ShowMax hit hard by weak rand

ShowMax and VU, two of South Africa’s streaming video providers, will be affected by the weakening of the rand.

During 2015, the rand weakened by 30% to the US dollar – with its value dropping by 13% in December alone.

The decline of the rand in December and January was attributed to President Jacob Zuma’s axing of finance minister Nhlanhla Nene for David van Rooyen.

Zuma’s replacement of van Rooyen with Pravin Gordhan briefly strengthen the rand, but the currency currently sits at around R16 to the dollar.

Weaker rand means more expensive Netflix

“As with many other companies and industries, the significantly weaker rand does have an impact on our business plans,” ShowMax told MyBroadband.

“Our focus is on managing that impact and keeping pricing stable.”

It said a weaker rand also means an automatic price increase for Netflix subscribers in South Africa, which is beneficial for ShowMax’s value proposition.

“Rand weakness translates into a de-facto price increase by our international rivals, whose services are priced in [dollars], which has the beneficial impact of making ShowMax better value for money.”

Video content is bought in dollars

Discover Digital, which operates VU, said most premium international content licensing deals are done in US dollars.

“The slide in the rand against the greenback will have a knock-on effect on all broadcast and/or VOD content procurement costs,” it said.

This may force operators to decide if they must subsidise costs until such time as they achieve critical mass, or increase prices.

“Time will tell which route they take.”

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ShowMax hit hard by weak rand