Kenya’s Freeview looks for a new business model in the digital future

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Outside of South Africa, Kenya has been the one country where the transition to digital transmission is making real progress. New signal carriers are likely to be set up but initially broadcasters will use incumbent KBC’s transmission network, currently being tested. There are proposals that the regulator CCK will subsidise set-top boxes for those who can’t afford them from the funds it collects from operators. Russell Southwood spoke to Freeview CEO Kass Khimji who’s pioneering a new Free-To-Air digital business model

Q : How did your operation get started ?

A : Initially we started out as intending to go to cable TV. We purchased certain equipment but shortly after, two cable companies popped up so we said, let’s change the business model. So we decided to go the DTT route offering Pay TV. This was in 2006 and it took us ten months to get everything set up. The tramsmitters cover all of Nairobi an dits immediate environs. We launched what was then called Oxygen as a Pay TV network in 2007.

Q : How did that go ?

It was a tough start. The day we geared up our operations, DStv launched its Compact TV bouquet, its low price offering. We got about 2,000 subscribers and a lot of our customers were unhappy satellite customers. Then two cable companies – Mitsumi and CTN started and GTV launched two months later with a bang. I twas all football, football, football….We actually grew a little because of all the publicity about Pay TV from these companies.

Renewals was the problem : there was a high churn and problems with payment. But in most cases there was no problem in getting the set top box equipment into the households.

Q : So what happened ?

We took a decision to change the business model completely and we took on new partners who put in more capital. We’ve now relaunched as Freeview. We’re starting out with 7 channels, including sports, religion, etc.

We launched at the beginning of September and have rolled out into stores like Nakumatt, Ukwala and Tuskies (which has 17 locations). We’re also looking at electrical shops and mobile phone outlests.

Q : What’s the set top box and what does it cost ?

The cost to the end user of the set top box is KS5,000 (US$69) and it’s not been subsidised. It’s an MPEG 2, no frills box but it has the capacity for both parental control and an electronic programme guide. There are are 99 channels and it’s unencrypted.

Q : It’s early days but how many subscribers have you attracted ?

Currently there are 2,000 subscribers getting the free programmes and we calculate that’s somewhere between 5,500-6,000 viewers.

Q : How many viewers do you need to to get to attract advertising ?

There are around 3.5-4 million televisions in the country. If we can target 5-10% of that, then we stand a chance. We’re going to target Small and Medium size Enterprises (SMEs) for advertising who are excluded (for reasons of cost) from using mainstream broadcasters. These include : smaller banks, other financial institutions, real estate companies, financial planners, law firms, doctors and clinics. It’s only cost that currently excludes them.

Q : How will the advertising rates compare with other media ?

They will probably be about a third of radio rates but most of the advertisers will not be advertising agency customers. However, we will have the support of advertising agencies because they want to expand their client base. There are already smaller agencies doing work for SMEs. And we’ll be doing segmented advertising.

Q : What will the socio-demographics of the viewers be ?

Those with middle income is who we’re targeting and that’s why we’re selling the kind of box that we are. We’re working on the assumption that those with high income will have satellite Pay TV and those with low incomes will not have either the money or the required level of TV ownership.

We’ll get the latest stats in a months time and Freeview TV will be carried by KBC which will give us an advantage.