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Thursday, March 6, 2008

DTH in Asia: Living up to its promise

Asia’s potential as the world’s largest market for Direct-to-Home (DTH) satellite television is one step away from becoming a reality. And China is expected to take that crucial step in 2006.

Should China live up to its word and give the go ahead for DTH—and analysts say the 2008 Beijing Olympics should compel China to do just that—the results might surpass those attained by India.

China’s southern neighbor began commercial DTH operations only in October 2003 and by December 2004 was said to have over three million subscribers. These huge numbers dwarf those of Japan, Asia’s current DTH leader. Japan’s sole DTH service, SKY PerfecTV!, reported 3.75 million subscribers in 2005. And SKY PerfecTV! began broadcasting in 1992, eight years after Japan launched the world's first direct broadcast satellite.

China promises to become Asia’s—and the world’s—largest market for satellite TV. Some 260 million households are the potential market for DTH, said the State Administration of Radio, Film and Television (SARFT), China’s broadcasting regulator. Analysts expect China’s DTH subscribers to hit 30 million by 2008, if DTH get the green light in 2006.

Reaching this projected number won’t be that difficult since China already has an existing DTH market, albeit an underground one. U.S. firm IMS Research estimates there are over 25 million illegally installed digital satellite-TV households in China, a number almost similar to the total installed DTH base in the US.

Still illegal
The problem in addressing China’s potentially huge DTH market is that Chinese law makes it illegal for individual Chinese to receive DTH programs on their own satellite receivers. Regular apartment buildings are also restricted from setting up satellite dishes to receive DTH.

Fewer restrictions would have made China the world’s leading DTH country. Instead, world telecoms waits for China to finally let DTH loose this year. If it doesn’t, well, there’s always 2007.

Doubts about China’s willingness to launch DTH were fueled in August 2005 when new regulations were issued that increase Chinese control over foreign TV programs and ban more foreign satellite broadcasters from entering the market. Controlling foreign influences and protecting China’s culture were the reasons invoked for the tougher rules.

In April, China limited all media companies to a single programming joint venture, and in July banned Chinese broadcasters and foreign investors from jointly operating TV channels. Foreign broadcasters with the right to broadcast in some areas include News Corporation's Star TV, Phoenix Satellite Television (a News Corporation affiliate) and Viacom's MTV.

Signs of liberalization
China will have to show more seriousness in launching DTH services by passing the long awaited Telecommunications Law, which was to have shown its face in 2000.

Observers say the Telecommunications Law is on the agenda for review by the National People's Congress in August 2006 and will most likely be promulgated in 2007. This new law is expected to permit convergence of the Internet, media and telecoms networks in China.

Chinese DTH satellites, however, are poised for launch—SinoSat-2 later this year and ChinaSat-9 by late 2007—and are to join the in-orbit Apstar-6, another DTH satellite. SinoSat-2 is China's first direct broadcast satellite and its largest to date.

China has about 360 million households, of which 100 million receive cable TV programs. Research firm PricewaterhouseCoopers expects satellite growth to outpace that of cable by 2009 due mainly to growth in China’s satellite-broadcast industry.

Indian DTH: no longer lost in space
Indian DTH finally got off the ground in October 2003. “Dish TV,” the DTH offering from Subhash Chandra’s ASC Enterprises, launched that month followed in 2004 by “DD Direct Plus” from state-owned Doordarshan.

After nine years, Rupert Murdoch’s Star TV will roll out its DTH service in mid-2006 under the banner of “Tata Sky Ltd,” an 80:20 joint venture between Tata Group and Star TV. Waiting for its curtain call is India’s fourth DTH provider, Noida Software Technology Park Ltd (NSTPL), which is to begin its service in mid-2006.

NSTPL, a company of the JK Jain-controlled Jain Studios, said its DTH service called “360TV” would initially offer 30 to 50 channels out of an eventual 125. It said the service would be the first to offer data services such as financial and legal services, stock market, travel and trade information.

Two more players are scheduled to enter the DTH arena: Sun Network and Anil Ambani of the Reliance Group. Sun plans to launch its US$34 million DTH service via an independent company called “Sun Direct TV”.

