid mobile phone cards, recharge cards are available in leading consumer electronic stores across the country. They offer consumers the convenience of checking their subscription details (balance and usage) through monthly e-mail statements, by calling their helpline and even on their own television sets through on-screen messages (alerts).

2. Offer superior quality of cable service to customer

a) Investment in high end technology in communications. For eg:antennas, TV dish: Investment in state of the art technology can ensure higher quality of transmission i.e. higher quality of picture as well as sound and hence a better experience for the viewer. This can help a great deal in drawing customers from Doordarshan as well as Cable TV since these service providers still lack a good deal in providing services of global standards. Tata Sky has partnered with NDS, the leading provider of technology solutions for pay television. NDS systems has played a key role in the end-toend system architecture and launching the nationwide digital service. The NDS Video Guard conditional access solution provides superior broadcast security.

b) Investment in broadband/bandwidth i.e. in transponders: Limited bandwidth is offered to the industry players taking into consideration the total amount of bandwidth that is available. Thus investing in most advanced 18

and high powered satellite will give a definite edge to Tata Sky. Tata Sky has leased all 12 Ku-Band transponders on ISROs Indian satellite, INSAT 4A, the most advanced and high-powered KU-Band communication satellite in the region, developed keeping in mind local requirements. The satellite enables Tata Sky to offer superior picture and sound quality with a wide range of channels.

3. Empower Indian viewer with choice, control and convenience

a) Control and Choice: This involves offering variety of packages and schemes to fit the needs of different segments of viewers. Different customer segments have different needs. Realizing those needs and then offering products accordingly can help boost revenues to a greater extent. For example there is a separate customer segment for viewers with a taste for drama serials, likewise for sports, news, cartoons et al. with a variety of product offerings it would be easy to lure different segment of customers through the same medium. Tie ups with other broadcasters to provide a breadth of portfolio of content ranging from sports, drama serials, cartons, news etc as well as different choice of broadcasters like Sony, Star plus et al will help in gaining large number of customers.

b) Convenience:

Price: Firstly there should be different customer convenient payment options through which payment can be made. Secondly, there should be various package options to service the need of every segment of customers including price sensitive segment also. Service: Dedicated call centre workforce to address customer grievances and for service support. After sale service of customers is also very important because of low switching costs in the industry and hence investment is needed in this area.

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Construction of CSF tree for Tata Sky in DTH industry, India .

CSF Tree

Objective: To reach 8 million subscriber mark by 2012

Promotion

Content/ Quality of Service

Customer Service

Dealer Network

Identify custome r Segment s

Offer the most relevant bouquet of channels and

Deliver high quality content for both video and audio

Resp onse Time

Quality of service/ response

Expandi ng and managi ng dealer network

Convenience of payment/

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Make relevant

Strategic Use of IT to achieve CSF .

1. Data Warehouse: A data warehouse is needed for maintaining all the data
related to customers, dealers, operations, marketing, finance and other functions. This will act as the base for most of the IT systems in the company.

2. Data mining tool: The data mining tool can have multiple benefits:
a. Customer Segmentation: Logs of channels watched, subscribed pricing packages, location etc can help in segmenting the customers. Data mining tool can find patters in such data that can help in this regard. b. Relevant bouquet of channels and services: The data mining tool can identify patterns that can help in identifying most relevant services and channels to be offered to a particular segment of customers. c. Value Proposition to broadcasters and advertisers: Data mining can provide a more comprehensive picture of user preferences and can help in programming and advertising. d. Customer Service: Patterns in customer feedback/ complaints can help in identifying the root cause of the problem and thereby helping in delivering better customer service.

3. Customer Relationship Management: CRM offers multiple benefits:

a. Customer Service: Most CRMs offer call centre software and help desk software that can help in delivering better service quality to the customers.

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b. Retaining customers: CRM can help provide special loyalty schemes such as additional channels/ services vouchers that help in retaining customers. c. Effective Promotion campaigns: CRM can help in making real time relevant and personalized offerings to customers. They can also help in identifying the right channels to use to reach the customer. d. Marketing analysis: The CRM tool can assess the effectiveness of the marketing campaign. It can also identify areas for improvement and create more relevant offerings.

4. Billing Software: This offers the following benefits:

a. Multiple billing options: The billing software must be able to offer multiple payment options to the customer such as pre-paid/ post paid, internet payment, mobile payment etc. b. Customized offerings: The billing software must be able to generate customized billing for customers depending on the services used, channels subscribed etc. Moreover, customers should be offered the flexibility to switch their channel bouquet scheme at will.

5. Marketing: Use of IT in marketing can be done in following ways: a. Internet Marketing: Web can be used as an effective tool to market DTH as the value proposition of DTH is higher in urban areas where the penetration of Internet is higher and customers are tech savvy. Internet can also be used to counter the emerging threat of IPTV as an alternative. b. Identifying focus groups: IT can help in identifying segments where DTH has an advantage over other forms of Pay TV, such as remote or hilly areas where Cable TV or Terrestrial TV is not feasible.

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References .

1. http://www.tata.com/company/Articles/inside.aspx? artid=OM7gMi6NuqM= 2. http://www.trai.gov.in/WriteReadData/trai/upload/PressReleases/613/cp aper1dec08.pdf 3. http://www.financialexpress.com/news/people-will-pay-forquality/190096/0 4. http://www.rocw.raifoundation.org/masscommunication/MACM/mediae volution/lecture-notes/lecture-14.pdf 5. http://www.oracle.com/industries/communications/index.html 6. http://www.oracle.com/industries/media-entertainment/index.html 7. http://zeetelevision.com/pdf/contact/White%20Paper-%20Indian %20Cable%20and%20Satellite%20Industry.pdf 8. http://www.indiantelevision.com/dth/dth8.htm 9. http://www.indiantelevision.com/indianbrodcast/history/historyoftele.ht m
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10. http://www.indiantelevision.com/indianbrodcast/curstatus/currentstatu s.htm 11. http://www.sivasundaram.com/wp/uploads/2007/08/dth-industry-inindia.pdf 12. http://www.tatasky.com/corporate-info.html 13. www.visionik.dk/pdfs/DTHIndia_Broadcast&CableSat_OctNov07.pdf 14. http://www.blonnet.com/ew/2007/05/28/stories/2007052800160200.ht m 15. http://www.blonnet.com/2007/08/09/stories/2007080951300500.htm 16. http://www.dishtv.in/Static/analystcoverage.asp 17. http://www.dishtv.in/Static/pdf/Mgmt.%20Discussion%20& %20Analysis.pdf 18. http://www.scatindia.com/indianmarket.htm 19. http://www.thehindubusinessline.com/2008/06/03/stories/2008060351 710500.htm 20. http://www.merinews.com/catFull.jsp? articleID=155841&catID=8&category=Business 21. http://www.rocw.raifoundation.org/masscommunication/MACM/mediae volution/lecture-notes/lecture-14.pdf 22. http://www.indiantelevision.com/special/y2k6/zee_dish.htm

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