Dish TV, India’s leading DTH pay-TV operator, has launched a local service in Sri Lanka, a market where a relatively small legal pay-TV industry is poised for take-off over the next three to five years.

Dish, India’s first pay-TV company to set up a service overseas, is initially targeting Sri Lanka’s sprawling gray market and illegal subscriber base with a collection of Indian and local free-to-air channels priced at 317 rupees (US$2.4) including tax, a new low price-point in the legal marketplace.

That’s significantly cheaper than services offered by either of Sri Lanka’s pay-TV incumbents – Dialog TV and Peo TV, both owned by large telecom groups – or, for that matter, for many of the island’s gray market DTH services, accessing signals intended for India.

Dialog TV is Sri Lanka’s legal market leader with 452,000 subs at end-2014, while Peo TV had 124,000. The gray market however, thought to number 600,000 to a 1 million subs, is bigger than both.

Medium-term impact

Nonetheless, Dish is unlikely to make much of an impact on the broader marketplace until it can expand its channel line-up, likely attracting local cable subs and first-time buyers in its first two years of service.

Existing relationships with Indian content providers should stand Dish in good stead in the medium term however, helping Dish bolster its  Sri Lankan portfolio and start accelerating subscriber growth with more direct competition with gray market DTH services from 2017 onwards.

Hindi movies as well as Tamil content from India are popular in Sri Lanka, helping drive the gray market, which Indian content owners are unable to monetize at present.

Monetization via Dish should appeal to them, even if takes time for Dish to build its base.

Dish’s market entry will also supplement existing momentum in Sri Lanka’s market, with both Dialog and Peo continuing to expand infrastructure, services and content, paving the way for the development of pay-TV channels in Sinhalese, as well as more advertising revenue, as the subscriber base expands.

“In Sri Lanka, people are accessing a lot of illegal cable, a lot of illegal satellite services,” notes Aravind Venugopal, VP at industry analysts Media Partners Asia (MPA). 

“The key issue is not that people don’t want to pay for content, or that they love free-to-air and will not pay, which is what is happening in Indonesia, or Thailand to some extent,” Venugopal explains.

“In Sri Lanka, the issue is that people don’t want to pay that much. Pay-TV in Sri Lanka is an expensive proposition. It is almost double the Arpu of what India pays.”

MPA projections suggest that pay-TV penetration in Sri Lanka will rise from ~15% of TV households at the end of 2014 to over 28% by 2019, with subscriber growth picking up after 2016.

Arpus may edge down over that time, as Dialog TV and Peo TV reduce prices for their basic packs, but are likely to remain relatively robust as Dish TV focuses its attention on a different segment.

At the same time, pay-TV ad spend, representing less than 1% of total TV advertising, has nowhere to go but up, helping foster a second revenue stream for pay-TV, and a firmer foundation for the development of Sri Lanka’s TV industry as a whole.

In 2014, Sri Lanka’s TV industry as a whole generated US$320 million in net revenues, according to MPA, only 0.4% of nominal GDP. Pay-TV captured less than 15% of market value.