Direct-to-home (DTH) service player Tata Sky, which has been competing for market share with old rivals such as Dish TV and recent entrants like Airtel, is on a cost-cutting drive to manage its bills even as it boosts expenditure to build on its subscriber base.
Tata Sky has built a strong brand and offers services like recording of satellite broadcasts, but faces the prospect of a price war from new players like Sun Direct and high-tech offerings from others like Airtel.
“We have introduced an internal programme called ‘slim fit’ to improve productivity and bring down our operational cost by a minimum of 30 per cent,” Vikram Kaushik, Tata Sky’s chief executive, told Hindustan Times. He did not give the amount planned to be saved.
As a part of the cost saving exercise, Tata Sky is renegotiating its deals with partners including content providers and set-top box manufacturers and plans to outsource services like installation to franchise partners.
“Part of the savings would be used to fund new projects,” Kaushik said.
With 40 lakh subscribers, DTH is next to Zee group’s Dish TV, which has 55 lakh. Airtel has managed 11 lakh in less than a year after launch.
DTH players say they have also been hit by taxes on both hardware and services.
Average revenue per user in the DTH industry is around Rs. 150 whereas the subscriber acquisition cost is as much as Rs. 2,500 for players like Dish TV and varies between Rs. 4,000-Rs 5,000 for Tata Sky, ndustry sources said.
The costs are mainly incurred in subsidising set-top boxes, whose costs are recovered in the long term through subscriptions.