DStv, Telkom vs other digital media in SA: show me the money!

Television subscriptions and advertising made up an estimated 60% of the total revenue of digital services and content in South Africa during 2013, according to a Delta Partners analysis of PwC’s Entertainment & Media Outlook 2013–17.

Adding in estimated movie revenue for 2013 brings the total market for video content and services in South Africa to 64%, or R30.9-billion.

Since DStv is the dominant subscription TV player in South Africa by a significant margin, it is fair to say that the vast majority of the estimated R17.1-billion in pay-TV subscriptions went to MultiChoice.

The graphic below illustrates how Delta Partners (using PwC data) describes the digital services and content market in South Africa:

South African digital services and content - PwC 2013 estimates, Delta Partners analysis
South African digital services and content – PwC 2013 estimates, Delta Partners analysis (revenues shown in R-billion, compound annual growth rate % for 2008-2013 in boxes)

Telkom chief operating officer Brian Armstrong cited these statistics in his presentation on Tuesday, 3 September 2014 at the Southern Africa Telecommunication Networks and Applications Conference (Satnac).

He was answering the question of what the main driver for the adoption of high-speed broadband would be.

In his presentation, Armstrong highlighted that it may still be some time before a household absolutely needs a home fibre connection faster than 40 Megabits per second (Mbps).

Basic Internet browsing, gaming, and even video-on-demand and high definition (HD) video requires relatively little bandwidth compared to what fibre-to-the-home (FTTH) can provide.

When would you need FTTH
When would you need FTTH

However, when a household starts demanding two simultaneous HD video streams (with some bandwidth left over for browsing), 10Mbps ADSL becomes insufficient.

Demand for video services, and streaming television in particular, drives the adoption of high-speed broadband, Armstrong said.

Telkom’s grand media plans

Telkom has spoken about offering media services to complement its VDSL and FTTH network roll-out since before it officially announced VDSL.

Rumours that Telkom was in talks with international online content providers such as Netflix were confirmed when group CEO Sipho Maseko told Bloomberg that they had held discussions with many such companies.

While Netflix eventually squashed hopes that it would be coming to South Africa anytime soon, it quickly emerged that Telkom may have struck a deal to offer DStv content.

Asked for more detail about Telkom’s plans to offer video and TV content over VDSL and fibre, Armstrong said that there are two general approaches for carriers to take.

“You can be a pipe and portal player, or you could become a media house,” Armstrong said, adding that he is not in a position to say where Telkom is going to land between the two options.

“There is a very particular market structure [in South Africa] that we need to be cognisant of,” he said.

“We don’t want to be just a pipe and portal player, but don’t want to embark on another doomed adventure,” said Armstrong.

The “doomed adventure” Armstrong referred to was Telkom Media, the MultiChoice competitor that ended up never going on air, and was eventually sold to Shenzhen Media.

Jan Vermeulen was a guest of Telkom at Satnac 2014

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DStv, Telkom vs other digital media in SA: show me the money!