DPOs hit hard by second Covid-19 wave as inactive subscriber base grows manifold

The second Covid-19 wave has hit the distribution platform operators (DPOs) hard with the number of inactive subscribers increasing manifold. With millions of people getting infected, TV entertainment took a backseat for many families as they were navigating a health crisis that exhausted them mentally, physically as well as financially. The Telecom Regulatory Authority of India (TRAI) classifies Cable TV, DTH, and HITS platforms as DPOs.

There are various estimates on the number of TV households that went inactive. It is estimated that 1-2 million DTH homes didn't renew their subscription in the last three months. The figure is more or less similar for cable distribution companies. Put together, the total inactive base could be in the range of 4-5 million.

A senior executive from a leading DTH company says, "There has been a 1.5-2 million drop in DTH pay-TV subscriber base in the last three months. This will continue for some more time. While Covid-19 has had an impact, the presence of an alternative like DD Free Dish has also played a part. The impact is largely in the Hindi belt among low ARPU customers. Cable TV has also seen an impact on their subscriber base. However, the situation will improve with the implementation of NTO 2.0."

He further stated that the impact of drop in pay-TV subscribers is only being felt by the distribution platforms. "Broadcasters are not facing the heat since they have a presence in OTT as well as FTA space. But if this trend continues, they will also feel the pinch sooner or later. Subscriber churn is not long-term and growth should come back."

A top official of a leading cable TV firm said that the churn has not happened so far as subscribers have gone inactive and are not renewing their subscription. "What has happened this time is unique and cannot be termed as a churn. This time subscriber has not recharged because they don't have money or their medical expenses are high due to the pandemic. If they remain inactive for some more time, then that will result in customer churn. Inactive base for both cable and DTH would be anywhere between 5 and 6 million," he said.

During the recent Q4 earnings conference call, Bharti Airtel MD & CEO, India & South Asia Gopal Vittal conceded that the DTH business did see softness in subscriber addition in the JFM quarter. He also said that the company added 1.2 million new subscribers in the last three financial years. "Yes, we did see a softness in the customer base in Q4, but we had a strong recovery in April, so I would discount that a little bit and I would look at it as saying what was it in full year 2019, full year 2020, and full year 2021. We had 1.2 million users that we added in FY2019, we added another 1.2 million FY2020, and we added close to 1.2 million - 1.1 million in FY2021, so the underlying trajectory is not a source of concern."

Vittal also said that the second Covid-19 wave had impacted the DTH subscriber additions. "We were expecting to have a really very, very solid quarter one, but then the lockdown hit us. I sense that some of these capabilities on the One Airtel plan, as well as the mass retail integration, give a very strong upside for DTH to gain share from cable and expand its presence."

The senior official of a DTH company said that the second wave has hit the pay-TV industry hard. The executive said that the impact was largely due to lockdown and not DD Free Dish. "The DTH industry saw an estimated 1 million subscribers going inactive. Whether or not these subscribers will come back only time will tell. The DD Free Dish phenomenon has been there for the last three years. Both these factors have had a huge impact on pay DTH. DD Free Dish has been eating into pay DTH base, but its impact is beginning to subside."

The official said that the AMJ quarter was bad for DTH players, however, things have started improving July onwards as lockdown restrictions are being relaxed. "Further improvement depends on the lockdown situation. Still only 60-70% of the country is out of lockdown. Overall, DTH subscriber base would have remained flat in FY21."

While OTT has emerged as a threat to traditional platforms, the official said that the impact of video streaming has been negligible. "OTT's impact on DTH has been negligible and is limited to premium audiences in metro cities. Also, DTH subscription is affordable, so people don't mind keeping linear service while also paying for OTT subscription. Not everyone can afford OTT considering the costs involved. Consumers have to pay for broadband as well as OTT subscription," the official averred.

According to a TV distribution executive, who works with one of the top cable TV companies, the entire pay-TV industry has been down due to second Covid-19 wave. He also noted that the problem of inactive subscribers is more on the corporate side. "The corporate subscribers who started coming back in the last quarter of FY21 once again started declining from the first week of April. Even though offices are opening, corporates are still not renewing subscriptions. We are hopeful of recovering that lost growth once the lockdown opens up," he stated.

The cable TV executive further stated that the retail customers are balancing out the loss from commercial customers for some companies. "Two types of churn happens in cable industry. One is the cable operator churn which is not happening. In terms of customer churn, we have not seen that much of an impact because our prices are reasonable. A lot also depends on the third wave," he said.

The set-top box (STB) seeding has also declined due to lockdown. "We were seeding 1-1.5 lakh STBs in a month, and that has reduced significantly," the executive noted.