IPTV in India: Will Apps Lead to Profits?
There are four operators offering IPTV services in the country: Bharat Sanchar Nigam Ltd. (BSNL) , Mahanagar Telephone Nigam Ltd. (MTNL) , Bharti Airtel Ltd. (Mumbai: BHARTIARTL), and Reliance Communications Ltd.
Bharti Telemedia launched IPTV service last year but is offering it only in the National Capital circle, which includes Delhi, Faridabad, Gurgaon, Ghaziabad, and Noida. Reliance Communications has also launched IPTV service, but it is available only in Mumbai. The technology is not the focus area of any of the operators. (See Bharti Profits From Mobile Boom.)
Smart Digivision and Aksh Optifibre Ltd. are the two major IPTV providers in the country. Both of them have tie-ins with the two state-owned operators: BSNL and MTNL. (See AirTies Wins Indian STB Deal.) Smart Digivision offers IPTV services under the brand name "MyWay," and Aksh Optifiber under the brand name "iControl." While Smart Digivision boasts 18,000 subscribers, Aksh claims to have 25,000 subscribers across the country. (See Aksh Optifibre's K.S. Choudhari.)
Smart Digivision can offer its MyWay service in 54 cities in the country for BSNL and in Delhi for MTNL. The company launched its services in 2009. Aksh Optifiber, on the other hand, is licensed to offer iControl in 20 cities for BSNL besides offering services in Mumbai and Delhi for MTNL.
Apps and maturity
So why the optimism? Those offering IPTV say the technology is maturing and the applications will help them stand out.
G.D. Singh, director at Smart Digivision, tells Light Reading Asia: "Till now we were not giving any compelling reason to the end customer to move from DTH [satellite] to IPTV. But now this is going to change. We are offering applications like personal recording and seven-day recording. We are also planning to come up with applications like Gmail, Facebook, and Twitter on TV, which we believe are going to be the differentiators." (See BSNL Deploys Verimatrix.)
Lt. Gen. V.K. Dhir, president of corporate initiatives at Aksh Optifibre, tells us: "We have struggled with IPTV for the last few years, but earlier the technology had also not matured. That is not the case now. We believe that the interactivity of video-on-demand is far superior than what DTH has to offer. Going forward, mobile TV is also likely to pick up. Besides, 3G is also likely to help in generating awareness about the technology." (See MTNL Launches Mobile TV.)
Uncle ARPU says 'Hello'
Despite their optimism, IPTV vendors have a long way to go before their services are profitable.
One of the biggest issues is average revenue per user (ARPU). While Smart Digivision declined to share its MyWay ARPU numbers, Aksh Optifibre says its ARPU is between INR200 (US$4.20) and INR400 ($8.50).
“The big difference between the Indian IPTV market and the rest of the world is that the ARPUs are abysmally low. In the US, the average IPTV ARPU is around $45 and in Europe around €20 [$25.60] to €30 [$38.50],” says Aditya Kishore, Heavy Reading senior analyst.
As with wireless services, low ARPU means that scale is of immense importance for the IPTV players. Here, both the players are hoping to substantially increase their numbers by the next year. MyWay believes it will start adding 30,000 subscribers per month by March 2011, and Aksh says it will double its number of subscribers by next year.
To further differentiate its offering, MyWay is planning to come out with its own application store in two months. "We feel that our application store is going to be a major revenue generator. It is going to be a like a mall, where we would give out space to the retailers and charge a small percentage per customer," says Singh. He says Smart Digivision has an exclusive deal with one consumer bank and also application deals with Indiatimes, Justdial, and Domino's Pizza.
Heavy Reading's Kishore says it's too early to tell if that idea will work, noting that all will depend on how the app store strategy is executed.
Smart Digivision says it has invested $25 million in its service and plans to invest another $55 million in the coming two years. The company hopes to be EBITDA-positive by the end of 2012. By that time it is likely to have hit the 1 million subscriber mark, which is where the company says the service will become profitable.
Aksh Optifibre, on the other hand, has invested INR1.5 billion ($32 million) in IPTV operations and plans to invest another similar amount. The company is also planning to get licenses to operate in more cities. Aksh believes it is likely to turn positive when it reaches a subscriber base of about 100,000 customers, which is likely to be by the end of next year.
While the vendors are keen to talk, the operators aren't talking up IPTV quite so much -- and that's a problem. "There hasn't been any aggressive marketing on the part of the vendors to promote and educate the users about the new technology," says Kishore. "Besides, in India there is a strong perception that satellite is more technologically advanced than other technologies. However, there is certainly potential in the Indian market."
— Gagandeep Kaur, India Editor, Light Reading