Netflix killing DStv in South Africa

The arrival of Netflix in South Africa accelerated a shift in how people consumed entertainment at home, to the detriment of the country’s once-dominant pay-TV broadcaster, DStv.

DStv parent company MultiChoice recently reported a massive loss of R4.1 billion in its 2023/24 financial year, following another loss of R2.9 billion in 2022/23.

In its most recent financial year, liabilities exceeded assets, leaving the company technically insolvent.

While several factors have contributed to DStv’s decline from a growing and profitable entertainment giant, Netflix is undoubtedly a major roleplayer in the broadcaster’s recent misfortunes.

The biggest influence Netflix had on DStv over the past eight years was reducing its valuable Premium customers, which brought in the highest average revenue per user.

Premium was once the most sought-after entertainment package in South Africa, offering a wide range of content and unbeatable sports offering, resulting in solid growth for many years.

MultiChoice first started reporting how many of its subscribers were on the Premium package in March 2012.

At that point, roughly 39% of its overall base — or about 2.19 million customers — were subscribed to its flagship offering.

Three years later, Premium’s share had shrunk to 23%, but its customer numbers had increased due to exponential growth across DStv’s packages.

In March 2015, Premium peaked at 2.35 million customers across Africa.

However, a year later, the three-year gain was all but erased — with a crash to less than 2.1 million Premium customers by March 2016.

A key event between these dates was Netflix’s global launch in January 2016.

South Africa was one of 130 countries that received official support for the service after it had previously required the use of a virtual private network to access.

With a monthly starting price of $7.99 (R126 at the time), Netflix offered incredible value for money compared to DStv Premium’s R699 price tag.

Netflix provided on-demand access to thousands of movies and TV shows, including Netflix Originals and popular movies from third-party studios that were fresh out of the cinema or airing on US television, as well as a vast catalogue of classics and older content — all without ads.

Hiding the pressure

DStv Premium’s decline continued to 1.96 million customers by March 2016 and 1.92 million in March 2017.

Precisely what happened to Premium-only subscribers from that point onward takes some guesswork.

MultiChoice began mixing its Premium and Compact Plus customers together in a new “premium” segment, in what was widely considered a move to hide its Premium-only decline.

It muddied the waters further two years later by starting to report a new 90-day active subscriber figure instead of absolute subscriber numbers by the end of a financial period.

Another sign that DStv knew its Premium base was in trouble was that the package’s annual price hikes dropped below inflation from 2017 after previously being aligned with inflation.

MultiChoice’s first public acknowledgement that video streaming services posed a threat to its business came in February 2021.

In a submission to Icasa regarding its inquiry into the subscription television broadcasting services market in South Africa, MultiChoice argued that providers like Netflix, YouTube, Disney+, HBO Now (rebranded to Max), and Peacock were an “existential competitive threat.”

The graph below shows how DStv Premium customer numbers changed from March 2012 to March 2018, and estimates how the number might have reduced further based on historical subscriber mix trends.

Premium bloodbath spills over to other segments

While Premium customers were the first to migrate to Netflix, MultiChoice’s other segments have also been impacted by the proliferation of streaming services in the past few years.

The typical Premium customer’s profile matched those most likely to have shifted to video streaming because they could afford uncapped or high-capacity Internet services to stream. Many lived in suburbs with extensive broadband connectivity options — including fibre.

As broadband penetration and affordable uncapped Internet availability have increased, the “Netflix Effect” filtered down to DStv’s mid-tier and low-end customers.

In its last reported financial year, DStv lost over 1.6 million customers across all regions and segments.

More streaming services also launched in the intervening years, most notably Amazon Prime Video and Disney+, increasing the pressure on DStv.

Alongside Netflix, these providers are keenly aware of the budgetary limitations in the South African market and have introduced affordable mobile-only subscriptions and special promotional video streaming data bundles in partnership with mobile operators.

Editorial credit: Ralf Liebhold / Shutterstock.com

If you can’t beat them — join them

MultiChoice’s glimmer of hope is that many of these customers could also be subscribing to its video streaming service — Showmax.

While Showmax has been in South Africa for longer than all the international streamers, it has played second fiddle in the public’s eye. It has a smaller library of content and outdated features, like a maximum 720p streaming quality.

MultiChoice hopes to change this and turn Showmax into a true streaming behemoth in Africa through a partnership with Comcast’s NBCUniversal, which saw Showmax relaunched on the US company’s Peacock platform in February 2024.

It is aiming to increase Showmax 2.0 customers and revenue by over 1,800% in the next five years, which would be an extraordinary achievement.

A complicating factor could be Canal+’s planned acquisition of MultiChoice, who might not share the same optimism over Showmax’s potential.