Seasons Greetings from Balancing Act: That was the year that was – 2019 in review

19 December 2019

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Dear readers, viewers, contributors and advertisers

 

Just in case you’ve not got the memo, Africa’s broadcast and film sectors are undergoing a tough time economically. Key economies are still in poor shape. Nigeria’s economy is still bumping along the bottom. Kenya’s over-borrowing has yet to be resolved. Angola has spent the last three years in deep recession. And so on…Shrinking economies mean less advertising spend which it turn means things shrinking in the broadcast sector. The 100+ staff made redundant at K24/Mediamax in Kenya are just one example of the pain hitting both public and private broadcasters. But there are still growth opportunities despite this overcast economic outlook.

The biggest cloud for broadcasting is the impact of the loss of value of local currencies, which can run as high as 30-40%. Local broadcasters are finding it hard to buy premium international content, particularly at the top end. Nevertheless, the reverse effect – your dollar is worth more locally – means that various distributors and broadcasters (including Canal+, Disney, Warner and Zee) are spending on local productions.

Big investments continue to be made – some winners and some losers

Major investments have been made in African broadcasting, not all of them successful. The BBC World Service has committed an additional £298 million over five years to its output, a significant part of which it is spending in Africa. Mary Lusiba, its Head of Business Development, Africa told me the decision was made because Africa “was seen as having great audience potential”. Among other things Lagos and Nairobi have become key production hubs, it is doing co-productions with local broadcasters like Channels TV and KTN, has added more languages and its investigative programme Africa Eye is making waves and winning awards.

Kwese TV, which started with a great deal of fanfare four years ago, crashed out owing US$600 million and it was hard to go anywhere at AfricaCom or DISCOP without meeting its creditors. At its full pomp, the company was offering free-to-air channels, a pay TV bouquet and a VoD platform. This behemoth was headed up by key shareholder, Strive Masiywa, Econet and Joe Hundah, formerly DStv, TMG and SABC. In the New Year, we will look at why the organization failed to deliver on its promise.

DTT in Africa – Slow train coming…

DTT continues to bring investment into the sector but the results are often mixed. Excaf in Senegal implemented one of the few DTT switchovers not paid for by Chinese loans. It has had to find US$60 million through French banks and has had a number of setbacks it has now overcome. Soon to be completed, Excaf has taken a page out of the StarTimes playbook and will get its money back from broadcaster fees and its own pay TV bouquet. It has also launched a VoD platform called Wassa. But that’s not an end of it as it will go on to carry out the DTT switchover in neighboring Gambia.

One of the other non Chinese-financed DTT contractors is KNet, which is also heading towards completion in Ghana and will soon start implementing in Liberia.

In May 2019, I wrote a story contrasting the relative success and lack of progress in Benin (the country) and Nigeria. Benin’s progress has been slow but it has put in place a DTT Steering Committee under Eutelsat’s Darium Quenum. By contrast, Nigeria’s DTT transition process has been hamstrung by unresolved accusations of corruption and slow progress.

Getting the business model right for the DTT signal carrier is tough as the example of Zambia shows. The joint venture between the country’s state broadcaster ZNBC and StarTimes is called TopStar. In August I reported that it had borrowed US$237 million from China’s Exim Bank (which also includes the costs of news studios for ZNBC) but local Vice President Cliff Sichone said TopStar was"faring well" against increasing competition but he acknowledged that the generation of revenue remains critical. Translation? Things are tough.

But DTT’s impact is probably going to me most sharply felt at the level of individual broadcasters. Research from Kenya I reviewed in July shows what a tough hill DTT is to climb. In 2015 there were 9 TV channels and there are now 68. In addition, there also 22 new online sites. According to Reelforge’s analysis based on rate card, advertising expenditure bounces up and down from 2014 to 2018 with a record year in 2017 with election expenditure. Spend by media follows audience size, with radio still taking the lion’s share. However, behind the rate card statistics is the reality of 50-60% discounting on rate card that make these figures hard to read but my guess is that real advertising revenues (outside the election year) are shrinking.

New forms of TV distribution – satellite takes a bow with Ethiopia as a new large market

SES has launched three satellite TV platforms, the first two in Ghana and Nigeria and this year in Ethiopia. The Ghanaian platform saw Multi TV go from being in the middle of the pack to being the number one broadcaster. The Nigerian platform has been slower to establish itself but is getting towards critical mass.

