South Africa: War for TV Viewers

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The television broadcasting market in South Africa is in for a shake-up with the introduction of more players and greater competition. As the media landscape changes shape through convergence, the boundaries between telecoms operators (telcos) and broadcasters are becoming blurred.

Telcos, which are facing dwindling voice revenues because of disruptive technologies such as Voice Over Internet Protocol (Voip), are looking for new revenue streams, one of which is broadcast TV. Telkom, South Africa’s fixed-line incumbent, is positioning its subsidiary Telkom Media to roll out TV offerings via an extensive fibre network that it uses to deliver its services, and is one of 18 applicants that have responded to the Independent Communications Authority of South Africa’s (Icasa) call for subscription broadcasting license applications.

Because of its extensive fibre backbone, Telkom Media is seen to have an advantage over other applicants. A recent analyst’s report, which details strategies telcos have adopted in their move into the broadcasting arena, suggests that free-to-air channels will be the biggest losers in the fight for the advertising buck.

The report uses international examples to suggest that the highly interactive broadcast models provided by TV via broadband offerings will threaten the advertising revenue of free-to-air channels such as e.tv and subscription broadcasters such as Multichoice.

The report suggests that, in the short term, the introduction of personal video recorders (PVR) will threaten the advertising revenue of free-to-air TV channels because more and more people will record TV content to watch at their own leisure, which will result in more viewers skipping through advertising.

However, the report points to the interactive qualities offered by Internet Protocol Television (IPTV), which will allow advertisers to target audiences more specifically, as the biggest threat to free-to-air channels and satellite broadcasters. IPTV services will be able to call on massive libraries of content, which they can deliver on demand to the home via the samecable that delivers fixed landline and broadband, so that viewers can watch what they want, when they want.

“By applying new technologies like IPTV, it should be possible to target individual households with TV adverts individually tailored to their interests and spending patterns,” says the report. “The traditional free-to-air broadcast model is likely to come under severe pressure, with such broadcasters perhaps having to move to a subscription model – thus becoming ‘pay-on-air’,” says the report.

This may explain e.tv’s application for a subscription broadcasting license as it is perhaps pre-empting the threat to its advertising revenue and positioning itself as a subscription-based broadcaster.

Attempts this week by the Mail & Guardian to discuss this with e.tv CEO Marcel Golding were fruitless, with Golding refusing to comment during the build-up to the subscription-broadcasting public hearings scheduled for next month by Icasa.

The report says that PVR’s can e rolled out cheaply, which will give the technology an initial advantage. However, the IPTV service is the “superior service” and will replace PVR’s in the medium term. “We think that terrestrial TV will struggle initially against PVR-led offerings from media companies, and later against on-demand TV,” says the report,

The report says that ventures into the broadcasting arena by telcos present them with an opportunity to stave off the churn of customers intent on accessing their voice telephony services through other operators. “This approach has the attraction that it allows the operator to defend its lines by selling multi-play bundles, while collecting additional revenue from the pay-TV services,” it says.

A more aggressive approach would be to cut the cost of the multichannel TV offering, perhaps giving it away free in order to sign up as many customers as possible and lock them into the incumbent before they turn to competitors. This strategy was employed successfully by Hong Kong’s PCCW, where declining line numbers stabilized and then increased over 18 months.

Multichoice spokesperson Marilyn Watson says the introduction of PVR has given advertisers an opportunity to raise their game. “When we launched the PVR, a lot of advertising agencies were concerned,” says Watson. “We said” ‘If you make your advertising entertaining, people will choose not to opt out.’”

Watson says Multichoice also offers advertisers dedicated advertising locations (DAL), where an advertiser can use a dedicate channel to provide in-depth information about its products. Watson says the DAL option has been successfully used by clients such as BMW and Jack Daniels, who were very happy with the results.

BMW’s DAL channel flighted for two weeks, attracting 240 000 viewers who stayed on the channel for an average of six minutes. However, ultimately satellite broadcasters and PVR cannot offer the ability to target advertising in accordance with customers’ interests and spending patterns. This could prove the deciding factor in who wins the war for the advertising buck.

Mail and Guardian, 12 May 2007