Pay-TV competition failure
Over the last twenty years South Africans have grown accustomed to MNet or DSTV serving their pay-TV needs. Both MNet and DSTV have become synonymous with live sports broadcasts, the latest movies, international news channels and well known documentary channels – requirements which are not typically met by either the SABC or eTV.
The Independent Communications Authority (Icasa) set out to break MultiChoice and MNet’s monopoly in the pay-TV market when it awarded four new pay-TV licenses in September 2007. The four new licensees were Walking on Water Television, On Digital Media (ODM), Telkom Media and e.sat, sister company of the free-to-air e.tv.
Despite promises from the new licensees to shake up the pay-TV market and to introduce true competition to this sector, consumers still don’t have an alternative to DSTV or MNet.
Competition delayed or cancelled
e.sat was first to dash consumers’ hope of more competition when it announced in December 2007 that it would launch the country’s first independent 24-hour television news service using MultiChoice’s DSTV platform. Instead of introducing a competing channel to DSTV, it decided to join forces.
Telkom was next to throw in the towel when it announced in March 2008 that it planned to rid itself of its stake in Telkom Media. The pay-TV company was at risk of being closed down after Telkom Media’s shareholders unanimously voted in favour of a special resolution to wind up Telkom Media in April, but a last minute deal, in which Shenzhen Media South Africa bought Telkom’s 75% stake, has kept the company alive on life support.
Since this deal Telkom Media has been dead quiet regarding its plans, and its website simply states “COMING SOON…..” – something which local consumers have heard far too often without tangible results.
On Digital Media (ODM), which initially planned to launch commercial services in the second half of 2008, has also pushed back its launch date numerous times. According to the company it now plans to launch its service to subscribers in the last quarter of 2009.
ODM Chief Technology Officer Frans Lindeque however warned that this date may also fall by the wayside, saying that the company has not received a license from Icasa for its uplink yet. This in turn is delaying decisions about which technology to deploy.
ODM is planning to target lower-income customers with packages ranging between R149 and R349 “depending on the level of choice of a given subscriber”. The company also announced that it will allow subscribers to create ‘custom designed’ bouquets, something which MultiChoice previously said was not financially viable.
The last licensee, Walking on Water Television (WoWtv), never intended to take on DSTV. The company is aiming its service at the local Christian community with a R 49.00 per month offering. “We are the very first and the only broadcaster in South Africa that is 100% committed to broadcasting programming that is free of violence, free of nudity, free of sex, free of abuse and free of abusive language,” the company states.
WoWtv said that they “anticipate that by mid 2009, all our subscribers would be able to view the WOWtv bouquet”.
Making it easy for MultiChoice
MultiChoice has ensured that it will not be caught off-guard by competitors. The company used its monopoly and subsequent financial gains to actively target all market segments and develop new technologies to remove the value proposition of rivals.
Both Telkom Media and ODM have indicated that they will target their ‘more affordable’ services at the emerging middle class, but while they are struggling to get off the ground, MultiChoice is signing up this market segment with their new offerings.
Over the last twelve months MultiChoice grew its local subscriber base by 453 000 new users, mainly through its lower end Compact and analogue offerings. Over the last twelve months the DSTV Compact subscriber base grew by 82%, a clear indication that MultiChoice has been successful at signing up lower-income and emerging middle-class customers.
MultiChoice is therefore shrinking both ODM and Telkom Media’s potential markets, making it even more difficult for the new entrants to take on the established DSTV brand. The longer the new entrants wait to launch services, the more difficult it will become to challenge the TV powerhouse.
Telkom Media has previously announced that it is planning to launch IPTV services through its relationship with Telkom, something which may have given them an edge in the South African market. MultiChoice has however also not left this stone unturned.
MultiChoice recently announced that it is trialing its own IPTV service aimed at gated villages and other areas with high speed connections to the home. This means that Telkom Media will now be the newcomer in the IPTV space should it decide to go that route, making it far more difficult to gain market share than if it was first to launch IPTV services.
Apart from expanding its service offerings to target all segments of the South African pay-TV market and preparing to launch IPTV services, MultiChoice is also ensuring that that the Internet becomes part of its value proposition to subscribers.
The company already has an online content distribution portal, DSTV on Demand, and recently launched its new DSTV Online division to expand its online service offerings and ensure increased integration between the different content delivery platforms.
Difficult to compete
MultiChoice has a well established brand, exclusive rights on a fair amount of content (including some sports) and service offerings which target basically every segments of the local market.
MultiChoice has also previously said that it is not willing to share its decoder with new entrants, which means migrating from MultiChoice to a new pay-TV provider will incur additional hardware costs.
The end result is that it will not be easy for the new pay-TV providers to take on MultiChoice, especially since they may have given the incumbent too much time to entrench itself in the market segments which they planned to target.
One of the only ways in which a new player like ODM and Telkom Media will be able to gain market share will be to provide a service of equal value at a lower price, but it remains to be seen if they will be able to provide the same sports, movies and documentaries which DSTV subscribers have grown accustomed to.
Pay-TV competition – what should be done?
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