Business Projections for IPTV

Shyamal Ghosh, IAS (Retd.)

Chairman, IPTV India Forum IPTV service scenario in India
It is expected that IPTV service will increase the user density across the country by being able to extend the benefits of broadband to television sets in one million homes by 2010. BSNL and MTNL have launched IPTV services on their networks with their franchisees. Bharti has launched its commercial service in NCR Delhi in January 2009. Reliance has launched friendly trials but is yet to start commercial services. work operating centers for content delivery. To launch premium services, operators will have to invest in content. Since it has to compete with cable TV and DTH, the ARPU is very low and therefore return on investment has a long gestation period. For IPTV service to reach homes, private telecom operators require rights of way (RoW) permission which is not easily given. The RoW permission requires high fee as demanded by the local municipality. The last mile local loop unbundling is not permitted by the government resulting in slow progress in broadband access. Currently, broadband users are only 4.3 million and the government targets to achieve 20 million by 2010, which is a Herculean task. The key driver for IPTV business is that it is considered as a potential revenue earner in the next couple of years. The target set is one million subscribers by 2010, ARPU of Rs. 350, and total revenue of Rs. 35 crore. IPTV will emerge fast as a premium service provider and would be in a position to attract top line subscribers in top 67 cities, which will further boost revenues. IPTV can be coupled with other services such as video conferencing, VoIP, e-Learning, e-Governance, home surveillance and disaster management. Availability of niche content due to its interactivity services like video on demand, gaming, user-generated content, and social networking will add to its unique advantage. IPTV service can be seen as a clear differentiator as it can easily combine TV viewing with walled garden services and provide best of both. The individual experiences from lean back to lean forward position

IPTV business challenges in India

IPTV has to compete with the existing cable TV and DTH services, which are growing at a much faster pace. Telecom players are not very aggressively pushing triple play, which can increase their penetration of basic telephony. TRAI performance indicator report shows a declining trend in 40 million basic telephones, whereas mobile phones have been increasing multifold to reach 350 million subscribers. Television is driven by content which comes from broadcasters, who view IPTV to be in a nascent stage and for a niche market. They therefore demand high content fee due to a low subscriber base. Regulation and policy framework for IPTV is still evolving with the announcement of IPTV policy guidelines and amendment to the guidelines for downlinking feed to the IPTV platform. Currently, it is restricted to only regular satellite feeds and there is no room for Internet-based channels due to lack of monitoring/censorship. IPTV services require a sizeable upfront investment for setting up net-

with personalization, interactivity, and other customized services. Piracy cost pay-TV operators and broadcasters in Asia USD 1.75 billion (Rs. 8750 crore) in lost revenue for the year ended June 2008, according to a rough estimate by an industry association. The major amount some USD 1.1 billion (Rs. 5500 crore) in lost revenue reportedly comes from India. The loss of revenue to content providers is also a loss of revenue to the government. With the emergence of convergent technologies, it is important to have a standard for IPTV as well. The International Telecommunication Union (ITU) has already defined standards for IPTV. ITU has three distinct parameters of watching consumers interest, content providers interest, and network operators/ service providers interest. Telecom Engineering Center of Department of Telecom is in the process of making generic requirements for IPTV in the country. The quality of service (QoS) and quality of experience (QoE) are also very important for delivering IPTV services. The Telecom Regulatory Authority of India (TRAI) is framing IPTV QoS norms and parameters.

An ADI Media Publication | adi-media.com | MARCH 09 | TV VEOPAR JOURNAL | 11

Free Color Television Scheme for the People of Tamil Nadu

CS Narayanan
SG DM -II (PID) Electronics Corporation of Tamil Nadu Limited
have color TV sets would be provided with free 14 inch color television sets from state funds. Electronics Corporation of Tamil Nadu Limited (ELCOT) has been nominated as the procurement agency as per government order vide G.O.Ms.No.3 Information Technology Department dated 20/06/2006. In this connection, the government has constituted a technical committee comprising members from Anna University, Indian Institute of Technology and a representative from CEAMA (Consumer Electronics and Appliances Manufacturers Association). The technical committee has finalized the technical specification of CTV based on IS Standards and to have 2 year warranty period. The technical specifications were approved by the All Party Legislative Members Committee headed by the Honble Chief Minister of Tamil Nadu. The order finalization and quantity allotment to each supplier were also finalized by the All Party Legislative Members Committee headed by the Chief Minister. Expected Number of Beneficiaries - 130 lakh Phases Phase I (National Competitive Bidding Tender 30,000 units (2006) (Completed) Phase II (International Competitive Bidding) 2,500,000 units (2007) he Honble Chief Minister of Tamil Nadu, on the floor of the legislative assembly on the motion of thanks to the Governor on 30.05.2006, has announced that for providing entertainment to women and to enable them to acquire general knowledge, the scheme for free distribution of color television sets will be commenced on September 15, 2006 on the occasion of the birthdays of Perarignar Anna and Thanthai Periyar E.V.R. It was also announced that this scheme will be implemented in a phased manner. The Government of Tamil Nadu has announced that all the households in Tamil Nadu state that do not

(Completed) Phase III (International Competitive Bidding) 3,750,000 units (2008) (Completed) Phase IV (International Competitive Bidding) 4,162,500 units (2009) (Commenced) Phase V (ICB Tenders will be floated by Sept 2009) - 2,500,000 units (2009-2010) Under Phase-I, 30,000 CTV sets were procured from three suppliers during August 2006 and the programme was formally launched on the 15th September 2006 by the Chief Minister near Chennai city at Kancheepuram District, the birth place of Perarignar Anna. The CTV sets had been despatched to the beneficiaries of Periyar EVR Samathuvapurams in the Districts @ 100 nos per Samathuvapuram, slum clearance board tenements in Chennai district and tribal families of the Nilgiris District. After the pilot launch of the programme, the Phase - II programme was launched by the Chief Minister on February 15, 2007 at Tiruvallur district and 2,500,000 CTV sets were procured from five suppliers during 2007 and distributed @ about 1,000 no of CTV sets per assembly constituency for 234 assembly constituencies of Tamil Nadu. The phase - III programme was launched by the Chief Minister on the February 16, 2008 at Vellore district and 3,750,000 CTV sets were procured from ten suppliers during 2008-09 and distributed @ about 1,450 no of CTV sets per assembly constituency for 234 assembly constituencies of Tamil Nadu. Up to March 4, 2009, 6,304,379 units of 14 inch color television sets were despatched to the districts. Under phase IV, orders were placed with fifteen suppliers for the procurement of 4,162,500 units of 14 inch color television sets and the

The novel scheme of free distribution of 14 inch color TV sets from state funds to households in Tamil Nadu state that do not have color TV sets has been very popular all over India and the electronic industry circle due to its extreme transparency.

12 | TV VEOPAR JOURNAL | MARCH 09 | adi-media.com | An ADI Media Publication

programme is formally launched on February 24, 2009 at Chennai. It is expected that this Phase IV despatches will be completed by December 2009. The selection of free CTV beneficiaries is done by a village level committee appointed by the Government. The actual distribution is done by the Revenue department of the respective district administration under the direct supervision of the district collectors concerned. The geographical spread of the beneficiaries is all over the state of Tamil Nadu.

Free 14-inch CTVs being distributed in Tamil Nadu

To supervise the quality of the color televisions supplied, ELCOT has positioned its own officers in each factory to carry out online auditing of the raw materials used and also the quality of manufacturing process. This is supported by a third party quality inspection agency such as SAMEER (Government of India Electronic testing agency) or any other agency appointed by ELCOT. The third party inspection agency carries out detailed analysis of the samples drawn from the manufacturing plant and subjects them to various tests as prescribed by the Bureau of Indian Standards (BIS).

All these quality control exercises resulted in very high quality systems being supplied to the beneficiaries. The rate of failure at the field level is almost negligible. ELCOT monitors the customer service cells using a toll free call centre (toll free call centre number 1800 425 4466) for attending the service calls for the free color television sets distributed by the government to the public. The colour television suppliers are maintaining the free color television service centers in all taluks of Tamil Nadu to enable the beneficiaries to service their CTVs . This novel scheme has been very popular all over India and the electronic industry circle due to its extreme transparency. After floating each tender, pre-bid meeting will be held and the representatives from the CTV industry are participating and the queries raised by them are attended and solved by the technical committee members and government officials in a transparent manner. The All Party Legislators Committee headed by the Chief Minister supervises the tender process at every level. Under Phase V programme, during the presentation of Tamil Nadu state government budget for the year 2009 - 10, it was proposed to allot Rs. 500 crore towards the procurement of 2,500,000 units of 14 inch free color television sets.

The selection of free CTV beneficiaries is done by a village level committee appointed by the Government.

To supervise the quality of the color televisions supplied, ELCOT has positioned its own officers in each factory to carry out on-line auditing of the raw materials used and the quality of the manufacturing process. This is supported by a third party quality inspection agency.

