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‘Zing will operate on higher EBITDA margins’
Dish TV chief executive officer RC Venkateish is mapping out the company’s new outing. Creating a sub-brand Zing, he is aiming to branch out into an area less associated with direct-to-home (DTH) and more with the cable TV service providers in the Phase III and IV towns of digital addressable system (DAS).
With West Bengal serving as the launch pad, Zing plans to travel the whole ring stretching from Odisha to Maharashtra, Gujarat, the North East and the four southern states. Being the first DTH operator in the country to have two warrior brands, Dish TV is hoping Zing to pocket price-sensitive television viewers who have a strong propensity to consume local-language content.
Feeling that the time has come for DTH operators to take on cable by going regional, Venkateish expects Zing to contribute 30–35 per cent of Dish TV’s total incremental subscriber additions. With content costs being lower, Zing’s EBITDA margins will be high compared to the mother brand.
In an interview with TelevisionPost.com’s Sibabrata Das, Venkateish talks about the need for having two brands, the carriage fee phenomenon and the ongoing dispute with IndiaCast.
Q. Why is it relevant for a DTH operator like Dish TV to have two warrior brands?
DTH operators have traditionally looked at the market with a pan-India approach. The organisational culture has reflected this and the management, too, have looked at a north- and- south kind of market divide and treatment. We are out to change this and the new sub-brand Zing will target regional-language markets. It will force the organisation to think about the sensibilities of each state and act on the fact that India is a diverse country with diverse market needs. As the main brand, Dish TV will get customers who primarily want national and international channels. It will be strong in the Hindi-speaking markets (HSM).
Q. Why did you decide to launch in West Bengal first?
We are starting with West Bengal and expanding to Odisha. We will do the whole ring stretching from the four southern states to Maharashtra, Gujarat and the North East. We will be tapping into those markets where viewers have strong regional language preferences. In West Bengal, for instance, the Bangla general entertainment channels account for 42 per cent of the state’s total TV viewing time.
“Our aim is to support the local content producers and bring channels relevant to the regional customers. Carriage fees will be restricted to the main brand. Zing will need 2–3 years to build a base of 2–3 million subscribers”
Q. Isn’t this somewhat like what Sun Direct did in the South? How do you take on Sun Direct?
Yes, Sun Direct employed this regional strategy in the South. But it is largely in Tamil Nadu and not so much in the other southern states. We are not going to fight on price but focus on having a rich offering of language channels across the states where Zing is going to launch.
Q. So is Zing going to mop up price-sensitive customers in Phases III and IV of digitisation?
Under the new sub-brand Zing, we aim to branch out to consumers of local-language television. We are looking at cable TV customers, TV viewers who have a strong propensity for local-language consumption, and expansion in DAS towns under Phases III and IV of digitisation. The base pack will be regional and the add-ons will be national channels. With Zing, we hope to get a unique set of customers.
Q. Will Zing significantly contribute to Dish TV’s customer base?
There will be a significant bump-up and our state-level subscriber additions will get a lift as India is not a mono-lingual country. We expect Zing to contribute 30–35 per cent of our total incremental additions.
“There will be a significant bump-up and our state-level subscriber additions will get a lift as India is not a mono-lingual country. We expect Zing to contribute 30–35% of our total incremental additions”
Q. What if cable TV service providers decide to slash cable bills and offer more regional-language channels as they have no bandwidth constraint?
Cable TV has advantages in these markets as they funnel in more regional-language channels. We are not going to compete with cable on price. We are offering a DTH option to consumers for the first time.
Q. Won’t Zing cannibalise subscribers from the mother brand?
There will be some amount of cannibalisation but this will not be restricted to Dish TV alone; it will be spread out across all the players. For existing Dish TV subscribers, there is a deterrent. They can’t move automatically and will have to buy a set-top box (STB) in order to get the service of Zing.
Q. Will customer acquisition cost for Zing be higher than for the main brand?
The STB for Zing is Rs 300 cheaper than that of Dish TV. We are passing that on to the customer. But overall, the customer acquisition cost for Zing shouldn’t be higher as the marketing expenses will be much lower.
Q. With lower content cost, will Zing not enjoy better operating margins than Dish TV?
Zing has the content cost advantage because regional channels are reasonably priced and most of them are free-to-air (FTA). In the base pack (Rs 175 including taxes), two Hindi GECs (Colors and Sony Entertainment Television) are not there. Though we will pass on the benefits of lower content costs to our subscribers, we will still be able to operate on higher EBITDA margins.
Q. Will you be adding regional channels and charge carriage from them?
We will be strengthening our regional-language offering. We have the plan to add transponders and so can accommodate more channels. Our aim is to support the local content producers and bring channels relevant to the regional customers. But carriage fees will be restricted to the main brand. Zing will need 2–3 years to build a base of 2–3 million subscribers.
“Zing has the content cost advantage because regional channels are reasonably priced and most of them are FTA. Though we will pass on the benefits of lower content costs to our subscribers, we will still be able to operate on higher EBITDA margins”
Q. Has there been any progress on the carriage tap opening for DTH?
Broadcasters are softening their approach to DTH. The momentum has been set up. It will also depend on how the other DTH platforms approach the issue. Some DTH companies seem to be generous and are not working on an economic business model. Being a market innovator, Dish TV has taken the lead.
Q. Have discussions started on resolving the IndiaCast issue?
There have been some discussions but nothing substantive. We have been saving on content costs by putting the channels on reference interconnect offer (RIO) basis.
Q. Do you plan to carry out a similar exercise with the other content aggregators?
We have done this exercise and the model has been successful. It leaves us with an additional tool for negotiations. But if we get a good deal, then we won’t need to take this approach. The choice is ours.
Q. The Telecom Regulatory Authority of India (TRAI) has come out with regulation for content aggregators. What are your views on this?
If it is followed in letter and spirit, then it is good. Our apprehension is that this shouldn’t become a farce. We are aware of one aggregator trying to add on more broadcasters. The regulator should keep an eye on all this. We will report such moves to the regulator.
Q. DTH has seen muted subscriber growth this fiscal year. Is customer growth slowing down for DTH?
Unlike the previous quarter, we have seen strong growth for the three-month period beginning January. This despite not being a festive season, we will surpass the last quarter in term of gross additions. With us stepping on the gas and Zing adding to the kitty, we are targeting 1.5 to 2 million net additions in the next fiscal as opposed to 0.85 million in FY14.