Indian DTH platform Videocon d2h – engaged in a hyper-competitive and costly subscriber push in one of the largest pay-TV markets in the world – is banking on HD and channel tiering to steer the service towards profitability, Videocon Group director Saurabh Dhoot told attendees at APOS 2014.

“There will continue to be great organic growth in India, [but] the focus is now moving from the land-grab stage towards improving realizations for a customer,” Dhoot said, after noting that d2H now generates free cash flow when excluding amortization and depreciation.

“Qualitative sell-through is becoming more critical,” he added.

HD channels alone can transform average revenue per user (Arpu), Dhoot said, anticipating the number of homes taking HD to triple over the next three to four years.

For Videocon, a consumer electronics company that makes its own set-top boxes, this could mean abandoning basic SD boxes in favor of HD alternatives, as cost differences between the two diminish.

“Our focus is not on what the one-time capex was to acquire the customer,” Dhoot said. “Our focus is moving towards how much realization we can achieve over time from that customer.

"It makes sense for us to look at only seeding HD boxes, and working on the customer to upgrade one day.”

At the same time, Dhoot and his d2h colleagues need to persuade broadcasters, accustomed to an ad-supported business model, to consider smaller channel tiers for more niche genres such as kids, trading reach for higher subscription revenue.

“Sports and English already have achieved the tiering with regards to packs, but there are more opportunities to look at the other aspects of channels,” Dhoot suggested.

“Other than the core GECs [general entertainment channels], what about the other GECs?” he asked. “Other than the core kids, movies, music channels, what about the others?

"That itself will make a big difference in Arpu. We need to work with our broadcasting partners to achieve that.”

Costs and Churn

DTH operators in India have historically grappled with costs and subscriber retention, competing amongst each other to win over cable customers in cities while introducing pay-TV as a new proposition to smaller towns and rural areas.

Nonetheless, competitive intensity is easing, Dhoot argued, as a government drive to phase out analog cable networks squeezes out lower-priced pirated systems, even though the timetable will take years to complete.

Meanwhile, clear leaders are emerging within DTH, thanks to solid execution.

The ratio of active subscribers on DTH’s overall customer base is firming up as a result, passing 7 million out of 11 million gross subs for Videocon.

Dhoot is confident the time is right for Videocon to pursue more value from its subscriber base, as well as volume.

“Videocon d2H has consolidated and improved market share positioning,” he said. “We expect to garner our fair share.”