An ADI Media Publication | adi-media.com | MARCH 09 | TV VEOPAR JOURNAL | 15

An Eco-System to Promote Electronics Manufacturing in India

Rajoo Goel
Secretary General ELCINA Electronic Industries Association of India
costs, other input costs, finance costs, R&D costs (technology development fund) etc. ll Testing labs infrastructure, to provide solutions rather than go/nogo; (reference to the World Bank stress on metrology as a growth imperative) In addition to the above, areas which require attention for successfully implementing the policy are to simplify policy and procedures to encourage fresh and incremental investments in electronics manufacturing in the country. A special impetus is required in the export-promotion area to make Indian manufactured electronic-goods competitive globally. Efforts must be made to build the electronics brand for Made in India products, which currently do not have a competitive brand-perception in global markets. It is imperative to follow the software model and perhaps ride on the positive perception of the same to create desirability in international markets for products manufactured in India. The industry is the first to face the WTO zero-tariff regime, and it is a dual risk in the absence of any Indian standards that may serve as controls on e-dumping and e-waste (prevention of organizations from importing second-rate/refurbished/pre-owned/ phased out goods). The other aspect is that in the event of Indian goods being blocked out of certain international markets, there may be scope the imposition of a non-tariff barrier lectronics occupies a key position in modern science and technology. Electronics can impact the economy in the following five ways: ll Raise long term growth potential (increased productivity, competitiveness) ll Create employment opportunities (both high skilled & low skilled) ll Spread of education and literacy ll Provide universal health services ll Deliver e-Governance. The government has emphasized the need for an entire eco-system approach to creating an environment for growing the domestic electronics opportunity. These measures are directed at growing the domestic manufacturing opportunity, increasing the percentage value addition in the country and making India part of the global value chain in electronics manufacturing. This approach must include a focus on the following components: ll Developing R&D capability and contact between industry and academia ll Supply chain initiatives especially with reference to component manufacturing ll Encouragement to increase in value addition by manufacturers ll Positioning India in the global value chain (encouraging EMS companies etc) ll Flexibility in labor policy for electronics manufacturers ll Infrastructure (supply chain, Ewaste management system, power

from the Indian side. The market for electronics hardware touched USD 40 billion (Rs. 200,000 crore) in 2007-08. The domestic production was just 50 percent of the market demand, at USD 19 billion (Rs. 95,000 crore). There is a huge gap in demand and supply of components. Demand is estimated at over USD 8 billion (Rs. 40,000 crore) against supply of USD 2.2 billion (Rs. 11,000 crore) only. In spite of the economic slowdown, the demand will rise to about USD 44 billion (Rs. 220,000 crore). The gap between demand and production will continue to rise due to lack of a conducive business environment for manufacturing. Some of the general problems related to policy and high costs faced by this industry are: ll Inverted duties due to ITA-1 & FTAs (eg. CPTs & set top boxes) and dual use inputs such as plastics, copper, aluminum, etc, plaguing hardware manufacturers. ll Domestic taxes and levies impose fiscal disabilities ll Cascading impact of CST on components detrimental for finished products manufacturing ll High cost of finance and power add to disabilities: Overwhelming im-

16 | TV VEOPAR JOURNAL | MARCH 09 | adi-media.com | An ADI Media Publication

The Government has emphasized the need for an entire eco-system approach to creating an environment for growing the domestic electronics opportunity. It can take a number of steps to help India become a global manufacturing hub.

pact under zero duty regime and physical - discourage capital intensive, high value add investments ll Higher the value addition, higher the disability faced by manufacturer: high risk and absence of level playing field is discouraging investments in manufacture of components / parts which require high and long term investments and need a supportive fiscal and infrastructural environment In mobile/ wireless devices, India accounts to around 10 percent of the total worldwide mobile shipments. About 10 million phones shipped every month (in year 2008 total India shipments would cross 120 million phones). Worldwide volumes are projected to touch over 1.25 billion phones in year 2008. The average selling price is around USD 80 (Rs. 4000) per phone in India and total mobile phone revenues in India are over USD 10 billion/annum (Rs. 50,000 crore).
ll Disabilitiesfiscal

Global manufacturing scenario

ll China

has been biggest manufacturing hub for worldwide phone requirements. Almost all the component supply chain is in China, giving it all the advantages. ll Wages in China have increased significantly by about 60 percent in the last 12 to 15 months and the currency is appreciating. Overall manufacturing costs in China increased significantly so far in this year 2008, making it not the best available option for worldwide requirements. ll Some SE Asian countries (like Malaysia, Vietnam etc) have taken this opportunity (of cost increase in China) to develop and encourage manufacturing from their countries at lower costs than that of China. ll High import duties & taxes on imported mobiles are helping local manufacturing in Brazil. Their tariffs are as follows: ll Total import duties + taxes (state and federal) on fully made phone imports from outside countries in to Brazil are 49 percent. ll Total import duties + taxes (state and federal) on locally manufactured phones in Brazil for sale in Brazil are 12 percent.

ernments in the world give incentives for local manufacturing, the same doesnt seem to be case with Indian Government for mobile manufacturing. ll Import duty for mobile phones (fully manufactured outside India) is only four percent SAD; though this duty becomes zero percent for local manufacturing; two percent CST and 1 percent NCCD take away all the benefit received. ll Moreover the component supply chain in India is not developed as of now which increases the cost due to inbound logistics (most of the components/ BOM needs to be sourced from outside countries like China etc). ll Local manufacturing units (of OEMs & EMS companies) can cater to the entire mobile volume requirements of India and also export significant volumes to other countries with fully efficiency and quality at competitive prices if the Government is ready to provide incentives for local manufacturing and discourage direct imports by increasing import duties. Brazil seems to have succeeded with this model. ll Brazil could make its local manufacturing initiative successful with 50 million unit volumes per annum; so with 120 million unit volumes per annum India can make local manufacturing a bigger success and also cater to global exports.

Some suggestions to the government to help India become a global manufacturing hub
The Indian government should utilize the opportunity (high cost increase in China) to replace China as the next global manufacturing hub. The Indian Government should implement the below immediately: For direct imports of fully made phones from outside countries: ll Continue 4 percent SAD, 1 percent NCCD, and also add basic dutyat least 4 percent. ll Discontinue the option of 4 percent SAD drawback against the VAT paid. For local manufacturing (importing components and assembling in India): ll Remove CST & NCCD. ll Actually ensure that all taxes and duties are zero percent. The Government should consider implementing this model in all the industries.

India manufacturing scenario and requirements from the Government

ll There

are no real incentives for local manufacturing in India. While many gov-

18 | TV VEOPAR JOURNAL | MARCH 09 | adi-media.com | An ADI Media Publication

Mobility, Connectivity, and Convergence : The New Growth Drivers

Dr RC Chopra
Senior Advisor, Confederation of Indian Industry
alent to over 60 per cent of the global population. Annually about 1.3 billion handsets are being manufactured. With growth in demand, coupled with the paradigm shift in life and work style and its impact in enhancing productivity, mobile phones have become the focus of developers and have metamorphosed into a star convergence product. Mobile phone presently incorporates functionality of voice communication, text/video messaging, Internet connectivity, email browsing, personal organizer, calculator, video games, m-payments; incorporates a camera, MP3 player, radio receiver; can function as a USB storage drive, and now a DVB-H TV receiver. The integration of camera has received an overwhelming response 80 percent of the phones have built-in cameras. Global positioning system (GPS) technology has matured into a resource that goes far beyond its original design goals of navigation and asset tracking. GPS portable navigation devices provide accurate location and integrate many consumer features, as people use GPS to be more productive, and make their automotive commute safer, and easier. With declining prices, reducing form factors, the portable navigation devices are transitioning to personal navigation devices (PNDs) and their penetration is expected to increase at a faster pace. These are now being integrated into mobile phones. It is estimated that about 15 percent of the mobile phones manufactured globally have built-in PNDs. At the recently held CES 2009 at Las Vegas, pocket video projectors (picohe standalone products are giving way to multifunctional and interconnected products, shaping the way we live and do business. The convergence of communications, computer and consumer electronics technologies, emergence of Internet as the global communications platform, coupled with the developments in wireless technologies, have revolutionized the product portfolio in the ICTE sector. The developments in semiconductors, digitalization, and software have redefined product functionalities and often offer solutions to the unarticulated requirements, delighting the users - with technology acting more in the nature of demand push than the user pull. While on one hand it has ushered in multi-functionality, combined with significant advances in technology integration, power efficiency and miniaturization, it is accelerating the development and proliferation of a new generation of devices that are smaller, lighter, quieter and with longer battery life than ever before - ushering in the era of mobile platforms enabling access to the content, applications, and services anywhere and at anytime, opening up new business opportunities. The now ubiquitous mobile phone has become one of the worlds great success stories. For the first time in 2002just 21 years after its introduction - the number of mobile phones worldwide has outnumbered total fixed telephone lines. By 2006, the global number of mobile phone users reached 2.5 billion as compared to 1.4 billion fixed lines. Worldwide mobile subscriptions have reached about 4.0 billion - equiv-

projectors) were introduced. These have also been integrated with mobile phones. The growth of the Internet has been phenomenal. The Internet has begun to redefine the way people communicate. The Internet has also begun to redefine the way businesses are conducted. It provides global marketing reach, facilitates collaborative product design, integrates supply chain management, and enables information to be widely shared. This increased connectivity not only allows citizens and businesses to access various data, voice, and video applications anywhere, anytime, but also enhance collaboration and efficiency within the public and private sectors, and delivery of services. With the Internet, virtual corporations have become a reality. At the end of year 2000, there were 360 million Internet users which increased to 1.58 billion by 2008. PCs, which were the mainstay for net connectivity till recently, are giving way to on-the-move Internet Access and mobile Internet devices (MIDs). The global PC shipments were 264 million units in the year 2007. This increased to over 300 million in 2008. By end of 2008, the number of personal computers in use worldwide reached

