DStv subscribers becoming less valuable

MultiChoice is losing its most valuable subscribers, and if it isn’t careful could see itself consigned to being a budget TV option like so many of its local rivals in South Africa.

So warns South African TV expert Thinus Ferreira.

Speaking to 702’s Gugulethu Mhlungu, Ferreira explained that DStv subscribers remain the most valuable in South Africa’s TV industry, but there are concerning signs of apathy at MultiChoice.

“They are still the most valuable in the TV industry because these are people who are willing to pay money to watch television,” Ferreira said.

“They are still valuable but are becoming less valuable because people are switching to lower packages.”

MultiChoice’s financial statements support Ferreira’s views, showing that the company’s average revenue per user (ARPU) has steadily declined since its 2017/18 financial year.

This is despite DStv’s overall subscriber base increasing.

Stated differently — the number of DStv subscribers is increasing, but, on average, they are spending less even though MultiChoice increases its fees every year.

Therefore, DStv is bleeding high-end subscribers that pay R549 or R839 per month (excluding their R110 Access Fee) and only recording a net gain in viewers who pay less.

This year, for the first time, MultiChoice also recorded a decline in its mid-market segment of 6%. This was in addition to its 4% loss in premium subscribers.

MultiChoice’s premium segment comprises DStv Premium and Compact Plus, and the mid-market consists of DStv Compact and Commercial.

“It’s the same as if McDonald’s has 100 people who used to walk in the door and buy a meal and now… [they] are walking in and just buying a drink or some chips,” Ferreira said.

The following chart shows MultiChoice South Africa’s steady decline in ARPU since March 2017. Netflix’s global launch was in January 2016.

DStv ARPU. Y-axis truncated to make declines more visible. (Click to enlarge)

MultiChoice’s decline in DStv ARPU is likely a combination of several factors, including:

  • DStv Premium, Compact Plus, Compact, and Commercial subscribers are downgrading their services to cheaper options.
  • High-end and mid-market subscribers cancel outright, possibly switching to video streaming services.

Although some subscribers switching to streaming could subscribe to MultiChoice’s Showmax, this would be at a much lower fee of R99 per month.

Unfortunately, it is impossible to plot DStv Premium subscriber numbers over the same period. MultiChoice changed its reporting metrics twice between 2018 and 2020 after Naspers spun the company into a separate JSE listing.

The following chart from MultiChoice’s results presentation shows how its premium market segment declined between 2018 and 2022.

Ferreira explained that it’s easy for a company like MultiChoice that has dominated its market for so long to begin “coasting.”

It happens gradually at first, and then suddenly, the company is stuck in a rut.

MultiChoice has repeatedly stated that it has adopted a “hyperlocal” content strategy — producing and delivering local African content in all its markets.

But Ferreira says this isn’t enough for the “diamonds” of South Africa’s TV industry to pay nearly R1,000 per month for DStv — there just isn’t enough value for them.

“[MultiChoice] keeps spending money on local content,” said Ferreira.

“But you would hope there would still be a longing to spend money on premium or prestige content and not just localised Jerry Springer tabloid television-type content.”

DStv’s competitors also aren’t resting on their laurels when it comes to local content either.

Netflix has announced substantial investments in South Africa, and Amazon Prime Video is adding Afrikaans films to its library.

SuperSport remains DStv’s killer premium offering, but even this faces increasing competition.

Massive multinationals with deep pockets, like Amazon and Disney, are starting to bid on sports rights that have typically been DStv’s domain.

Major sporting leagues are also starting to offer streaming services directly to fans.

MultiChoice’s plan to become a “super-aggregator” — offering subscribers a one-stop-shop to get Netflix, Disney+, Amazon Prime Video, YouTube, and other streaming services — is also a hotly-contended space.

The company’s forthcoming Streama media box must hold its own against Apple TV, and free software-based services like Plex and Google TV.

With competition encroaching on the market MultiChoice has dominated for decades, it faces an existential question:

Can it hold its own? Or will it become a cheap local alternative to its international competitors?

Now read: Netflix and Disney must comply with BEE and pay tax — MultiChoice

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DStv subscribers becoming less valuable