A key step Tata Sky took towards its aim of becoming India's largest digital TV platform and revolutionizing TV broadcasting was to corner all 12 Ku-band transponders on Insat-4A, India’s first DTH satellite. Launched in December 2005 by Arianespace, Insat-4A is operational.

In contrast, both Doordarshan and Dish TV use C-band transponders on the NSS-6 satellite owned by European firm, SES Global.

More competition: lower prices
More competition is helping Indian consumers where it counts the most: by lowering subscription prices and improving service.

In April 2005, Dish TV scrapped its subscription fee for new users for a year to match Doordarshan’s offer of free-to-air DTH. Doordarshan is heavily promoting the advantages offered by its free-to-air DTH service, which it markets under the brand name, DD Direct Plus.

Doordarshan has waived the subscription fee for DD Direct Plus and allows subscribers to purchase their set top boxes (STBs) on the open market. DD Direct Plus carries 44 video and audio channels, soon to be increased to 50 according to Doordarshan.

In another competitive move, Dish TV launched India’s first DTH movie-on-demand (MOD) service featuring the latest Bollywood hits. Launched February 2006, this service makes two movies available for a week and permits viewers to control which movie they want to watch and when.

Dish TV targeted one million subscribers in 2005 while DD Direct Plus aimed for five million, two million more than its claimed subscribers in 2004.

Research firm Media Partners Asia (MPA) predicts that DTH will become India’s primary digital platform in the long term, taking over 65% of subscribers. IPTV is expected to take 25% while cable’s share should drop to 10%.

DTH in Asia
India is the sole exception to the Asian DTH rule: two operators are enough; one even better. Japan, South Korea, Malaysia, Thailand and The Philippines each have a single DTH operator. Australia and its extremely competitive market hosts two operators, but this might soon change. There is as yet no clear indication of how many DTH operators China intends to license but it is certain these will be joint ventures as required by Chinese law.

Even India, which has taken to DTH with gusto, expects its existing six operators to be pared down because of competition and consolidation to perhaps two or three survivors, according to analysts.

With both China and India entering the fray, Asia stands to assume a lead role in the world DTH market. The Satellite Industry Association (SIA) said DTH services comprised 81% or $79 billion of total satellite service revenues in 2004. It noted that satellite services were leading the satellite industry’s ongoing recovery, accounting for 63% of industry revenues totaling $97 billion in 2004.

SIA predicts that consumer satellite services (the key growth driver in 2003 and 2004) will lead to a sustained industry recovery before 2010. SIA said 53% of all global launches in 2004 were U.S. government related while 47% were commercial.

Eight Asian countries (China, India, Japan, Malaysia, South Korea, Australia, Thailand and The Philippines) between them had some 36 million DTH subscribers in 2004, including 25 million from China’s underground DTH market.

DTH’s taking center stage in India plus China’s promised launch of DTH this year will enable Asia/Pacific to remain the world's fastest-growing TV distribution market. Analysts estimate the region’s 13.3% CAGR, with revenues rising from US$16 billion in 2004 to US$30 billion in 2009.

A selection of Asia’s DTH markets presents a varied picture of opportunities present in each country. What is apparent, however, is the pursuit of digitalization by a growing number of these countries. Australia, Japan and South Korea continue to forge ahead in exploiting digitalization and will complete the digitalization of their broadcast services by 2015. Other Asian countries have begun the catch up process.

Japan
The current strategies of SKY Perfect Communications Inc., Japan’s sole DTH provider, and JSAT Corporation (JSAT), the country’s leading satellite operator with nine satellites, show a remarkable convergence of vision between both business partners.

In its strategy for mid-term management development until 2010, SKY Perfect said it would “promote the establishment and spread of a multi-channel culture in the future” with the introduction of satellite delivered digital multi-channel broadcasting.

SKY Perfect projects over five million subscribers at the end of FY 2007 and over eight million by 2010, or double the number in 2005. SKY Perfect said it would push hard to attain its mid-term vision to move digital technology forward and establish an even more diverse multi-channel culture within Japan.

JSAT, which hosts the SKY PerfecTV! DTH service, said it wanted to promote hybrid networks that combine satellites and fiber optics, satellites and mobile units, satellites and wireless and other options. HDTV is a technology in which satellites can play a key role, according to JSAT.