20 | TV VEOPAR JOURNAL | MARCH 09 | adi-media.com | An ADI Media Publication

Going by the pace of technology development, declining price points, better features, growing consumer awareness, and trends in the demands of marketplace, mobility, convergence, and connectivity will be the key themes that would dominate the ICTE landscape over the next decade.

one billion. During these years about 81.5 percent of PCs shipped had been desktop computers, 16.4 percent laptops and 2.1 percent servers. Laptops which ushered in portability in computers were replaced by lighter and smaller notebooks. With Internet becoming the platform for not only information access/exchange and business application and growing online applications, the demand for low cost internet access device has been growing. To service this market, a new class of products called netbooks has been introduced. Netbooks are mobile computers, having small form factor with screens ranging from 5 inches to 10 inches, and they carry no optical drive. They are designed for basic applications such as web browsing, email, word processing etc. The user stores files on the internet and manages them with web based applications (cloud computing). Prices generally are between USD 200-500 (Rs. 10,000- Rs. 25,000). Aided with fast growth in the netbook segment, in the 3rd quarter of 2008, the notebook/netbook segment exceeded desktops for the first time. In about a year after their introduction, netbook sales are estimated to be more than 10 million in 2008. Almost all global major companies are offering products in this segment. Netbooks have been termed as disruptive products, competing with notebooks on one end and smartphones on the other. The second billion of PCs, which are expected to be put on the market by 2014, would be dominated by notebooks/netbooks. Mobile phones are widespread ICT devices, and are becoming the primary means of connecting to the Internet, surpassing traditional computers. Smart phones which support full featured email capabilities, miniature keyboard, touchscreen, Internet browsing, personal organizer etc. - are growing. About 10 percent of the high-end mobile phones manufactured annually can function as computers in their own right with certain limitations. With processors becoming more and more powerful, memory becoming cheaper and newer communication protocols increasing the data transfer rates, it has become possible to handle bandwidth-hungry applications. The cornerstone of the e-governance initiative, feasibility of telemedicine, distance education, streaming video is the networks supporting high data speeds. In addition,

the growth of online businesses/applications, e-commerce is fueling the need for broadband Internet connectivity. About 80 percent of all online consumers worldwide access the Internet through a broadband connection. DSL, cable, and fiber are the dominant access technologies. Mobile communication industry is poised to make another big leap forward. Streaming audio has created a radical shift in consumption patterns from physical sales to new forms of digital music which can be downloaded anytime. Broadband connectivity has made video streaming a reality and is growing at a fast rate. Presently, DVD players, Blu-ray decks and other devices such as roku and vudu connect to the Internet to stream video to television.For 2009, TV manufacturers globally have announced Internet connected televisions which will deliver video services from various service providers directly to TV. Increasingly, consumers, especially the working population, are becoming dependent upon access to information/data while on the move. Wireless broadband access technologies are showing a marked growth. In addition, the prevalence of mobile Internet browsingsurfing the web on a wireless handheld device such as a cell phone or smart phonealso continues to climb globally. Presently over 33 percent of the Internet access is on a wireless mobile device. In India, the population of mobile products covering mobile phones, PDAs, iPoDs, MP3 players, laptops/netbooks is presently estimated at about 400 million numbers. The annual sale of mobile products is presently in the range of about 120 million numbers. A common requirement for all mobile products is the rechargeable battery. Considering the present volumes and future demand, there is an urgent need to have investments in manufacture of this product in India. Extraordinary opportunities are facing the technology industries, and continued expansion of computing, new form factors, access to information and data from anywhere and on any device are opening way for innovations and solutions that were not even imaginable earlier. Going by the pace of technology development, declining price points, better features, growing consumer awareness and trends in the demands of marketplace, mobility, convergence and connectivity will be the key themes that would dominate the ICTE landscape over the next decade.

22 | TV VEOPAR JOURNAL | MARCH 09 | adi-media.com | An ADI Media Publication

Trends in Consumer Promotions and Marketing

Since the consumer is indispensable, marketing and promotion trends have to be altered to suit the needs and requirements of the dynamic market scenario
oday, the marketing spends on promotions in the budget of any consumer goods company are continually on the rise. It may be because the trends in consumer promotions and marketing change frequently, and therefore it becomes essential for a company to keep pace with these developments. Sales promotion plays a signicant role in increasing the revenue of a company. But before we venture further, lets rst understand the methodologies which are initiated by a company to increase its market share. There are mainly two ways of achieving this goal. The rst is to motivate the existing consumers in order to continue using a particular product and the second is to win over new customers into becoming consumers of your products. The market is ooded with differentiated, quality products, and to establish effective marketing conditions, a company uses certain tools to aggressively pursue its objectives. To choose the right product for its target audience, a company has to outline 5 basic policies: l A product and the product line l Branding (sponsor, brand name) l Packaging (size, shape, materials, color, text, brand logo) l Labeling (description, identication) l Customer service (pre as well as after sales) These measures, along with other factors like price formation, distribution and promotion, together create a strong visibility of the brand amongst its consumers. Amid the above mentioned factors, promotion of a product plays a key role in the long run. A very effective way of approaching a consumer is through advertising and sales promotion. Companies are adopting newer methods and techniques of

KR Kim
Vice Chairman & Chief Executive Officer Videocon Group

promotion to ensure wide reach, increased visibility and display, by entering newer markets and spreading its distribution network in potential markets. Consumer behavior helps the company to understand and decipher what exactly its customers wish for and want. There is plethora of marketing activities which induce varied consumer buying behavior. Choosing and designing a promotional campaign is critical in determining the extent of success the promotion would achieve. An effective promotional campaign strikes the right chord in consumer buying decision and purchasing process and adds sparkle to the consumers eye. Companies participate in exhibitions, trade fairs and organize various events and product demos, specially crafted to tap the potential buyers in order to increase the brand awareness and visibility, thus ensuring direct involvement and communication through coupons, contests, sampling, cross promotions, bonus back, freebies, etc., with the end consumer and thereby generating immediate sales without distorting the brand equity. Nowadays, companies are increasing the frequency of social marketing and cause related marketing program vis--vis traditional commercial advertising. Marketers have started to use sales promotion as a main element of their marketing strategy. This ensures increased sales in short and medium term, and increased brand loyalty in long term. Since the consumer is indispensable, marketing and promotion trends will and have to be altered to suit the needs and requirements of the dynamic market scenario. Thus, promotions must be in sync with the brand attitude to achieve maximum results and ensure brand sustenance in the long run.

24 | TV VEOPAR JOURNAL | MARCH 09 | adi-media.com | An ADI Media Publication

The Indian CE & HA Industry: The Road Ahead

Moon B. Shin
mong all sectors which have refused to show any kind of let down or reduction in activity, consumer durables continues to be the flag bearer. The sector shows considerable potential for expansion as well aas innovation of existing products. Among the trends which are going to dominate in the near future, going green and product customization rank on the top, followed closely by smart technology and style factor. Also the route to prosperity passes through rural India in the near future. While going green has been the talk of the town for long, only now companies across the world including India, are going green through eco-design and eco-products, reducing outflow of hazardous materials in production process, and recycling electronic products taking into consideration the global warming and sustainability in the long run. The Indian market is fast moving towards high-end customized products, which are both technologically advanced and aesthetically designed to complement the modern households. The need right now is to continuously innovate and come out with product variations across categories to meet the expectations of a varied class of customers. Product design is a must for creating better products for the customers and matches their lifestyle. Todays customer not only requires products with better functions but also wants that the product that complement their personality. So whether its about an LCD TV which has special features of loud and bass sound for music loving Indians to a washing machine with speech technology

Managing Director, LG Electronics India Limited

for helping a housewife in domestic chores, companies need to go all out to please the new pampered, hard-toplease Indian consumer. Companies today should focus on the issues underlying consumer behavior. Todays multi-dimensional consumer shops in different ways, based on a range of considerations that trigger purchase decisions. The Indian market looks very promising with the new age consumers not only looking at mobility and basic computing features but yearning for more technologically advanced features. To be able to preempt his needs and match up to his expectations is a challenge that companies need to live up to. This could be done by launching products that are innovative and stylish and most importantly, that fit into consumers everyday lives. Smart HDTV technologies with lower power consumption, beautifully designed wireless models that deliver stunning picture quality will rule. The LCD TV will see a continuous advancement with LED backlighting and TruMotion 240 Hz technology. High growth could be expected in network blu-ray disc players and blu-ray based home theater systems. Another trend to watch out for will be network connectivity in plasma and LCD TVs, giving consumers even more options for content delivery. Today customers are open to experiencing new and different products and are gradually shedding their inhibitions. The shift in tastes and preferences of Indian consumers from traditional and conservative looking product lines to more varied, modern and liberal assortment of commodities can be attributed to some social and economic trends like high disposable income, increased consumer awareness and preference for new advanced products. With the advent of modern homes and increased focus on decor, more emphasis on fashion and lifestyle, the focus on aesthetics is bound to increase. Consumers are now looking at products which are not only functional, but have futuristic design and sleek looks to match their personality as well. In such a scenario, it has become imperative for companies to take product design seriously and innovate on the same lines as sometimes the deciding factor for a consumer to choose one brand over the other could be as simple as a product looks. Last but not the least, the future of consumer durables lies in the vast semi-developed rural India. The Indian rural sector is something which has been least affected by recession. People here not only have good disposable incomes but are also yearning for a better lifestyle. More so, with the introduction of loan waiver to Indian farmers and introduction of subsidy, rural people are left with more and more disposable income. Companies which will be able to harness on this sector stand a better chance to stand the global slowdown.

