African Pay TV waiting for its pre-pay breakthrough moment

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Once mobile phones were the playthings of the African elite with a few hundred thousand post-paid subscribers who paid (or quite often did not pay) their monthly bills. Then mobile companies introduced pre-paid options where users paid when they wanted and for as much time as they could afford. Because of this “pay-as-you-go” approach mobile phones are now in the hands of millions and the rest is history. African Pay-TV needs a similar “pay-per-view” breakthrough moment and Russell Southwood argues that one element could be M-money payment systems.

Before the advent of competition in the Anglophone Pay-TV market, subscribers might pay as much as US$70-80 a month for a bouquet of programmes. Prices have come tumbling down as both GTV and Multichoice seek to outdo each other in offering low-cost, low-end TV offers to increase the habit of paying for viewing. However, payment remains a critical barrier for a lot of potential users: one of Multichoice’s really low-cost offers requires the user to pay the relatively small annual sum up front. (Without competition, Francophone viewers of near-monopoly Canal Plus do not have these kinds of choices).

So what are the building blocks to create the breakthrough moment where potential Pay TV viewers can pay for what they can afford when they can afford it, including for premium content like football?

- M-money systems like Safaricom’s M-Pesa in Kenya are already in place. That particular system is used by around 2 million people so it’s well on the way to being able to be described as widely used. A mobile user can send cash to someone to transfer money to them. Tanzania’s e-Fulusi and Ghana’s AfricExpress allow individual users to pay bills. All three use relatively simple interfaces and offer a way of checking payment. If an individual has topped up, he or she can use easily use their phone to make an almost instantaneous payment.

- Unfortunately for the Pay TV operator, the choices between M-Money systems are not completely straightforward. Safaricom’s M-Pesa system is proprietary to Vodafone (who helped develop it) and its network affiliates. Even if their networks gain sufficient critical mass in the next 1-2 years, Vodacom/Vodafone is not present in some of the key markets. Non-proprietary systems like e-Fulusi and AfricExpress work on persuading mobile companies to add their services for users as Value-Added Services on the network. To succeed, they need either major marketing clout in their own right (with a large-scale backer) or for a mobile company to buy into the idea, in which case it becomes more like M-Pesa in approach.

- However, assuming such a building block is in place, the customer can then transfer money to the provider of the programmes and films. There then needs to be a platform which stores the value of the credits. The customer can then order using a simple menu (sub-menus by genre) an item of programming having first checked the price. He or she may say to themselves, I’m bored this evening and I really want to watch this latest movie or a particular football match. The user sends an SMS requesting this programme to the provider. The providers’ platform checks the cost against the credit in the provider’s account and if there’s enough to cover it, the transaction is OK’d. If not, an SMS goes to the user saying you’re short by however much and why don’t you top up again?

- The next building block is how to deliver the programme to the user who’s paid for it. There are probably two ways of doing this: a set-top box or a broadband connection capable of offering IP-TV. In the first instance, the signal is unscrambled for the duration of the programme and for IP-TV, it’s simply a case of having a one-off authorization PIN number to initiate a streamed screening. The coming digitilisation offers the right moment to introduce appropriate set top boxes.

- Once accustomed to this process, there is nothing to stop people paying per day, per week, per month or per year. The only question is: does the cost of the programme represent good value in the eyes of the customer? The benchmark for this will vary. Tomorrow’s UEFA Final? It may be possible to load a premium. The latest available movie? Slightly cheaper than the rather high African cinema ticket prices. Older movies and music content? Slightly cheaper or the same as their pirate content equivalents but with better picture quality maybe.

- The final part is probably the trickiest as it touches on who controls the value in the transaction. A number of vertically-integrated mobile companies are already planning for Triple Play and realize that with a payment system of the kind described they have every chance of ending up owning the customer, whoever has the rights. However, in the short to medium term, the Anglophone Pay-TV operators hold most of the power as they control the access to the majority of the interesting content.

- It’s a bit like the beginning of cinema and the relationship between the cinema owners, the distributors and the film studios. There could evolve a highly vertically integrated delivery chain or there could be a more diverse infrastructure. For there are now many African Free-To-Air channels who might sell their successful local content within a country market.

The creation of a “Pay-per-viewing” approach – whether for a single item of programme or on a timed basis – could allow the Pay-TV industry to push out more rapidly the boundaries of its addressable markets and maybe offer others the chance to market repeats of successful local programmes. Do not forget the mantra: It’s what they want, when they want it, where they want it.

The arguments in this article are based on two pay-for reports recently published by Balancing Act:

African Broadband, Triple Play and Converged Markets

M-Money: Finances, Banking and Payments through mobile phones

For details of what they contain and their prices, click on the link below:
http://www.balancingact-africa.com/publications.html