DStv’s biggest threat – Cheap data

MultiChoice has been bleeding DStv Premium subscribers to Netflix since affordable uncapped fibre became available in South Africa.

The same thing is set to happen to other DStv packages when cheap data becomes available to a large part of the population.

This is the view Sasfin Securities deputy chairman, David Shapiro who was commenting on MultiChoice’s recent financial results.

Shapiro said MultiChoice is still using older satellite technology, which is currently serving it well, but it will change when affordable data becomes widely available.

“MultiChoice is going to find a strong competitor in Netflix and all the other streaming services which are coming,” he said.

MultiChoice is in a very good position without competition from streaming services, but affordable data will change the environment.

To stay relevant MultiChoice is investing heavily in local content, but that may not be enough to stave off competition.

Even with an increase in local content, Shapiro is backing the data and streaming revolution rather than the DStv satellite service.

Business Day TV’s Giulietta Talevi agreed, adding that DStv’s high prices are not serving it well in a competitive environment.

DStv Premium’s decline

DStv Premium was South Africa’s premier entertainment platform for years, with subscribers peaking at 2.35 million in 2015.

In 2016, MultiChoice’s DStv Premium subscriber base started to decline and is making up a smaller and smaller percentage of the subscriber mix.

This decline accelerated in recent years and not even the excellent SuperSport offering could stem the tide.

There were a few factors which contributed to the decline of DStv Premium in South Africa.

  • DStv Premium prices increased significantly, and in 2016 they exceeded R700 for the first time.
  • Fibre rollouts accelerated, which means more household had access to high-speed broadband.
  • Uncapped broadband prices started to decline.
  • Netflix launched in South Africa in January 2016.

With Netflix offering excellent on-demand entertainment for a fraction of the price of DStv Premium and armed with an uncapped broadband connection, many DStv subscribers jumped ship.

MultiChoice also did not do itself any favours by continuing to increase the price of its DStv Premium subscriptions every year.

With the decline in DStv Premium subscribers, MultiChoice changed its strategy by starting to target the mid and mass-market segments.

These market segments do not have access to fast and affordable uncapped broadband, and DStv therefore still offers the most affordable entertainment available to them.

This strategy is working well for MultiChoice and it is now rapidly growing its mass-market subscriptions.

The changing broadband environment can, however, disrupt this market in the same way it disrupted DStv Premium.

Companies like Vumatel and Rain are starting to offer affordable uncapped products on poorer neighbourhoods which are enjoying strong uptake.

When poorer households get access to affordable uncapped broadband, they can easily dump DStv for a more affordable alternative like Netflix.

Unless MultiChoice reacts to the changing entertainment environment, it is facing a battle which it cannot win.

MultiChoice discussion

Now read: South Africans are dumping DStv Premium

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DStv’s biggest threat – Cheap data