An ADI Media Publication | adi-media.com | MARCH 09 | TV VEOPAR JOURNAL | 25

New Technology to Fuel Consumer Electronics Growth

R Zutshi
Dy. Managing Director Samsung India Electronics Private Limited
rapidly and I expect slim TV Volumes to double in the year 2009. In the year 2009, I also expect to see the introduction of LED technology in the Indian market. LED represents the next generation of technology in LCD TVs and I expect it to grow in popularity linked with its slim form factor, performance features and the fact that it is even more energy efficient than LCD TVs. Another technology that I expect to see growing well this year will be Blu ray. Even though Blu ray players have been available in the Indian market for a year now, they have not received a strong consumer response and growth impetus on account of the fact the Blu ray software has been found to be wanting. However, with the Blu ray software availability expected to grow in India this year, I see Blu ray players gaining ground. In terms of consumer durables, another trend that I see gaining momentum in India is the move towards environment friendly technology and products. As far as home appliance products are concerned, most manufacturers are working towards making their products more and more energy efficient. Even prior to the Government of India making it mandatory for manufacturers to display the star rating on products, most manufacturers are displaying star rating on their products like refrigerators and air conditioners. Even as products are becoming more and more environment friendly, they

he consumer electronics industry registered a healthy growth in the year 2008 based on new product and technology introduction as well as the healthy consumption seen for this category in semi urban markets. In terms of the overall industry, I expect the industry would have recorded a growth of around 1012 percent across the categories. All consumer electronics categories by and large recorded healthy growth, with the premium categories leading the growth. Some of the factors that contributed to higher growths being witnessed by the premium sector include the introduction of latest technological innovations in the premium segment, growing design consciousness, as well as growing affordability. A lot of manufacturers worked on enhancing their reach in smaller B&C class cities as well. In terms of new technology, full HD definitely dominated the audio video space, whether it was LCD TVs and plasma TVs to a greater extent or digital still cameras to a smaller extent. Given the Indian consumers rapid adoption of new technology and the fact that Doordarshan is planning to commence full HD transmission with the Commonwealth Games, I expect full HD LCD TVs to gain popularity this year and going forward. The flat TV market will continue to dominate the Indian color television market in the year gone by. In the year 2009, we expect the flat TV contribution to the total CTV Market to grow over 70 percent. Slim TV is another category that is growing very

are also becoming more stylish. As consumers are becoming more and more design conscious, so are the products mirroring this trend. In terms of form factor, displays are becoming flatter and sleeker. LCD monitors, LCD TVs, and slim TVs are gaining in consumer preference. Similarly, devices like digital still cameras and camcorders are becoming sleeker and more compact; wall mountable Blu ray players, sound bar home theatersall are here to stay. Connectivity in devices is another trend that is here to stay. Similarly, in the era of digital convergence, you have digital cameras which work as storage devices, have MP3 players, voice recording, and a host of other features even as you have mobile phones that have features ranging from camera and video recording, to music and movie playback to GPS navigation, apart from the calling function, of course.

The trends that we see in India are

no different from those being witnessed in other parts of the world. Given the fact that the adoption of new technology is quite rapid in India, I expect India to keep pace with, and sometimes even lead, the global trends in terms of technology.

26 | TV VEOPAR JOURNAL | MARCH 09 | adi-media.com | An ADI Media Publication

Trends in the Consumer Appliances Industry

The dream appliances that the industry needs to offer its consumers is better quality, user friendly, flexible, and yet at the same time simple, easyto-operate appliances.
he home appliances industry loves to keep itself abreast with the trends and preferences of the modern day consumer. For many years the manufacturers of home appliances have been striving to improve the energy efciency of the equipment that they produce, and to conserve resources. The ever increasing focus and public awareness for an energy-efcient and low-pollution future and a need to protect the environment has led major home appliance manufacturers, trade organization, and other bodies to think in terms of new energy and water efciency standards, recommendations for new energy star levels, and manufacturer tax credits for the production of energy and water efcient products. Linking water efciency to energy star requirements is an important step in helping people advance towards strong, positive advances in water conservation. At the same time, simpler values are being reected in appliance design, like the desire for fresher food, simpler and healthier cooking methods and lower energy use. The increasing need of healthier nutrition using methods that retain more nutrient properties is reected in various appliances like microwave ovens, dishwashers, and most importantly refrigerators. Refrigerators are evolving into styling exercises with many additional uses, with features such as ice cube makers, humidity regulators, air lters and zero-degree compartments, dual-tech conversion of freezer into normal refrigeration compartment for substantially extended storage and built-in LCD televisions and water dispensers. Mechanical controls have been replaced by electronic controls and panel displays. This leads to greater

Shi Zhiyuan,
Managing Director, Haier Appliances (India) Private Limited

precision, multiplicity and reliability. The intelligent control systems and sensors tted to home appliances enable them to be used for an even wider range of applications. The main emphasis is on simple and ergonomically designed controls which can be integrated to other systems to make an intelligent home. Appliances have certainly become very high-tech. This is also triggered by the consumers preference for products that are no longer static but think and react. Sophisticated electronics continue to make their way into the appliance world. Theres visual feedback, automatic temperature controls, motion sensors, LED lights, and sensors. Apart from technology the consumer also demands style, color and user friendly appliances. Style is the suddenly the new style quotient. Manufacturers are offering more appliances that also have convenience like the bottom mount refrigerators where the freezer is at the bottom. Although consumer-buying trends largely continue in small appliances, they are now beginning to coincide with the buying trends seen for bigger home appliances. It goes without saying that there is increased demand for appliances across segments. Moreover, this isnt only limited to need-based buying. Consumers broadening knowledge of technology has changed their views of what they want in their appliances. More and more consumers are opting for high-end appliances that save on time and effort on housework. Design, style, technology are the must haves for any appliance chosen by the consumer. The dream appliances that the industry needs to offer its consumers is better quality, user friendly, exible, and yet at the same time simple easy to operate appliances.

An ADI Media Publication | adi-media.com | MARCH 09 | TV VEOPAR JOURNAL | 27

Trends in the Indian HVAC Market

Krishan Sachdev
Director Marketing & Strategy, Carrier Airconditioning & Refrigeration Limited
Movement toward the global trend happens to be a common factor underlying the above stated trends emerging in Indian HVAC market. Exposure to international products and trends has created the demand for similar products in the domestic market. Consumers today have a wide range of systems and technologies to choose from, based on specific requirements and budgets. he Indian HVAC industry is vibrant and dynamic with trends being driven by new and better technologies. Customers are becoming more sophisticated and more aware of global standards that drive their expectations. ll We have seen trends in: ll Product ll Technology ll Distribution, and ll Back-end support systems In the HVAC industry, there are two relevant areas: energy efficiency and non-ozone depleting refrigerants. Energy efficiency has been the foundation for promoting awareness about products that are environmentally sustainable and provide good pay back value to the customer. The Bureau of Energy Efficiency (BEE) has been promoting the star label concept and it is expected that labeling will be made mandatory in near future. Customers are now conscious of labels while buying air-conditioning products and are making informed decisions.

Technology
In technology, the Indian AC market has leaped forward over the last few years. There have been changes in compressor technology where reciprocating compressors have been replaced by rotary, scroll and screw compressors in the residential, light commercial and commercial air-conditioning segments. Electro-mechanical controls have been replaced by electronic and micro-processor based controls. Fixed speed compressorbased equipment is being challenged by variable speed driven split systems i.e. inverters. Other changes include evolution of VRF (variable refrigerant flow) technology, and the emergence of R410a and R134a as non-ozone depleting refrigerant alternatives to the ozone depleting HCFC refrigerants.

tence during installation as well as for after-sales service. These sales and service dealers are also evolving to a more international model where many of them are large organizations with strong designing, execution and service capabilities. Many of these successful organizations have partnered exclusively with a manufacturer and are identified with that brand.

Back-end support systems

Unlike other consumer electronics products, air conditioners need preventive maintenance and after-sales service similar to automobiles. Proper installation is also a critical requirement to ensure that air conditioners run in a trouble-free and efficient manner for their full life. To ensure this, organizations have taken many initiatives in this direction. ll Training of installers and service personnel is seen as a key step toward enjoying the benefits of the product for its full life. ll Call centers where complaints can be logged and services can be requested have become a norm rather than exception. ll Shorter response time is critical as customers are no longer willing to wait for even a day for their units to be repaired.

Product
There have been many product-related trends in the last few years: ll Customers are buying hi-wall splits in place of window ACs for residential applications. ll Consumers prefer energy-efficient products and the emergence of product life cost as a purchase driver as against only initial purchase cost. ll There is growing preference for variable speed compressor units or inverters, which leads to significantly lower energy consumption, along with a smooth climate control experience throughout the year.

