Netflix, economy weigh on DStv
MultiChoice, the soon-to-be-listed pay-TV subsidiary of Naspers, continues to bleed premium subscribers in SA as competition from international online streaming services such as Netflix and Amazon Prime hots up and a weak domestic economy weighs on consumers.
South Africans are "feeling the pinch", Naspers CEO Bob van Dijk told Business Times.
Many people have had to make "hard decisions" to scale back lifestyle spending on services such as DStv.
In its results announcement for the six months ended September 30, Naspers cited tough macroeconomic conditions in the country for the continued loss of subscribers, although it reported growth in other African markets.
At more than R900 a month, MultiChoice's DStv Premium offering has had the biggest decline in users. In 2018, DStv’s Premium package is R809. Add-ons like an access fee for PVR users costs R90 and decoder insurance costs R35. These amounts tend to be revised annually. Customers have been fleeing the platform, opting for cheaper alternatives in online streaming services.
In the year to end-March, MultiChoice lost 41,000 subscribers. The previous year, the pay-TV operator lost more than 100,000. Netflix has attracted an estimated 400,000 subscribers in SA over the past two years. DStv has 7.2-million customers.
To compete, MultiChoice launched its own online streaming services, Showmax and DStv Now, which can only be accessed by people who have a satellite subscription.
There's been growing speculation that MultiChoice, in an effort to halt sliding customer numbers and get a bigger share of the growing online streaming market, is looking to bundle its online streaming offerings with that of Netflix.
Van Dijk said it is "premature to speculate" what future packages might look like.
Niclas Ekdahl, CEO of MultiChoice's recently created connected video unit, told sister publication Business Day this week that the company is working on a subscription model that won't require a satellite subscription, although he provided no details.
In markets where the internet is widely available, satellite TV operators such as Sky have started offering online services.
Van Dijk said the aspiration "is to come to a point [where] whatever you want to watch on DStv you can also watch without having a satellite . that's definitely an aspiration that MultiChoice is close to. Exactly what it will look like and packaging, I think that's premature to speculate about."
MultiChoice has complained to the regulator, the Independent Communications Authority of SA (Icasa), on a number of occasions about the unfair advantages that Netflix has in SA, such as not having to pay tax or being obliged to show local content.
This week Icasa said Netflix had no obligation to show local content in SA as it was a streaming service and not a TV broadcaster. Broadcasters such as the SABC and MultiChoice are compelled to spend a minimum of 15% of their content acquisition budgets on local content.
Netflix is said to be investing $8bn (about R111bn) a year in original content globally, posing a threat to DStv in the race to deliver more value to customers.
One of MultiChoice's strengths is SuperSport. Maxwell Ramutla, CEO of technologyinnovation firm Afrovation, believes thatcreating a "sport-only" streaming service would be a good move for MultiChoice.
However, the price of such a service would be an important consideration.
"It has to be R150 per month at most to compare with Amazon and Netflix's average monthly price of $10," he said.
Naspers announced earlier this year that it would list MultiChoice separately on the JSE. The unbundling of the pay-TV operation, which is expected to take place in 2019, will help Naspers to rein in its hefty valuation discount relative to its Chinese operation, Tencent.
After the break-up, Naspers will be left with a group of classifieds, payments and online food delivery businesses that it owns and manages, similar to the model employed by travel website Booking.com.
Despite its domestic woes, Naspers saw "a strong future for MultiChoice going forward, especially in the rest of Africa, where we expect subscriber growth to continue rising, together with take-up of Showmax", Van Dijk said.
Naspers plans to list 100% of the company on the stock exchange and will no longer be a shareholder in MultiChoice.
Analysts expect MultiChoice to have a market capitalisation of about R100bn when it is listed.
Despite a somewhat bleak outlook given the competitive landscape, MultiChoice made positive returns in the period.
Vestact portfolio manager Byron Lotter said it is amusing that Naspers described the 6% growth in trading profit at MultiChoice as "flat", as other large companies in SA would celebrate that number in the current economic climate.
"I still think that MultiChoice is pretty decent," Lotter said.