DTH likely to be a costly affair for new entrants

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Superior technology & expensive set-top boxes to increase the cost. The cost of acquiring direct-to-home (DTH) subscribers could be 70-80 per cent higher for new players like Sun Direct, Bharti and Reliance Bluemagic than the existing players like Dish TV and Tata Sky. Industry experts attribute this to the superior technology and expensive set-top boxes they plan to use. At the moment, the Zee group’s Dish TV gives a subsidy of about 25 per cent on the total package to each subscriber, while Tata Sky provides a subsidy of 34 per cent. Dish TV has 2.3 million subscribers, while Tata Sky has acquired over one million subscribers within one year of its launch in August last year. Experts say this is because Dish TV and Tata Sky use the MPEG-2 technology which have set-top boxes 30 per cent cheaper than those which will be used by Sun Direct, Bharti and Reliance Bluemagic. All the three players entering the DTH business operate their DTH service through the MPEG-4 technology, the set top boxes of which come at $54-57 (Rs 2,160-2,280) a piece. This is significantly costlier than the set top boxes offered by the existing companies like Dish TV ($34) and Tata Sky ($40). According to a senior executive of Sun Direct, the main reason for using the MPEG-4 technology is the enhanced picture and sound quality for the existing channels: “Using MPEG-4 will help us acquire more subscribers due to the superior viewing experience for consumers, even though it may be costlier than the existing DTH technologies.” The main difference between the two technologies is the higher number of channels carried per transponder under MPEG-4 in comparison to MPEG-2. Currently, the cost of a Dish TV connection comes to Rs 3,500 (with a subsidy of Rs 600-900), while it is Rs 4,000 for Tata Sky customers (with Rs 1,200-1,400 subsidy). The main element of subsidy comes on the hardware, including the set-top box, the antennae, wires etc. Sun Direct is offering its boxes for free, thereby straight away bearing a subsidy burden of over Rs 2,200 per subscriber which is 120 per cent more than Tata Sky, an expert said. Sun Direct was launched on September 21 at a low price of Rs 75 per month per subscriber. The offer promises a free set-top box and dish antenna with two months’ free subscription, exclusive of installation charges and taxes of about Rs 1,100. The service was launched all over Tamil Nadu with 75 free-to-air TV channels and 15 radio channels. The DTH service from Bharti and Reliance are expected to be launched by the year-end.



DTH likely to be a costly affair for new entrants
 
The price for set top box used for comparison could have been the market rate and not the factory/bulk manufacturing price. My friend who visited Thailand recently told me that superior quality MPEG4 set top boxes (smuggled from Taiwan I believe) are available there for less than INR 1000/- with free dish. So Maran definitely would have struck a deal for maybe half of that price. If they are bearing a burden of nearly 3k/customer for hardware alone, it will take a minimum of 10 years to break even, not taking into consideration the new comers like reliance and bharti. I doubt whether Sun will play a stupid game like that.
 
yes price above seems to be wholesale/retail price. i am sure subsidy word is used to attract customers.
 

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