Distribution
Retail has emerged as the preferred channel for individual consumers to buy residential air conditioners. This is again a global trend and is driven by the need to touch and feel the product just like other home appliances. For larger and complex installations (even residential), sales and service dealers or AC specialists are still the preferred option since they bring an advanced level of technical compe-

28 | TV VEOPAR JOURNAL | MARCH 09 | adi-media.com | An ADI Media Publication

Reducing Margins: A Concern for Dealers

Bimal Malhotra
Director Marketing, Donex Industries Limited
middle brands have reduced their MRPs due to higher excise input to reduce the cost of production which does not give more than 10 percent margin to the retailer. The prices have gone down drastically. If the product cost is Rs. 20,000, the margin is Rs. 1,000. A dealer has his own natural market where the cus-

n todays market scenario, a major concern regarding retail outlets, especially electronics dealers, is that profit is reducing day-by-day. The dealer is not able to increase sales volumes due to opening of more outlets in nearby areas and expanding competition. The big brands and the lower

tomer comes to him and buys products from him. He cannot get more margins. Thats why the electronics dealers are diversifying their business from electronics retail business to other avenues like financing, stock markets, or real estate. If the margins are not improved, most of the traders will shift their focus to other businesses. All the companies should take care of dealers and distributors margins and ensure that they make good money and meet their ends.

Trends in the Indian DVD Player Industry

Mohandeep Singh
Director - Sales, Philips Consumer lifestyle
adversely impacted sentiments of metro consumers during current economic scenario. The DVD category witnessed a 10 percent price erosion in 2008, whereas in 2009, considering the price of raw materials already at minimum level, depreciation of rupee against dollar, increase pressure to maintain margins, companies may not enter in price game and therefore the focus would be to negate price erosion by delivering more value added feature pack players to the consumers. Convenience and connectivity based segments viz; HDMI and USB, which contributed almost 25 percent to 30 percent of the industrys overall sales in 2008, would continue to drive growth for DVD category in 2009. Newer technologies like Blu ray player may enter in Indian market by Q3/ Q4 provided the content is not a constraint in the Indian market. VD players have added a new dimension to home entertainment experience. A country where the audience love to watch their favorite movie again and again; emerging need for recreating the cinematic experience at home; DVD disc availability at nominal rates; rental industry boom, coupled with the current DVD household penetration levels offer a tremendous opportunity to this category. In 2008, DVD players grew double digit in unit sales and saw more than 100 new models launches by various players in the category. The DVD category contribution from town class B&C was more than 50 percent and would continue to grow in 2009 on the back of limited entertainment avenues like multiplexes or movie theaters. Companies will explore newer markets and would focus more on the reach and expansion than ever before to counter the

While home video constitutes 3/4th of the film industry in US, Indian home video industry is currently just about eight percent of the total industry. Expected shift from theatre to home-viewing in urban areas, growing middle class and urbanization clubbed with rural penetrations, the home video market is expected to grow at a healthy rate on the back of latest technology, superior design and innovation over the next five to six years.

An ADI Media Publication | adi-media.com | MARCH 09 | TV VEOPAR JOURNAL | 29

lobal and domestic economic changes have opened up a big canvas of opportunities for manufacturers in India. This is the moment of truth. Time is absolutely ripe for putting our industry on the right track. The track will lead us to the popular vision of an economic superpower in the next decade or so. Automobile has proved it. Telecommunication is well on the way. Consumer electronics and appliances had televisions made locally, but a large section of goods, namely washing machines, air conditioners, microwave ovens, were still dependant on imports from China. This is where the entire game plan has to change. Costs are at par with China now. Quality is certainly better controlled. Flexibility of business is far superior. There is every reason to revert to local sourcing. Large players have already realized this fact and reset their procurement plans. The Indian market, buoyed by tremendous rise of rural demands, is huge and still counting. We do not need to look outwards and get cowed down by the recession all over the world (as Chinas problem is). The scal measures and consumption pattern in India will continue to provide enough fodder to the manufacturing sector.

Consumer Electronics and Appliances Manufacturing A Sunrise Industry?

Old and prospective manufactures need to come out of the shell of depression and join the celebration of an unprecedented opportunity that is knocking at our doors.
D Bose President Noble Group of Companies

This movement of local electronics manufacturing industry is well understood and supported by the Government and policy making bodies as well as the industry associations. There have been several talks and presentations by the Government and the industry in the past to support this strategy. Employment generation and bigger economic activities in backward areas have been already tested. There is no debate necessary on this topic - only concerted action is required to put the idea on a fast track since todays global meltdown hugely favors this strategy. We also need to get our act together to meet the challenges of quality production. There are a lot of idle capacities to be tapped and still many more units may be required. Processes, technologies and mind sets need to be upgraded. This is an appeal to all old and prospective manufactures to come out of the shell of depression and join the celebration of this unprecedented opportunity that is knocking at our doors. We leave the jugglery of numbers to the market research people or the hardcore economists. But the mood is upbeat in all of us and we can do it if only we so believe. The dragon is faltering, let the elephant rise.

iding high on the success of previous years, the year 2008 was expected to catapult India to the fore a nation that along with China was the cynosure of all eyes with global investors making a beeline to partake in the growth story - India Shining! India Incredible! These were the buzzwords. But alas! How things have unfolded since then! Indeed a rude awakening for the entire world. Down went the global economy severely denting us too in the process. We could not escape unscathed. The ongoing crisis has impacted Indian economy in a manner few could have predicted. The crisis whose genesis lay in the housing sub prime of the US snowballed into a financial holocaust which spared none, neither the developed economies nor the emerging ones. The impact of this downturn is being felt both by the world trade channel and financial channel. Trade because when an economy falls into recession, it impacts trading partners as well. Recession implies less demand for overall products and services and leads to lower investments and corporate spends. And this would consequently affect the incomes of the export partners and consumption level of the importing partners. On the financial side, the crisis leads to a substantial change in the financial markets. The biggest pointers would be decline in the capital market indices, depreciation of the domestic currency and the non-performing assets in the credit markets. We see all of it happening not only here but worldwide. The global impact of the downturn comes as no surprise as financial linkages stretch across country boundaries and the exposure has been increasing substantially over the years with high leverage derived from many of the complex derivative instruments, a resultant of the financial ingenuity and market sophistication. The markets have become more integrated not only in terms of volumes but also in terms of movements of financial assets with banks being at the centre of such financial international trade. And this truly poses the biggest challenge for policy makers today. Arguably, there is an urgent need to bring in radical reforms and lift restrictions that hinder business activity

Global Downturn An Opportunity in a Calamity!

A downturn provides an ideal opportunity to look at things in a radically different manner using a different set of lenses.
in the country. But that alone is not going to help. What we need is not one, two or three but a series of steps to be taken which will create demand, propel growth and restore confidence in the financial system. Having said the above, let me also admit that while the developed economies of the West are reeling under this prolonged recession, we in India are relatively less impacted and therefore, likely to bounce back faster than the rest. While sectors like real estate, infrastructure, and consumer durables have seen a slowdown, telecom services, health, pharmaceutical sector, and FMCG are not as much impacted. However, everyone is grappling and the question uppermost in everyones mind is how we navigate our way through this turbulence. With a high degree of volatility in commodity markets, severe crunch in the credit market and hugely fluctuating currency rates, the biggest challenge to producers and marketers is how to plan and strategize in such uncertain times. The gloomy backdrop as painted above has its bright side as well. It provides for a unique opportunity to drive (a) never-before cost efficiencies, (b) launch new disruptive products and (c) build enduring customer loyalties. If you look at the history, the highly successful organizations were shaped through the most difficult times. A recessionary period offers the most ideal opportunities for the organization to do different things differently. There are a few core themes on which one needs to work during a deep downturn. Some of this may appear fundamental but nevertheless they are pivotal.

The gloomy backdrop provides a unique opportunity to drive never-before cost efficiencies, launch new products, and build enduring customer loyalties. Successful organizations would adopt a cross functional approach to identify and action initiatives to crunch costs ecross all elements of the end-to-end supply chain.

34 | TV VEOPAR JOURNAL | MARCH 09 | adi-media.com | An ADI Media Publication

tactical and short sighted. Unless and until one makes cost management a key organizational value, it will never get institutionalized. Cost focus has to go beyond the obvious and one should look at not only low at hanging, quick wins but take a harder look at the operational and structural issues. Look at newer ways to boost productivity and cut waste. Successful organizations would adopt a cross functional approach to identify and action initiatives to crunch costs across all elements of the end to end supply chain. And a big chunk of costs resides in your working capital block, inherent in the system and that is a great opportunity to optimize on. Being lean mean agile should be the new credo.

Leveraging People
Compelling times call for compelling measures. A severe downturn warrants redefining goals and priorities and realigning people and teams to implement the shift. We have to relook at our performance management systems to create both opportunities and challenges for the team members and revamp our remunerations, and rewards to drive behavior. There are many organizations which also use such times to restructure the organization by de-layering and enhancing the span of controls to allow for job enrichment, enhanced responsibilities and quicker decision making.

George Menezes Chief Operating Officer, Godrej & Boyce Mfg. Co. Ltd. Appliance Division
Driving revenue and enhancing margins
Driving revenue and enhancing margins is central to the business model of any organization and the recessionary period is a compelling time to take a hard look at these issues, viz. a close assessment of the assets of the business reveals that the 70-30 rule is so much applicable here too, 30 percent of the assets would contribute to 70 percent of the value. So what is the rest? Is it flab that needs to be trimmed, wastes that need to be eliminated? A reassessment of the value being generated by these assets - products, processes and people is absolutely mandatory. And what needs to be shed should be divested as it makes no financial sense going forward. Simultaneously, we need to look at opportunities of entering high margin categories which are less sensitive to price fluctuations. Successful marketers will strategically price products introducing new variants at high price points to derive an overall higher value while also taking bold decisions to phase out less value adding products. Similar to the product rationalization, channel optimization would be critical to deriving a higher price value. So the distribution strategy should look at not only the dimension of reach but also price extraction. And lastly, we need to explore all possible opportunities for cross selling to existing customers.

