Cost push for MSO’s is DTH’s gain

Star and Zee are hard-negotiating content deals with MSOs. Star has shifted to the RIO model, which has increased the cost significantly for the MSOs. Dish TV on the other hand has content cost fixed for at least the next 20 months (management guiding for 5-6% annual inflation). Star and Zee content-cost deal expires in Sep 2016, India Cast in Mar 2017 and Sony in Mar 2018. Cost pass-through for cable gives DTH players headroom to raise prices. Dish plans to implement differential pricing for different regions. While this may not be a water-tight plan, it still allays our concern that ARPU increases will only be region specific and hence may benefit urban DTH player more

Despite 416k net subscriber addition, Dish is still gaining 28% incremental market share. It seems that the DTH subscriber additions have been strong during the quarter and are probably gaining market share.

Separately, Dish TV  has sealed content-cost deals with all of the leading broadcasters for 2-3.5 years. The agreements with Zee and Star Plus are due for renewal in Sep 2016, India Cast in Mar 2017 and Sony in Mar 2018. Fifty percent of the agreement for content cost with the broadcasters is fixed, while the remaining is on CPS. Management has guided for higher single-digit growth in content cost over the agreement period.

Zing is positioned for local language consumption and has achieved impressive success since its launch across all regions. Zing now accounts for 17-18% of the company’s incremental subscriber additions and 18-35% of incremental market share in the states where it was launched.