DStv’s best hope

MultiChoice has pinned all its hopes on its video streaming platform, Showmax, for its future growth and sustainability.

The pay-TV operator’s financial results for the year ended 31 March 2024 revealed that the company was in a dire situation.

It had recorded a R4.1 billion loss, suffered a 9% decline in active subscribers, and became technically insolvent.

The only area where DStv wasn’t bleeding subscribers was the Rest of Africa mid-market segment.

However, the declines in its premium and mass-market customers wiped out any gains, resulting in an overall 13% subscriber decline in the Rest of Africa.

Active DStv subscribers in South Africa declined from 8.0 million to 7.6 million over the last year.

Although South Africa only accounted for 48.5% of MultiChoice’s active subscribers, it accounted for 60% of group revenue.

Therefore, South Africa is a core part of MultiChoice’s operations and vital to ensure its financial sustainability.

However, the company is struggling to retain its subscribers, and South Africans are dumping DStv by the thousands.

While it has offered streaming-only DStv packages since December 2020, these have not stemmed the tide of customers cancelling their subscriptions.

MultiChoice told investors in May last year that its standalone Showmax streaming platform would generate $1 billion in net revenue in five years.

It also targeted breakeven by the end of its 2027 financial year, with a 25% EBITDA margin and 20% free cash flow margins once Showmax reaches scale.

To generate roughly R17.5 billion in revenue, Showmax will need close to 15 million active subscribers who pay an average of R99 per month.

This is no easy task. Digital TV Research predicted that the total number of video streaming subscribers in Africa will only be 15.6 million users by 2028.

MultiChoice disagrees with this forecast. It said it expects video streaming uptake to undergo exponential growth in Africa.

According to MultiChoice, many broadcasting industry players see Africa as the final frontier for streaming growth.

MultiChoice is so optimistic that it is aiming to increase its total subscriber base, including Showmax and DStv subscribers, to 50 million users in 2028.

For Showmax alone, the company has indicated that it aims to have 25 million subscribers on the platform by 2028.

Although MultiChoice has elected not to release Showmax’s subscriber numbers after Netflix announced it would stop reporting its figures in the first quarter of 2025, it is estimated to be between 700,000 and 1 million.

Based on that estimate and its stated goals, Showmax would need to grow its subscriber base by an average of around 100% a year until 2028.

Looking at Showax’s revenue for 2023/24 yields a similar result.

It hit R1 billion in revenue in its previous financial year. Showmax would have to double its revenue every year for the next four years to hit R16 billion.

In other words, MultiChoice is banking on an African economic miracle that will cause an explosion in subscription video on demand adoption over the next four years.

It also hopes to position Showmax as the leading streaming platform in Africa to capitalise on that boom — taking on major players like Netflix, Amazon, and Disney.

It will do this by focusing on local content acquisition and production, combined with a selection of premium international content and popular sports.

Showmax recently launched a mobile-only Premier League football product, leveraging MultiChoice’s expertise in live sports broadcasting to bolster its subscription streaming service.

MultiChoice’s ambitious goals for Showmax came after it entered into a deal with Comcast subsidiary NBCUniversal Media (NBCU) and Sky in April 2023.

NBCU acquired a 30% stake in Showmax and supported it by licensing content from its Peacock, NBCUniversal, Universal Pictures, and Sky platforms.

Showmax also migrated away from its own technology platform and adopted Peacock’s, launching “Showmax 2.0” earlier this year.

By 31 March 2024, NBCU and MultiChoice had provided just over $120 million (R2.1 billion) in equity funding to Showmax.

In September, MultiChoice and Comcast announced they had provided another $164 million (R2.8 billion) in funding to Showmax since 1 April 2024.

Should its big bet on Showmax fail, that doesn’t necessarily mean the end of MultiChoice and DStv.

It won’t be the money printer it once was and may be forced to become a much leaner company, but it is unlikely to disappear overnight.

SuperSport remains the jewel in its crown and could continue to exist in some form, and MultiChoice could find a future as an aggregator of all the disparate streaming services.

There is also the pending matter of French media giant Groupe Canal+’s offer to buy MultiChoice at R125 per share.

If the Competition Commission and industry regulator Icasa approve the deal, it would likely mean major changes at the broadcaster.