Content on television (TV) screens has evolved with unprecedented choices available for the populace as private companies generate superior content to attract viewers.
The executives of these private companies such as MultiChoice Uganda (DStv & GoTV), Zuku Television, Azam Television, Star Times, and Kwese Television, have seen a cash gateway by crafting extensive premium content packages that they sell, pushing the limits of this business model.
While these platforms offer a range of options, their access comes at a steep price.
Now, consumers are frustrated with high costs, the difficulty of finding specific content, and the sheer number of streaming platforms. As a result, these businesses are compelled to reinvent their models, seek operational efficiencies and differentiate themselves to reduce churn and drive growth.
A case in point is MultiChoice, the company behind DStv and GoTV.
Price hikes
This year, MultiChoice increased its prices in Uganda, Kenya, and Nigeria. This decision, among others, has prompted many customers to turn to alternatives, impacting the company’s revenue.
To address it, Rinaldi Jamugisa, spokesperson for MultiChoice Uganda, explains that the company is putting up several packages at different price points. However, he acknowledges that producing and acquiring high-quality content is costly.
“Heavy investment is made in producing original content, delivering exclusive shows, broadcasting live sports or events, and international programming, which contributes to our overall costs, among other drivers of price adjustments like economic conditions that we may not have full control over,” he said.
But because of this rich content that appeals to a wide segment of the population, many have gone all up consuming it in piracy.
Piracy
In an email response on August 1, Mr Jamugisa said piracy poses MultiChoice a substantial threat that is now, prompting the company to take proactive measures.
This is a hard problem to solve more especially that the characters exploiting it use on multiple online sites that are hard to crack down on a daily, even though the act is illegal.
A man watches NTV Live Stream on YouTube. The traditional pay television industry is experiencing intense new competition due to the rise of streaming services. PHOTO/MICHAEL KAKUMIRIZI
“For an individual or organisation that has spent resources investing in piracy devices or content for resale, this is a huge loss,” Mr Jamugisa said.
“To deter piracy, we enhance our value proposition by offering exclusive content, high-definition streaming, convenient access to a wide range of programming, and additional features like catch-up and mobile viewing options,” he added.
Because of this, the broadcaster’s net revenues have suffered tremendously.
Financial performance
MultiChoice Group doesn’t reveal the financial performance of its units but instead consolidates them into one financial statement.
However, evaluating its overall financial results reveals a company struggling to balance assets and liabilities.
MultiChoice’s assets are below its liabilities. That means it would be technically insolvent if it were to sell all of its assets now.
The company’s financial statements show that its 2023, liabilities raked Shs9.1 trillion ($2.46 billion) exceeding its assets that were valued at Shs8.92 trillion ($2.41 billion).
For the year ending in March, the company reported a 5 percent drop in revenue and a significant loss of $226 million (Shs836.3 billion).
Some auditors believe MultiChoice’s financial woes were caused by the cost-of-living crisis that has led to a 9 percent decline in the company’s subscribers across the continent, plus the unfavourable foreign exchange rates in Nigeria, Angola, Kenya, and Zambia, which were alluded to by the company in its 2023 annual report.
They believe that its losses also stem from investments in its new streaming platform - Showmax 2.0, which has taken time to offset. Its revenues are on the rise but its losses are also high ($141 million in 2023). The company expects Showmax to breakeven in 2027.
And this is its lifeline. Currently, it makes revenues averaging $53 million (Shs195.6 billion) but its executives are banking on a figure that doesn’t go below $1 billion (Shs3.7 trillion) per annum.
Showmax, MultiChoice’s bold new venture, taps into global content trends, mirroring the moves of giants like Netflix. Its deep dive into African storytelling has sparked the interest of major investors, with French media powerhouse Canal+ eyeing a full takeover, seduced by its potential.
The French media giant wants to give Multichoice’s shareholders R125 (Shs25, 859) per share, which MultiChoice board accepted. That’s a windfall.
The company’s share price has long languished average at R80 (Shs16,549) until February when that appetite came up that excited shareholders to acquire more shares, something that shored up its share price to average R110 (Shs22,756).
“Across the world, the traditional Pay TV industry is witnessing a new wave of competition but also adapting to the same space. Key to the change has been the advent of streaming services, which offer video-on-demand (VOD) content, flexible viewing options, and affordable subscription plans. Streaming services also provide attractive features like no ads, global accessibility, multilingual content, and easy subscription management,” said Mr Jamugisa.
Many traditional pay TV companies have now adapted to these changes by incorporating streaming into their offerings.
MultiChoice has for instance introduced an option for customers to directly purchase a bouquet without the need to buy decoders – DStv via Streaming, allowing them to access content on-demand, in addition to its existing streaming app; Showmax which caters to diverse audiences and sports enthusiasts.
The company believes that by evolving its services, it can stay competitive and meet the changing needs of its subscribers because the expenses for serving linear TV customers are rising due to increasing programming costs and the challenge of passing these costs to customers, given the rate increase limits and subscriber minimums.
As the customer base shrinks, these costs become disproportionate, making the business less profitable and harder to phase out gradually.
Industry telescope
Marie Lora-Mungai, an expert in African creative industries, suggests that Multichoice’s merger with Canal + could reduce costs by streamlining technology spending, content production, and acquisitions.
“MultiChoice, DStv, Showmax and SuperSport are very strong brands. Together, the merged company will have 50 million subscribers (30 million in Africa) – making it the biggest entertainment company in the world that is not American,” she says.
Canal+ chairman and chief executive officer Maxime Saada thinks the merged entity can become one of the top five largest entertainment groups in the world, alongside Netflix, Amazon Prime Video and Disney+.
Despite recent forays in Ethiopia and Rwanda, Canal+’s business practices are largely informed by the 30 years it has spent operating in Francophone West Africa -- a region shielded from currency fluctuations by the CFA Franc, which is pegged to the euro,” said Lora-Mungai.
Jocelyne Muhutu-Remy, the managing director of Spotify in the Sub Saharan Africa, an audio content platform also believes that cost is just one of the many factors to consider.
“Demographic factors and shifting consumption habits in our very young population are a very central reason for this decline. Competing for share of attention with very compelling, free and short-form mobile video and social content requires a massive shift in content strategy and pricing tactics that MultiChoice took too long to start implementing,” she says.
But Vincent Bollore, the Canal+ owner has a 30-year wealth of experience in navigating African markets, and is believed to have built a deep understanding of regional currency challenges and subscription-based products. This expertise is expected to help him and his team manage current difficulties in this content-selling business.
PricewaterhouseCoopers International Limited (PwC), advises cable TV companies in one of its new research papers to consider developing new software or hardware solutions that combine traditional TV and streaming services.
Alternatively, it believes partnering with vendors to integrate these experiences could offer a more seamless user experience and retain subscribers.
“It is time to get proactive about managing down costs to keep pace with revenues to avoid negative margins, margin compression, and adverse allocations to the broadband business,” it notes.
Transform business models
PwC believes that the decline of traditional, linear television should serve as a cautionary tale for streaming services mostly because there is a churn trap of consumers who refuse to carry too many subscriptions and hop from one service to the next.
“The answer can’t simply be price hikes to recoup revenue. You will need other optimisation avenues that allow for flexibility in pricing packages, minimum commitment periods for streaming services or incentivised annual rates relative to monthly ones,” it states.
Many services have already taken this route, with discounts on quarterly and annual plans,” it states.
“Perhaps the solution needs to be more creative, albeit more difficult. It may necessitate business model reinvention altogether — one that involves collaboration and consolidation — and a focus on defining new capabilities,” it adds.
