When Netflix launched in South Africa on 6 January 2016, it signalled the end of MultiChoice’s dominance in the premium video entertainment market.
No longer would DStv’s only competition come from digital satellite TV startups that didn’t have the funding to take on MultiChoice, but from a global powerhouse that could outspend it a hundred times over.
MultiChoice recently reported that it spent over R33 billion in programme and film rights between April and September this year, and contributed over R1.7 billion to local entertainment and sports in South Africa.
Netflix, in contrast, is projected to spend $13 billion (R190 billion) just on its production of original content during 2018.
As a result of competition from Netflix and increased financial pressure on South Africa’s middle class, MultiChoice said it has been losing DStv Premium subscribers.
Naspers’ annual results for 31 March 2018 showed that DStv Premium subscribers across the MultiChoice Group declined by 41,000.
The year before, the group lost 135,000 DStv Premium subscribers. Last year’s annual results from Naspers showed that the group lost nearly 255,000 DStv Premium subscribers between April 2015 and March 2016.
DStv’s overall subscriber base continues to grow, however, but most of this growth comes from lower-end subscribers. This means that MultiChoice’s mass-market growth is continuing, even as its high-end subscribers are declining.
While DStv’s revenue and operating profit is still growing, its average revenue per user (ARPU) has declined. At the end of March, MultiChoice’s ARPU was R344 – down from R353 last year.
By the end of September, ARPU decreased to R335.
It is not clear how long the entry-level pay TV market in South Africa will continue to grow. Major factors influencing the uptake of streaming video and cancellation of pay TV are access to affordable broadband, live sports, and price.
As cheap, high-speed broadband becomes more available in South Africa, it stands to reason that more people will take up cheaper streaming video services.
It is not only DStv which is under pressure from Netflix, though. Elsewhere in the world, the tide has started to turn against traditional pay TV operators.
Dataxis found that in the first quarter of 2018 the European pay TV market only grew by 0.3% compared to subscriber numbers in Q4 2017 – the lowest growth its research has ever reported.
In Western Europe, the number of pay TV subscribers is set to increase by 2.6% between 2017 and 2023, Digital TV Research found. However, revenues will decline by about 7.2% – $2.11 billion.
The picture is even more grim in the United States – Netflix’s home market.
Variety reported that in the United States that the number of “cord-cutters” – people who have ever cancelled their pay-TV services – will increase drastically.
Citing S&P Global Market Intelligence, during 2017 traditional pay TV providers in the US experienced a record 3.7% drop in subscribers to 94 million households.
eMarketer estimated that 186.7 million adults in the US will watch traditional pay TV in 2018, representing a 3.8% decline compared to the year before, according to eMarketer’s estimates.
The high price of pay-TV is a big reason why this is happening, and the average pay-TV bill in the US was $100 per month this year. Netflix in HD is available for $11 in the US.