The new Ethiopian platform – launched in partnership with the Association of Ethiopian Broadcasters – offers 37 channels, 12 of which are in HD. The introduction of HD is a particularly bold move but one that goes with the grain of market developments. However, it goes with a mood of increasing aspirations: larger TVs come with HD as standard.

Key agency INSA was reformed as part of the Government’s overall policy changes and one of these reforms was to liberalize platform licensing:”INSA supports the development of the market and slot 57 degrees East is the perfect footprint for Ethiopia. Independent local broadcasters came to the table to talk about setting up the Ethiosat platform”.

The broader Ethiopian privatization programme will in a relatively short period of time create a number of companies (particularly mobile operators) who will have a strong incentive to spend on TV advertising to reach Ethiopian consumers, providing a part of the hybrid model that each channel on the platform will need to find.

VoD disasters – The pioneers get the arrows and the settlers get the land

The omens for the success of VoD this year have not been good. Kwese TV (which had a VoD platform as a key part of its offer) went bankprupt, owing US$600 million. The other notable casualty was Cell C’s Black that cost the company nearly US$50 million by its own account.

Mobile operators have the means to deliver it but have not yet really got to grips with it. In October this year, I spoke to David Gillaranz, Group CEO, Digital at MTN (for our telecoms e-letter) who had many interesting things to say. When I asked him about VoD I was a bit taken aback by the answer:”This has been more experimental. I’ve seen VoD bundles working more in a conversions type of market (in places like Latin America). It works better with a home bundle and Netflix. When it comes to VoD standalone for mobile, it’s quite tricky. We’re still learning. We have a product called Shortz and that has given us some insights and we’ve experimented with it”. MTN has been on this road for over 5 years and it’s still experimenting.

On a more optimistic note, Netflix and Showmax are both commissioning original content and buying existing work for their platforms. Both of these categories of content are getting an international airing with diaspora audiences.

Public broadcasters: Hats off to RTI but why can’t others do it?

It has not been a good year for Africa’s “public” broadcasters. Held in the grip of the Government, they have not fared well as Government budgets shrink and the number of competitive private channels increases. At least four of the – NBC (Nambia), SABC (South Africa), KBC (Kenya) and UBC (Uganda) – have all suffered existential crises in 2019. Others are also in less obvious positions of financial hardship.

In the main, there have been almost no public broadcasters that have broken free of from the hold of “Mr President TV” and got a grip on how to operate in the new broadcasting landscape. African politicians have continued to insist on the expense of covering international visits for domestic audiences without understanding the damage it does to their credibility.

One outstanding exception is RTI in Cote d’Ivoire that has prepared for the DTT switchover by upping the quality of its management and building its audience base. It has understood the new digital landscape: it has some of the largest local followings for its social media accounts and it is the number one You Tube channel in the country. It has made an innovation co-production with Indian company Zee. If RTI can do it, why can’t others?

Tastes change and local content quotas are beginning to have an impact

For a long time local content quotas imposed by broadcast regulators were often simply ignored or local broadcasters “gamed” the system. Rules have been tightened and in some instances the local percentage quota has been increased. Nigeria also insists on having childrens’ content in the schedule at a particular time.

Tastes are also changing and in many markets local audiences are beginning to prefer local to international (Hollywood) content. The difficulties with exchange rates alluded to at the beginning of this e-letter have reinforced this trend. There’s no study to show it but I’m pretty certain that the amount of vernacular content has also grown.

New delivery platforms are also changing how different kinds of content are being delivered. Several broadcasters in more well developed markets are reporting that platforms like Netflix and Showmax are changing who views what where.

These platforms are now getting a significant chunk of the middle class audiences for Hollywood movies and TV series that would previously have been found getting them on free-to-air channels. It may turn out that local content quotas will accelerate this kind of displacement.

This year we have published two reports that are important for Africa’s broadcast sector:

As a special seasonal present to readers of this e-letter, I will give anyone who writes to me (info@balancingact-africa.com) before the end of January 2020 a special 20% discount.

This year we have carried out many different research and consultancy projects - both large and small - for a range of clients including operators, equipment vendors, investors and policy bodies. Because we operate discreetly, you may not be aware that we offer these services. If you think you have needs or requirements of this kind, talk to us about them. In what will be a year of great change, we will have both data and ideas to help you change your circumstances. Just email me on: info@balancingact-africa.com

News Update will return in the New Year with issue 331 on 15 January 2019.

 

All the best

 

Russell Southwood
CEO
Balancing Act

Alice Saywood
Marketing
Balancing Act