Preparing for choice
Even though they are not yet operational, the new pay-TV channels are having an impact. Since the Independent Communications Authority of SA (Icasa) announced the opening of this lucrative space to more players, Naspers’s MultiChoice has been finding ways to refine its offering to consumers. Until now MultiChoice had the field to itself.
One of its main flaws which the four new players — Telkom Media, Walking on Water, E.Sat and On Digital Media (ODM) — have said they will exploit is that DStv has historically targeted high income earners.
But MultiChoice now offers DStv bouquets to all living standards measure (LSM) groups:
- DStv EasyView — R20/month for 10 video channels, five data ones and 28 radio stations;
- DStv Compact — R199/month; and
- The premium bouquet — R439/month, and the package used by most subscribers, offering more than 100 TV channels.
Since its introduction over a year ago, DStv Compact has attracted close to 190000 subscribers, mainly in the middle market.
The company also introduced Personal Video Recorders (PVRs) in 2005, which enable viewers to pause, rewind and fast forward live programmes. MultiChoice says 209000 units have been sold so far.
Some impact from the new products must have been felt in Naspers’s financial results for the six months to end-September. MultiChoice hit the 2m subscription mark recently, growing by 109000 to 1,5m in SA and 2,3m when including the rest of the continent.
Pay-TV is Naspers’s biggest cash cow in a range of media assets that include magazines, newspapers, Internet and book publishing. Revenue from pay-TV grew 21% to R6,35bn from the previous period’s R5,3bn. The division’s operating profit grew 20% to R2,2bn from R1,8bn.
On the other hand, growth in advertising revenue for print is slowing, up by just 14% to R2,9bn from R2,6bn. Newspapers, magazines and printing accounted for most of that, while book publishing brought in R429m, up an impressive R90m from R339m.
Naspers says it expects the decline in print growth to continue, due to low consumer spending as a result of rising interest rates.
Pay-TV is where the action is, but there are doubts that the market can sustain multiple players.
The two biggest revenue drivers for pay-TV are movies and sports, and MultiChoice dominates both. SuperSport International’s six channels on DStv made close to R300m in advertising revenue between January and December last year, according to Nielsen Media Research.
It recently acquired exclusive rights to Premier Soccer League matches for R1,6bn for the next five years, adding to its extensive bouquet of major sports rights. These include rugby — notably the Tri-Nations, Super 14, the Currie Cup, the Vodacom Cup and the Six Nations — and most of the big-ticket cricket events.
This leaves relatively marginal sports such as netball, athletics and swimming, which are broadcast mainly by the SABC.
With boxing, SuperSport’s shrewd strategy has been to secure world title matches, such as last weekend’s WBC welterweight title fight between Floyd Mayweather and Ricky Hatton.
Of the four new players, Telkom Media is MultiChoice’s biggest threat. The media entity is controlled (66%) by state telecom company Telkom. The rest is owned by filmmaker Anant Singh’s company Videovision Entertainment; MSG Afrika Media, which is co-owner of an outdoor company, Kagiso Outdoor, and Capricorn FM in Limpopo; and the Women’s Development Bank Investment Holdings.
Telkom Media chief strategy and operations officer Rikus Matthyser says he’s optimistic. “There’s no such thing as a saturated market with just one player,” says Matthyser. “One constant market requirement is choice for the consumer.”
Icasa recently announced that it was looking into how best to deregulate the market to ensure that content and sports rights are available to others. Its conclusions will be a decisive influence on the revenue prospects of MultiChoice and the new players.
MultiChoice’s dominant position could not have been anticipated when M-Net was formed in 1986, breaking the monopoly that had been enjoyed by the SABC for a decade since the inception of TV in SA. At that time the technology allowed subscribers just one or two extra channels.
Government certainly did not anticipate the growth in choice that would be facilitated by satellite technology, and in a sense the DStv network constituted an outflanking of the regulators. Rather like the taxi industry, the offering by MultiChoice grew so fast that by the time the need was seen to introduce regulation, major intervention would be needed to undo market dominance.
Other than deep pockets with a budget of R7,5bn, Telkom Media’s biggest strength is the cutting-edge technology it will be using to deliver content. This includes satellite, online, mobile-TV and Internet Protocol television (IPTV) — television content received through the technologies used for computer networks, instead of being delivered through traditional broadcast and cable formats.
One of the advantages of an IP platform is that it allows for more interactive and personalised viewing. For example, viewers will be able to look up a player’s statistics while watching a game or even control the camera angles.
Telkom Media will also be offering these platforms at various prices, starting from R100/month.
Though access to good content is a challenge facing the new players, as is infrastructure, there’s also the issue of the SABC, which is demanding that the new pay-TV platforms pay to carry its channels. Telkom Media says it does not mind carrying the channels as a “social obligation”, but it will not agree to paying the SABC for them. Christian broadcaster WowTV has said carrying SABC channels will compromise its policies, as not all of the public broadcaster’s content upholds the channel’s values.
Icasa was scheduled to conduct public hearings on the “must-carry” obligations for the new pay-TV channels recently.
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