Broadcasting3.02.2025

Bad news for cheaper Netflix in South Africa

It will likely be some time before over-the-top (OTT) streaming platforms like Netflix and Amazon Prime Video introduce more affordable subscriptions with ads in South Africa.

This is according to PwC director Charles Stuart, who specialises in entertainment and media.

Stuart pointed out that, due to South Africa’s lower income levels compared to other markets worldwide, these platforms were expected to offer subscriptions that included in-stream ads when they launched.

However, this has not been the case.

“If you come out with ads to start, then you lose customers who would have potentially paid for the service,” Stuart told MyBroadband.

“This is what we’ve seen the OTT streaming platforms do elsewhere. They have first exhausted the subscription model.”

Stuart highlighted how this was done in markets like the US and Europe until OTT platforms noticed a pullback in subscriber numbers, which needed to be arrested before it affected the platforms’ ad spend.

To tackle this issue, platforms like Netflix needed to adapt their business models, which led to the introduction of subscriptions with in-stream ads.

Netflix’s user growth began to hit a ceiling after a once-off surge in subscribers driven by the Covid-19 pandemic.

This was partially due to intensified streaming competition, which increased subscriber churn between services.

It was also because the addressable market had become smaller, and Netflix had increased its prices substantially in countries like the US over the past few years.

Therefore, Netflix needed to adjust its business model to reach consumers who could not afford or weren’t willing to pay for a full subscription.

To keep such packages profitable, it introduced a cheaper Basic with Ads plan that provided advertising spaces for companies interested in reaching the Netflix customer base.

Netflix was not alone; Disney+, HBO Max, Paramount Plus, and Peacock also took this approach.

Charles Stuart, PwC director specialising in entertainment and media

However, this trend raised concerns among users that the streaming experience could move towards being very similar to linear TV.

In 2024, Netflix chief product officer Eunice Kim said the company was “incredibly sensitive” to ensuring the user experience did not resemble the old days of traditional TV broadcasting.

Kim emphasised that Netflix’s ads strategy and personalisation were still relatively nascent.

“This is an area that we think of ourselves as being literally at the very beginning of the journey with lots of room to improve the experience for our users over time,” she explained.

Kim also said that the ad experience on streaming platforms can differ from linear TV because ad personalisation is possible.

“There is a degree of personalisation and relevance in a connected TV experience that you could never have had in a linear TV experience,” she said.

“In a linear experience, for the most part, the same ads are being shown to everyone, whereas here these are personal ads, and we think we can make them more relevant.”

OTT streaming services are also becoming more appealing to South African consumers.

Stuart pointed out how these platforms are taking advantage of linear TV subscribers shifting to streaming services, known as cord-cutting.

“Subscribers moving away from the traditional pay-TV space is still in progress. I suppose the streamers believe they can capture them into their subscription model,” he said.

The Independent Communications Authority of South Africa (Icasa) noted in a recent discussion document that OTT subscribers have increased from 3.7 million in 2017 to 8.3 million in 2024.

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