Connecting with Consumers

A downturn is the most opportune time to strengthen relationships with consumers. We have to travel the journey from engagement to attachment to bonding and we have to do this very rapidly. The reason being in a downturn when the consumer sentiment is at its lowest ebb, it is the right time to get close to your customers and connect with them at a deeper level. That is what will differentiate you from the rest. As in a personal relationship when one is going through an emotional or financial upheaval, it is ones near and dear ones, kith and kin, soul mates who help tide over those trying times. Same is as much applicable to customers. Remember that when the country and the global world are going through the financial upheaval, your customers are as much worried as you are. Stay close to them at all times. Talk to them continuously, bring excitement in their lives through your products and services and bond with them like nobody does. They will be then there with you through your life time! In conclusion, a downturn, a depression, a recession is not bad in itself. It provides an ideal opportunity to look at things in a radically different manner using a different set of lenses, identifying and seizing new business opportunities, driving revenue to derive higher value, spotting, identifying and eliminating inherent operational and structural inefficiencies and bonding with customers as never before, and above all, galvanizing a team into action to brace up for the challenging times ahead!

Focus on cost like never before

Talk of cost cutting in an organization you will find this activity sporadic, as and when, and to put it harshly, very

An ADI Media Publication | adi-media.com | MARCH 09 | TV VEOPAR JOURNAL | 35

Consumer Electronics Industry: Poised For Convergence

Consumers are now demanding more and more converged services including digital TV, high-speed Internet, video-on-demand, VoIP and a host of other applications

onvergence is rapidly shaping the way we live our lives. We are getting dependant on convergent devices for many daily tasks be it making calls, sharing pictures, maintaining meeting schedules, listen to music, play games, browse the Internet, check emails etc. Convergence means the coming together of entertainment, telephony and Internet (triple play) in one medium. Nowadays these there are further bundled with wireless technologies, also called The Fantastic Four or Grand Slam. Consumers are now demanding more and more converged services including digital TV, high-speed Internet, video-on-demand, VoIP and a host of other applications. IPTV is the buzzword waiting to mould our television experience in the near future. In simple terms, IPTV delivers audio and video over an Internet connection. The consumer can watch TV on a computer screen, a television set (using an IPTV set top box) or a mobile device like a cell phone. IPTV is often provided in conjunction with videoon-demand and may be bundled with Internet services such as Web access and VoIP. The viewers experience can be further enriched by features such as search for content by title or actors name, or a picture-in-picture functionality that allows them to channel surf without leaving the program theyre watching. Viewers may be able to look up a players statistics while watching a sports game, or control the camera angle. They can also watch uninterrupted movies with functions like

play/pause, forward, rewind and record. Many of the latest DVD players are incorporating existing computer technologies for broadening the entertainment experience beyond just video and watching movies. Firewire or IEEE 1394 is making it possible to connect and share information between devices working with large data, for example, camcorders, DVD players and digital audio equipment. Some of the latest digital photoframes with TFT LCD displays also have additional features like alarm clock with snooze function, indoor temperature monitor, and calendar. Many new digital cameras are now Wi-Fi enabled, allowing users to upload pictures directly to the Web. The new generation of LCD TVs have USB connectivity to connect devices like MP3 players, cameras, memory sticks etc to play various mediamusic, video and imagesthrough the TV, in addition to content sharing between various TV sets in the house. Gaming consoles like to Nintendo WII, in addition to gaming function, also provide Internet connectivity, social networking engine and iTunes connectivity enabling the user to share music and pictures between peers. It would not be long before the LCD/ Plasma TVs have a built-in hard drive, fully-functional computer (with both onscreen and wireless keyboards) with built-in modem, webcam, MP3 player, fully-functional phone with the TV remote-control working as phones handset, builtin FM radio, slots for printer attachment, wireless gaming facilities.

Mohit Verma
Director Beltek India Limited

36 | TV VEOPAR JOURNAL | MARCH 09 | adi-media.com | An ADI Media Publication

Trends in the Indian CTV Market

CTV prices more or less remained constant and rise in input costs was marginally compensated by the initiative taken by the government in reducing excise duty
he color television market for the year 200809 will show a modest growth of over 3-4 percent over last year and is expected to be around 16 million units against 15 million units over corresponding period last year. India, in fact, is the only country which is still clocking growth despite lower sales world wide. 21-inch pure flat continues to be the largest selling segment with over 55 percent market share. The Indian market also saw the introduction of slim CTVs and their share is now gradually increasing. In the coming months, ultra slim is likely to be 20 percent of the total market. 14 inch continues to be strong at over 20 percent of the total market. Sales in the 15 inch segment are not at expected level and continue to hover between 5-7 percent. Large screen size shares remain more or less at a level of 7-8 percent, maybe owing to competition from low/mid-end LCD TVs. LCD TV market during the year would be around 1 million, a mere fraction of the total CTV market in India. Given the income levels and household proles in India, it will be many years before LCD TV would make real dent in the CTV market. At least for the next 2-3 years, it is going to remain a niche product. LG and Videocon Group continue to dominate the market with over 45 percent market share between them, followed by Samsung and Onida. Other international brands like Philips, Panasonic, TCL, Haier have not been able to make much dent and continue to operate with smaller volumes. Surprisingly, the regional segment has bounced back with over 25 percent share of the to-

tal market. Major CTV manufacturers like Videocon, LG and Samsung are going all out to woo customers with newer and larger models of LCD, but sales are below expectations. CTV prices more or less remained constant and rise in input costs was marginally compensated by the initiative taken by the government in reducing excise duty. LCD prices did fall marginally, though not in line with international trends. Now that the dollar is appreciating, it is having a cascading effect on the cost of raw materials along with high increase in the energy cost. This has led to increased costs of the product and may witness a marginal increase in the price of CRTs and CTVs. The year 2009 is going to be a tough year with world recession, slowdown of Chinese economy, and fears of slow down in the Indian market. Key to sales would be rural penetration, production at peak efciencies and rationalizing costs. Indian outlook for 2009 remains positive despite worldwide recession and slowdown in India. The market is not expected to decline but is likely to grow around 5 percent and in the worst case scenario to remain at the same level. Growth is to come from Class B and C towns and rural markets. In fact, the last few months have seen a revival in basic sizes such as 14 inch and 20 inch. All said and done, India, with its huge population and households of over 175 million, still has a vast potential for color televisions. The challenge is to provide a robust set with good service back up with contemporary technology at affordable prices.

Deepak Dayal
General Manager Marketing & Customer Services JCT Electronics Limited

An ADI Media Publication | adi-media.com | MARCH 09 | TV VEOPAR JOURNAL | 37

Trends in the Indian AC market

Consumers nowadays are becoming extremely environment conscious and look for products that adhere to global eco-standards and save energy

ith summers approaching, the demand for air conditioners is increasing by leaps and bounds. Global manufacturers are increasingly seeking foothold in the growing domestic Indian market and homegrown manufacturers are also expanding rapidly. The competition that is already erce is bound to intensify in the coming years. All white goods giants are vying to achieve the maximum market share in the AC segment by rolling out new models featuring the latest technology. These companies are not only launching new models but are also upgrading their existing ones. With so many products available in the market, the consumers have a wide range to choose from, both in terms of unique features as well as prices that range from anything between Rs 15,000 and Rs 1 lakh. Consumers in India are demanding more in air conditioners; nowadays, they require more benets like lesser power consumption and price effectiveness. Over the years, we have seen the consumer preference for air conditioners shift from window air-conditioners to split air-conditioners. One of the primary reasons for this is very less difference in the prices of both with split air conditioners including features like digital temperature remote control, auto restart, slide-in slide-out chassis, and anti corrosion body. The maximum demand for split air conditioners comes in from Southern India. Experts attribute this growth to the fact that houses in the southern region, on an average, are larger in size and require high capacity air-conditioners. Moreover, the extreme temperatures, especially in summer, call for high capacity air conditioners and refrigerators, thereby pepping up the demand. The room AC industry has experienced one of the highest growth

rates since 1997. While the industry grew by around 20 percent (CAGR), the split AC segment grew by around 30 percent (CAGR). Only in 2008 we see an exception. Although 2008 has been generally dampening for the entire economy and especially so for the realty and IT sectors, the AC industry has been able to hold its ground and has not experienced any de-growth. The split AC market has been enjoying a very high growth rate (CAGR 30 percent) and a plethora of brands are available in the market. Pen-

Penetration of ACs in India is abysmally low and there is always room for additional products. Especially if such products are of good quality.
etration of ACs in India is abysmally low and there is always room for additional products. Especially so if such products are of good quality, enhance self-image/esteem, and are affordable at reasonable and affordable prices. Consumers nowadays are becoming extremely environment conscious and look for products that adhere to global eco-standards and save energy. They are also aware that replacing older sets with new stop several hundreds of pounds of carbon dioxide being released into the atmosphere each summer season as well as save a lot of energy. Although 2009 may not spell a great forecast growth wise for the overall economy, we still expect the summer season to provide a llip to the AC industry and grow between 5 percent and 10 percent over 2008.

