African Pay TV looks set to take a hit from VoD platforms, pressure on DSTV in South Africa from Netflix

1 June 2018

Top Story

Companies in Africa announce things when there’s good news but always claim confidentiality when things are not so bright. Earlier this month DStv made the odd move of naming its estimate of competitor Netflix’s subscriber numbers. Russell Southwood looks through the lifted curtain and tries to work out what’s going on.

Earlier in May 2018 MultiChoice – DStv’s South African operation – took the unusual step of giving South African online publication MyBroadband its estimate of Netflix’s subscribers: 300-400,000 by its estimate since its launch in January 2015.

However, nothing’s done without a purpose. MultiChoice South Africa CEO Calvo Mawela told MyBroadband. Mawela made the statement while warning against the over-regulation of the pay TV sector in South Africa by ICASA.

He said that thanks to the entry of services like Netflix, DStv now faces strong competition from global companies. Trying to regulate the market to break the exclusivity and first-air rights MultiChoice has will therefore hand South Africa’s pay TV sector to overseas companies, said Mawela.

It was a difficult regulatory case to pitch as Multichoice’s subscriber base grew by 278,000 users during the six months ending 30 September 2017 but Mawela said that this was all cheaper, low-margin packages.

The worrying thing for DStv is that from a previously unassailable position it lost over 100,000 DStv premium subscribers in the last financial year. Past wisdom was that the “content lock” it had on things like football insulated it from competition. Clearly sport alone will not stop the citadel falling.

Mawela argued that Netflix should need to be licensed in South Africa and have to comply with the classification regulations of the FPB.

DStv is remarkably ambivalent about giving numbers for its own VoD platform Showmax. In February 2017 in an effort to talk up its newly launched Polish service, it announced that 172,000 subscribers had “sampled” the service. This was alongside Netflix’s regular subscriber base of 80,000.

However, it is stubbornly silent about the user numbers for its own operations in Africa. In February 2017 it said that it had 10 million views. This figure was over 18 months so it gives an average of just over half a million views a month. So on the basis of 5-10 views per user, this would equate to a user base of somewhere between 50,000-100,000. It used to take a lot to wrong-foot DStv but it looks very much as if Netflix has done just that.

The increasing availability of Fibre-To-The-Home (FTTH) both in South Africa and in the rest of the continent is adding extra pressure. I was very struck when talking to a Zambian contact two years ago on Skype by how good the call was. He told me that he’d just got FTTH and the first thing he’d done was to get rid of his DStv subscription.

But although the Pay TV market is now under some VoD pressure, it does not mean that it’s all plain sailing for the incumbent’s newest competitor Kwese TV. A report from TV Sports on 22 April confirmed what many in the industry had already suspected.

The TV Sports report noted for example, Kwesé TV was expected to pay money to FIFA for the rights to the 2018 World Cup and would be late with UEFA for rights to Euro 2020 and the League of Nations. The operator also reportedly missed payments due to ESPN and the NBA for league basketball games.

Kwese TV’s CEO Joe Hundah told TV Sports:”To ensure transparency in this process, we have been in constant communication with our partners who remain extremely supportive and have shown great confidence in our company."

The same report said that Kwese TV had 120,000 Pay TV subscribers across 13 countries in Sub-Saharan Africa. Hundah declined to comment on the subscriber numbers and said it was happy with progress as it had only launched in the last quarter of 2016. Kwese TV also runs its own VoD platform (again no numbers available) and its sister company Liquid is rolling out FTTH. Company sources were quoted as saying the company’s future depended on two rounds of funding, one just concluded in April and a second one in June.

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