SKY Perfect’s 3.75 million subscribers in 2005 accounted for only 8% of Japanese households and was a fourth of 16 million satellite households.

In 2004, Japan reported 3.6 million DTH subscribers, an increase of 150,000 from 2003. Cable subscribers rose by 400,000 to 5.35 million. DTH and cable penetration stood at 18%, a figure the satellite broadcasting industry aims to increase to 30% in the coming years. The nationwide transition to digital broadcasting by 2010 is another key factor in the upbeat outlook for SKY Perfect.

Malaysia
Astro All Asia Networks Plc, Malaysia’s only licensed satellite DTH platform, was present in 33% of all Malaysian TV homes during the first nine months of 2005.

That translated into 1.76 million Astro subscribers, a net increase of 66,500 year-on-year. Astro also reported a 90% rise in net profits. It also announced improvements in group revenues and ARPU plus a drop in churn.

Astro began operations in 1996 and now offers 55 channels with an array of foreign and local programs in Malay, Chinese and Hindi for Malaysia’s multi-ethnic society. The company’s growth into a leading Asian DTH provider is all the more remarkable since Malaysia has only four million households, some 97% of which have TV sets.

The past year, however, saw the emergence of two new challengers in the space of four months to challenge Astro’s pay TV dominance: MiTV and Fine TV. The market entry of both MiTV and Fine TV ended Astro’s eight-year monopoly of pay TV service.

Analysts, however, expect Astro to respond to competition by exploiting its considerable advantages in content and content distribution. Astro has announced huge investments in new technology, content and customer service. It emphasized a determined effort to defend its market share that includes adding 50 new channels by the end of 2006.

The introduction of these new channels, however, depends upon the successful launch and operation of the Measat-3 DTH satellite. Originally due to launch in December 2005, Measat-3 is now scheduled for liftoff in the third quarter of 2006 on board a Proton/Breeze M vehicle from Baikonur, Kazakhstan. The new satellite will serve Malaysia, Southeast and Central Asia, Australia, Africa, the Middle East and Eastern Europe.

South Korea
One of South Korea’s most explosive digital growth areas has been digital satellite broadcasting. Launched only in December 2001 by sole DTH operator Korea Digital Satellite (KDS), the SkyLife DTH service had reached 11% of all households by 2003 and had 1.8 million subscribers by 2005.

KDS is South Korea’s first digital broadcaster and remains the lone provider of digital services nationwide.

SkyLife, which carries 160 channels, says its subscriber growth rate is the highest in the world and ascribes this to its constant effort at meeting subscribers’ demands for better picture and sound quality using digital technology.

Korea’s pay-TV market has also showed similar high growth with nearly 80% of some 17 million households subscribing to DTH or cable TV services in 2005. Analysts say this extraordinary expansion is mostly due to the low subscription for cable TV service (some US$5 monthly) and the tough competition against DTH that drives prices down.

SkyLife will keep focused on providing improved digital technologies in 2006, according to company sources. It intends to roll out advanced services such as integrated PVRs (personal video recorders) by mid-2006. SkyLife also plans to enhance its HD services by introducing H.264, a next-generation compression technology.

Australia
Foxtel, the top DTH operator, and Austar United Communications expect to turn the corner beginning 2006 with rising subscriber numbers and a mutual agreement to end analog television broadcasts by March 2007.

More subscribers and lower churn helped Foxtel increase revenues to $1.06 billion during the first half of 2005, a 39% year-on-year improvement. The drain caused by Foxtel’s heavy investment in programming content, however, resulted in a net loss of $109 million for the first half of the year.

Foxtel exceeded the one million subscriber milestone during the year. Over 70% of these subscribers are on the company’s digital platform with many opting for the more lucrative premium services.

Foxtel and Austar said a future growth area for pay TV is the provisioning of video content for 3G mobile phones. They will also explore content delivery over emerging technologies following the results of a trial with terrestrial Digital Video Broadcast Handheld (DVB-H) mobile devices.

They also plan further extensive development of interactive services. These will include on-demand programming; new EPG services such as remote booking for PDRs and developing portable personal digital video devices that connect with in home PDRs. Foxtel also intends to introduce a new portable digital TV service for handheld devices in early 2007. The service will only be available to subscribers that own PDRs. Mobility is seen as the next big thing in the delivery of TV content.

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