Sabiha Kidwai
General Manager - Marketing Panasonic India

38 | TV VEOPAR JOURNAL | MARCH 09 | adi-media.com | An ADI Media Publication

DTH: The Road Ahead

Tony DSilva
hough home entertainment viewing has come a long way since the early 1990s where the advent of satellite television opened up wider content choices, last mile connectivity has always been a major road block in content delivery. With over 110 million television homes, India is the third largest TV market in the world but cable TV covers about only 61 million homes which means that over 40 percent of the current market depends on terrestrial antennas for entertainment. In mature urban markets, single TV households are giving way to multiple television sets which means entertainment is getting more personalised. Beginning with 2-4 hours of programming on Doordarshan in the early 1980s, today we have moved to 24 hours of non-stop entertainment with the advent of satellite television, and yes the confusion today is what to watch and what not to watch. The DTH service has opened up a new way of looking at the mass entertainment market in India. It is bound to create a paradigm shift in how electronic media is consumed. In fact this is one service which will make the idiot box look a lot smarter. DTH by its very definition (direct to home) is at an advantage to change the terms of viewing arrangements. At a service level it will help mitigate the last mile connectivity issue, at a technology level there will be a big shift in the quality of entertainment, as a content aggregator there will be ample choice to choose from and at a price level the pay for what you view will turn out to be the killer idea in propelling market penetration of the services. The DTH service becomes a win-win for all stake holders. The set top box can become an intelligent tool and

Chief Operating Officer Sun Direct

will be able to collect data and analyse individual content preference. In the coming years this will lead us to deliver customised content to individual subscribers; which means the possibility of mass customisation of content. The customer will be able to exercise greater content choice and control on what he wants to watch and at what price and when he wants to watch it. The challenge here is to gear up to customer expectation; demystify the technology and services to increase the service proliferation. DTH services have grown a new set of ecosystem partners at various levels; it calls for expertise in areas like call-centre operation, dish installation, post-sales servicing, equipment distribution, manpower training, recharge services, and more. Like any other industry the three As (availability, affordability and acceptability) will play a crucial role to take the DTH services places. Tackling availability means stringing together a robust supply chain management, logistics and distribution system. Making available set-top boxes, connecting cables, dish and the other accessories on time every time. But then if this is simple enough, the difficult part is in post-sales installation and servicing a large geographical area. Affordability means we need to address the basic service buy-in price tag; world over the set top box and dish antenna are given free of cost (the practice is catching up fast in India), content customization means bundling the top 15-20 channels of choice at a base price; now service providers also have a-la-carte and stand alone packages and lesser lock-in time (a customer can buy a sports channel for 1 month and discontinue it, say after

the cricket season is over). This helps in faster trials at lower cost levels. Another aspect to affordability comes in the form of renewal of services. Today options like renewal through mobile phone, SMS, online and through re-charge cards have come out as strong supports to offer different levels of service continuation options. Acceptability needs to be handled at two levels; at a base level the quality of service comes in to play; from picture quality (can the picture be seen in cloudy atmosphere) to content choice (does a viewer get his/her favourite channels at his/her cost) and the reputation of the service provider are key deciding factors. While in mature urban markets the technological points like MPEG4, HDTV quality pictures, record and watch later will play a vital role in growing the market, in semi-urban markets local content customisation plays a crucial role. A customer is not just buys the DTH service, he also buys the content. Being more sensitive to customer needs and giving them high quality entertainment at an affordable cost will be a major deciding factor in the DTH market in the coming days.

An ADI Media Publication | adi-media.com | MARCH 09 | TV VEOPAR JOURNAL | 39

n the last few years, the sale of audio systems and audio equipment has taken a severe beating due to very low demand. The advent of DVD players with home theater systems has caused a dip in the demand for portable audio systems and mono compo HiFi systems. Only a fraction of units are being sold by most of the leading brands as compared to the sales figures accounted 8-10 years back by them. Audio systems primarily are categorized in three segments:

llSmall, handy portable systems (two-in-ones and

three-in-ones)
llMini compo HiFi systems; llHigh-end music systems

The first and second segments have witnessed a negative growth but sales in the third segment are steadily and continuously growing due to availability of high quality world class brands in India now. In the recent past, the Indian economy has witnessed an unprecedented surge in GDP which has resulted in creation of a very large pool of middle income group customers. The dramatic lifestyle changes at the upper level of the society have created demand for a good music system and therefore, the segment is growing. The ever increasing network of FM radio with crispy and very interesting programs aired by new generation RJs has lured millions of potential audio systems buyers to FM radio. The need to have an audio system is not felt due to FM radios availability in mobile phones, car stereos, and compact and cheap FM radio handsets. FM radio has eclipsed the demand for audio systems in urban and semi-urban markets and is soon going to effect rural markets also. This trend will continue for the next 23 years but there is a silver lining seen by many trade pundits in the steady and continuous growth of high-end audio systems created by the demand from affluent and discerning customers. Demand for good quality audio systems is increasing as it also serves as status symbol for the buyer. More and more customers will come under this category in the near future. We are witnessing a good demand for international audio brands in India and hopefully most of the big towns will have exclusive audio systems outlets of these brands. It is very disheartening to mention here that we do not have any Indian audio brand which can compete with the multinational brands.

Vijay Sharma

President - Sales & Marketing SNR Electronics Limited

Trends in the Indian Audio Market

We are witnessing a good demand for international audio brands in India and hopefully most of the big towns will have exclusive audio systems outlets of these brands.

40 | TV VEOPAR JOURNAL | MARCH 09 | adi-media.com | An ADI Media Publication

Trends in Consumer Promotions and Marketing

Exchange offer has emerged as one of the promotional schemes in recent times
s a result of advertising clutter, a trend is being witnessed wherein an increasing number of marketing people have started to use consumer sales promotion as a main element of their marketing strategy. There are basically two objectives of these sales promotion activities:
l Increase salesshort and medium

in addition to the main purchase), contest (provides a chance to win a large prize through skill), and sweepstake (provides a chance to win a large prize based on chance). The most popular promotion among all is the free gift promotion, which constitutes more than half of the total number of promotions. This promotion is popular across a large number of product categories. It offers the consumer an incentive to purchase in the form of a free product/service. Often, the product offered free is a complement to the original purchase. Within durables, the most frequently promoted product categories are color televisions and DTH services. The most frequently promoted categories in the services sector are tour and travel, and cellular phone service. One of the promotions that have emerged recently in the consumer durable category is the exchange offer. This promotion requires the consumer to exchange an old product for a new one and get some benet, usually a price reduction. The purpose of the exchange scheme is to upgrade existing users of durable products to newer and larger sized models of a product. Apart from above, a new kind of promotional activity is also being currently used aggressively by different marketers, wherein two or more products of the same company are used. Here a customer is encouraged to buy a primary product of that company against offering some secondary product as a freebie. This is also happening between two different companies as a joint promotion.

term
l Increase brand loyaltylong term

In todays scenario, the type of sales promotion activity is one of the most important criteria for consumers to buy a new brand for the rst time. Although consumers now act less and less impulsively, certain sales promotion techniques will help new brands to achieve higher rates of brand trial. Consumers prefer the following types of promotions for new products: free samples, coupons, displays/point-of-purchase (POP) material, and on-pack promotions. On a broader note, two kinds of promotions are being observed price versus non-price nature. In price promotions, cost of the goods or service is temporarily reduced, such as coupons (offers a certicate that provides a price reduction at point of purchase), price off (offers a discount to the normal selling price of a product), and refunds/rebates (offers cash back from the manufacturer on a purchase).

A N Sehgal
Director Consumer Electronics Division Super Cassettes Industries Limited

In non-price promotions, some value is temporarily added to the product at full price, such as extra product (offers an increased quantity of the product without an increase in normal retail price giveaways or contests), premium (offers a free gift

42 | TV VEOPAR JOURNAL | MARCH 09 | adi-media.com | An ADI Media Publication

Market and Technological Trends in LCD TVs

The trend is towards thinner units for use in living rooms, and consumer interest is also growing in the new audio/ visual experiences made possible by products such as home theater and wallmountable monitors.
he market of at panel display is experiencing rapid growth with the advancement of digital technologies in media, broadcast and communication. LCD panels have created a new lifestyle as consumers are becoming more aware of the benets they deliver, viz. low power consumption, thin prole and light weight as well as improvements in image quality, size and resolution. Increasing supply resulting in more attractive pricing has also boosted their popularity. We are witnessing a new era where digital video is delivered via a multitude of channels, as witnessed by the start of digital broadcasting, increasing adoption of broadband technologies, and growing market permeation of DVDs and digital cameras. LCD TVs are gaining popularity due to the unique benets provided by LCD technology, including thin prole, light weight, compact size, and low power consumption. Developments are underway in Indian digital broadcasting infrastructure with steady progress being made in the move to digitalize content. Rapid adoption of digital technology is predicted in the coming years. Results suggest a dramatic market expansion driven by the combination of a rapid fall in product pricing with increasingly large product line as the move to big-screen and wide-format models in particular gathers momentum. Signicant investments in manufacturing facilities by Chinese, Korean and Japanese LCD panel producers are expected to result in a dramatically more robust supply capacity, which should in turn contribute to a market expansion as favorable supply conditions permit domestic television manufacturers to intensify their participation in the segment.

