A shrewd ‘sham’
MultiChoice’s exclusive agreements with the Premier Soccer League (PSL) and Vodacom have dealt a blow to prospective rivals, who will find it more difficult to attract black, middle-class viewers.
News earlier this month that SuperSport International, a division of incumbent pay-TV operator MultiChoice, had been awarded exclusive rights to broadcast local premiership football matches led to outrage at the SABC and in parliament. A visibly angry SABC CEO Dali Mpofu labelled the deal a “laughable sham”.
What it was, though, was a brilliant strategic move by MultiChoice as it prepares to defend its turf in pay-TV.
SuperSport International’s bid was rich indeed — about R1,5bn for the five-year contract. The SABC had been paying the PSL only R67m/year to screen premiership games. For Naspers-owned MultiChoice, though, the deal was clearly worth the cash. The agreement ensures that it has the crucial sports content it needs to tackle aspirant rivals, rivals that have identified the emerging black middle class — the so-called “black diamonds” — as the next big growth area for pay-TV.
Until now, MultiChoice, with DStv, has appealed mainly to those in the upper LSM (living standards measure) categories — in other words, the well-heeled. Channels such as M-Net, Kyknet and BBC Prime target an affluent and mainly white audience. But many of the more than two dozen companies seeking pay-TV licences from the Independent Communications Authority of SA (Icasa) have identified the black market as untapped and one they want to target with cheaper offerings.
Recent research has shown that the black middle class is a key driver of economic growth. The research, conducted by TNS Research Surveys, shows that the number of black diamonds has grown from 2m to 2,6m in the past year. This year, these South Africans are expected to spend about R180bn, making them a sizeable contributor to economic activity. Within three years, their total spending power is expected to exceed white SA’s — in other words, an ideal market in which to sell pay-TV.
Telkom Media, On Digital Media and other pay-TV applicants have said they will introduce satellite TV bouquets that significantly undercut what MultiChoice charges for DStv. Telkom Media, for instance, has promised a R100/month (before Vat) bouquet aimed at the mass market. It won’t offer the range of channels available on DStv’s top-end bouquet but will instead provide a basic formula of drama, reality TV, news and sport.
Sport, specifically coverage of local football, could be the deciding factor among black consumers when choosing which pay-TV service to subscribe to.
MultiChoice’s recent deal with Vodacom, where the mobile phone operator will resell two new DStv bouquets, called DStv Select, for R139/month, looks particularly clever in this context. Vodacom has said it is likely that the football will be made available on the new bouquets.
Vodacom has a sales channel that dwarfs MultiChoice’s and is already using it to entice people to sign up for the new bouquets. Print advertisements were flighted at the weekend offering consumers free cellphones with free DStv decoders and satellite dish installations.
With pay-TV hopefuls set to launch services only next year — at the earliest — MultiChoice is moving quickly to defend its turf. The PSL deal will make it much more difficult for Telkom Media, the only other pay-TV contender that bid for the football rights (free-to-air channel e.tv also put in a bid) to make inroads against DStv.
With the PSL deal, MultiChoice has sent a clear message to its rivals: it’s not prepared to concede an inch.
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