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Tata Sky will score own goal with its Rs 8 ‘daily recharge’ plan: Dish TV CEO

MUMBAI: When Tata Sky introduced a ‘daily recharge’ voucher at a price of just Rs 8, it was not easy for the other direct-to-home (DTH) operators to swallow. Why was India’s premium DTH brand going to the bottom of the pit and allowing subscribers to pay only for the days they watch television?

“It is just a marketing gimmick. It makes for great advertising but there is no product to sell,” tells Dish TV chief executive officer RC Venkateish.

Tata Sky managing director and CEO Harit Nagpal feels that there is a target audience to capture. The main punch will be in the small towns and villages that fall under the third and fourth phases of digitisation. It is a market segment where Tata Sky has a lower share compared to Dish TV and Videocon d2h.

Venkateish02Venkateish does not believe that the daily recharge voucher scheme will help in getting new subscribers. There is a new connection charge that the subscriber has to bear, closer to Rs 2,000, and a small denomination recharge voucher is not what is going to be the deciding factor.

“This will not impact our new subscriber acquisitions at all. If anything, it will hurt Tata Sky. It will down-trade their own base. Tata Sky has scored an own goal with this product,” he says.

But what if Tata Sky drops the price for its set-top boxes (STBs) as well to aggressively mop up subscribers from the Phase III and IV markets, which have to turn completely digital by 31 December 2015 and 31 December 2016 respectively?

“I don’t think that will be the strategy at all as it can lead to a high rate of churn. The DTH industry has gone through that cycle during 2010–11. When the STB price drops below Rs 1,000, rotational churn starts. The trade margin is normally Rs 600 per connection. Dealers will encourage churn when a customer comes for recharge. That is why all of us decided to move the price table up,” explains Venkateish.

The lowest denomination recharge voucher works in the case of cell phone subscribers but will not be effective in the case of DTH, Venkateish feels. “We have a top-up plan for Rs 10 but only 0.001 per cent take it. The lowest denomination we get is Rs 50, but that is a miniscule population. The small denomination recharges work in telecom because a consumer can continue with the service by giving missed calls or receiving calls,” he says.

Tata Sky’s new scheme allows inactive users to recharge their subscription on a daily basis. Other DTH operators also provide recharge of small denominations but only for active subscribers.

Tata Sky daily recharge TG

Tata Sky’s recharge at Rs 8 is the lowest and is positioned like an FMCG product offering low price point variants such as shampoo sachets. With the base pack starting at Rs 240, any Tata Sky subscriber can recharge his connection for just one day for Rs 8. The day’s recharge value is determined according to the pack that the consumer has subscribed to. If a consumer has a Rs 300 pack, he can recharge by Rs 10.

Tata Sky daily rechargeThe coupons are available at grocery stores or subscribers can recharge online through their cell phones. Venkateish says that from a trade margin perspective, the scheme will not take off. “The dealer will hardly make anything and the grocery stores will get a margin of just 20 paise on a recharge.”

Will there be a dilution of ARPU (average revenue per user) for the DTH operators? Will subscribers with multiple TV homes take to this scheme while keeping the pack of their main connection alive? Venkateish rules this out, saying people with multiple TV sets are more affluent and would not bother opting for the service for only part of the month, like weekends. “In any case, Tata Sky should be more bothered as 17–18 per cent of its subscribers have multiple TV sets. In case of the other DTH operators, this comprises 3–5 per cent of their total base,” he avers.

Venkateish believes that Zing is a better seed corn to have than the ‘daily recharge’ voucher when the industry moves to plant digitisation in the Phase III and IV markets. Zing is designed for the price-conscious consumers who prefer a skinny bundle of regional-language television channels.

“Tata Sky’s daily recharge voucher is a reaction to Zing’s success. But we remodelled the product offering keeping in mind the consumer. Our basic premise while we did this is that subscribers consume TV channels. Tata Sky’s new scheme is like a daily diet concept, which is not what TV watchers want,” he sums up.

Also read:

Tata Sky’s Rs 8 ‘daily recharge’ voucher and its impact on the industry