Rambo Zhang
Head-Marketing, TCL India Holdings Private Limited

Growth in television applications being driven by the adoption of broadband communications technology, the signicance of the low power consumption and long service lifetimes offered by LCD TVs is growing. Easeof-use is also becoming a key consideration as the consumer demands products that are simple to set up and move. The trend is towards thinner units for use in living rooms, and consumer interest is also growing in the new audio/visual experiences made possible by products such as home theater and wall-mountable monitors. At the same time there has been a signicant acceleration in the adoption of home networking technologies. Growth is expected in the popularity of lifestyles characterized by the enjoyment of digital imagery and music over networks and by the integration of A/V components and IT hardware using USB, memory cards, wireless A/V transmissions, and broadband communications. If the recurrent themes and trends are any indication of where the industry is headed then the manufacturers expect us to start using our TVs as media access hubs. With developments like 240Hz frame rate, fascinating aesthetics with vibrant color schemes, WiFi connectivity, IPTV content access, wireless HD connection etc, the day is not far when we will have two-piece TVs, where the TV might consist of a hyper-thin display panel wirelessly connected to an outboard tuner-I/O-video processor box. And just when one thought high denition couldnt get much higher, manufacturers are beginning to show proof-of-concept technology demos and even prototype products geared towards up-scaling HD content to even higher, 3840 x 2160 resolution levels. Interesting, isnt it.

An ADI Media Publication | adi-media.com | MARCH 09 | TV VEOPAR JOURNAL | 43

Trends in the Indian AC market

As we move into the future, product innovation takes center stage, giving much needed momentum to the industry and opening up new vistas of opportunities

Pradeep Bakshi
Vice President Operations Voltas Limited

he air conditioning space witnessed a rather turbulent 2008 and is raring to move into a resilient 2009. While the industry witnessed a growth of 13 percent this calendar year despite the looming inationary trends, expensive money, limited nance options, decit rainfall, and the general slowdown in the economy, it has undoubtedly been a phase of immense learning during the tide for the air-conditioning segment, which holds a volume share of approximately 13 percent in the key consumer durables category. While the future boomerangs multiple challenges at the industry in terms of consumer apprehension and macro economic uncertainty, respite can be sought in the positive per capita income growth this year, which stood at 5.6 percent despite the odds signifying general economic betterment. As we move into the future, product innovation takes center stage giving much needed momentum to the industry and opening up new vistas of opportunities. With a clear focus on the rst-time consumer in non-metros and a maturing audience upgrading to technologically advanced energy efcient models, prospects can be seen in the semi-urban landscape. Besides the shrinking replacement market, which we believe will help the industry position itself well in the urban landscape, there are opportunities like declining retail interest rates, higher liquidity, and a young working population willing to move into new homes and upgrade. In the coming season, we can be positive the industry will be witness to action in the entry level segment with introduction of appropriately priced energy efcient models which we are condent will continue to be well accepted by consumers whose sentiments are linked to the economy that looks bullish going

forward. With improvement in spending in social infrastructure, coupled with raised living standards, which have given rise to numerous catchments and societies, the industry will have to respond to a robust market and this market is signicantly inuenced by a concern for energy and the environment. Investments in brand-building echoing product functionality and aesthetics with a long run payoff besides preparedness in terms of large working capital requirements are factors that need focus. The rate of change in our industry will be exponential. Some changes will be caused by improvements in technology whereas others will be the result of inuences outside our immediate control. As industry players, we have an obligation to be proactive in encouraging changes that are of benet to the society we serve. This in turn will have direct benet to our industry and to each of us individually. To reiterate, emphasizing on the rural analogous markets, which are relatively decoupled from the economic downturn and growing faster than the urban markets pose signicant opportunities. Rising income levels, double-income families, and increasing consumer awareness have been the chief growth drivers of the industry and will continue to be so in the future, albeit with a shade of somberness. Emerging triumphant in the longterm will require rms to develop a wide and robust distribution network, differentiate their products in areas of relevance to the consumer and innovate in the areas of promotion, product nancing, etc. I am cautiously optimistic that despite a gloom, the industry is waiting with a bated breath to take advantage of the turnaround in the ensuing season and keep the excitement alive with a host of new launches.

44 | TV VEOPAR JOURNAL | MARCH 09 | adi-media.com | An ADI Media Publication

Product Innovations in Mass Categories

For innovation to succeed, it must be rooted in consumer understanding
he opening up of the Indian economy in 1991 had an immense impact on innovation on most industries, and this is true for the home appliance industry in India. Prior to liberalization, the industry comprised of a handful of local brands, access to technology was expensive and limited, and focus was skewed towards basic functionality. Post liberalization, a number of international brands entered the industry. While existing brands had to remain relevant in the context of increased consumer choice, new aspirants had to create an identity for their brand to compete against well established brands. Innovation thus acquired an enhanced dimension in the new paradigm, as the need to differentiate product offerings became imperative. While there are a number of denitions, innovation is when a product or feature is an industry rst, when such a feature or product is protectable by law, or even when there is a novel solution or way to do something that exists. For innovation to succeed, it must be rooted in consumer understanding. Successful brands are those that innovate across the consumer pyramid in which they operate and whose innovations enhance the value proposition of the offering. Consumers will not value a product or feature innovation unless it is relevant and provides value to them. The value that is attached to an innovative product is reected in the price that it can command, which is usually at a premium to the average price of products in the segment, and the share that it gains. It is not a successful innovation when it is priced so high that it becomes unaffordable for the consumers it is meant to serve, thereby limiting volume. There are some myths about innovation. Here are a few that are especially true for mass categories. The rst myth is that innovation is not important for mass categories as most are rst time users and are looking only for the basics. The second is

Shantanu Das Gupta

Vice President Corporate Affairs & Strategy - Asia South, Whirlpool of India Limited

that innovation adds cost and therefore cannot be done in price sensitive, mass categories. Both these are fallacies. By denition, mass categories are low in price; hence innovation must be affordable, keeping the end consumer price in mind. This necessitates dening limits on any cost element that could have an adverse impact on the nal consumer price. This has to be done at the very start of the project and would include capital expenditure, bill of materials, etc., which must be rigorously monitored through the duration of the project. Many consumers of mass categories especially in India are indeed rst time buyers, and hence without any usage experience. Thus it becomes necessary to understand the non-owner habits and behavior as well as their expectations to be able to attract and delight them. One such example is the non-refrigerated utility drawer in entry level and mid-capacity refrigerators for storing onions and potatoes. Users at this segment tend to be challenged for space and value anything that helps them manage space. The third myth is that innovation has to be large scale and technical. For something to be seen as innovative, it is not necessary that it be a huge leap in technology. Indeed, many small innovations are equally or more valued, particularly if they are drawn from consumer insights and are relevant to the end user. There are several such across many mass categories, such as heater in top-load washing machines, fully automatic refrigerator which is also in the mass end of frost free refrigerators. There are several more examples of innovation for masses. Most successful marketers would not hesitate to acknowledge that it is consumers who provide the clues to innovation. Therefore, consumer understanding lies at the heart of innovation and it is those companies that rene this understanding and translate them into meaningful benets that will come out on top.

46 | TV VEOPAR JOURNAL | MARCH 09 | adi-media.com | An ADI Media Publication

Recession : The Buzzword

Sunil Sethi
RECESSION
RRejection EEmptiness CCold feet EEndangered SSidelined SSubdued IInterrupted OOmitted NNobody Lay offs, salary cuts, dollar uctuation name it, and its all happening. Yes it is true, we are living in an age where we are sleeping, breathing, talking, reading and living 24x7 with recession. And why not, after all what

Sr. Vice President Sales & Marketing, Weston

is good or bad for America is applicable to the world. We have religiously copied them, be it the way they dress (6 meter saris you can have six tops), what we eat (paranthas to burgers), how we eat (hands to knife and fork), what time we eat (8.00 pm or 11.00 pm), joint families to nuclear families, or from arranged marriages to live-in arrangement. Yes, America has sneezed and like the rest of the world we have also got a cold. The weakening of the American economy is bad not only for India but for the entire world. But have we asked ourselves why we did not do extra-ordinarily well when America did? The US economy has faced 10 recessions

An ADI Media Publication | adi-media.com | MARCH 09 | TV VEOPAR JOURNAL | 47

since the Second World War, and each time they have come out of it What has happened is it normal or a bolt out of the blue? Did we expect the Sensex to go beyond 20,000 (or stick there) to 30,000 to 40,000, GDP growth for the next five years would be 8 percent plus. Salary hikes will be in the same percentage, quarter after quarter, the turnover will multiply and the profits will keep on increasing by leaps and bounds. No, it is not possible, although it is good to defy logic. Look, even God has created different weathers to even out. During school days the result for each term would not be the same. Sachin Tendulkar does not score century every time he goes to bat, and all films of Shah Rukh Khan are not hits. But yes we cannot run away from reality, how/ where it started US home loan defaults landing banks into trouble (bad rating of credit worthiness), social security? At the same time what happened was that the price of oil rose to more than USD 100 per barrel. The Government would be there creating a better atmosphere by initiating duty cuts,

investment into infrastructure, lowering of interest rates etc. What we can do in such times is to look back on basics: on weak links. Recall refreshing for exam, the subject you were weak in/the amount of time you devoted extra to get better marks in the subject. ll Better time management: The extra time you devoted dressing up when going for the party you would love to spend time in. ll Get into detailing: The sensitive way you handle your newborn.
ll Focus

We should go back to basics in times of recession, including focusing on weak links, managing time effectively, and focusing on detailing

So, we should look at recession as: R- E- C- E- S- S- I- O- N- Reinvent Electrify Combat Empower Stimulate Simplify Initiate Originate Nail it.