COUCH POTATO HEAVEN
Couch potatoes are in for a real treat. The pay television industry is being thrown open to competition and, from next year, South Africans can look forward to at least half a dozen new TV companies competing for their attention.
The process of licensing new subscription television operators is being managed by the Independent Communications Authority of SA (Icasa). The regulatory body says it won’t deny a licence to anyone who can prove a business case. And there is immense interest from new and existing broadcasting players who want to enter the pay TV market, be it in satellite or digital terrestrial broadcasting. Icasa has received 18 applications.
Some of the bigger names include incumbent operator MultiChoice, which owns M-Net and DStv; e.tv; On Digital Media (ODM); and the SABC, which has partnered broadcast signal distributor Sentech in its application.
Perhaps the biggest surprise is Telkom The fixed-line operator has applied for a commercial satellite and cable subscription broadcast licence. It had been expected to offer television through its broadband lines and not via satellite. It has formed an alliance with Anant Singh’s Videovision Entertainment, MSG Afrika Media and Women Development Bank Investment Holdings
Telkom says current market offerings are targeted at high-income earners only and offer little flexibility. They fail, the company says, to address the mass market. This is a reflection of supply side weaknesses rather than demand side dynamics, it adds.
“Our research shows that there is a potential market of over 40% of SA households interested in and willing to pay for satellite TV services,” says Telkom chief sales and marketing officer Wally Beelders “This is a hugely untapped market that is not addressed by current pay TV services.”
The large number of potential competitors has surprised MultiChoice CEO Nolo Letele He says he had expected no more than 10 submissions to Icasa.
MultiChoice has enjoyed a virtual monopoly in the pay TV market for 20 years, first with M-Net and later with DStv. Several prospective competitors have criticised MultiChoice for abusing its monopoly by charging excessive subscription fees and for providing the market with limited choice in content.
One applicant, ODM, a black-owned company that plans to invest R1,7bn in a new satellite TV venture, says a large segment of the market is not being catered for by MultiChoice. ODM CEO Mergan Moodley estimates that there is an untapped market of 3,5m households. That’s nearly three times the 1,3m homes that receive M-Net and DStv.
Moodley says ODM has already secured access to 70 channels and will offer a range of services, starting with a basic service of 10 channels that will cost subscribers R150/month. “Our objective is to offer new opportunities to SA viewers, to bring choice and affordability to pay TV in this market,” he says. “It has become an expensive product at the top end of the market.”
MultiChoice, Moodley says, has not catered for the large, emerging black middle class. “[MultiChoice] had 26% penetration in 1996,” he says. “This has fallen to 18% in a growing TV market. The pay TV base has stayed static while the number of colour TVs has grown to 6m. We ask ourselves why.”
Letele dismisses Moodley’s claims, however. He says MultiChoice has had robust growth in the past few years, not only in its DStv Premium product but also DStv Compact, a lower-priced bouquet of channels aimed at households in the LSM 5-8 income brackets. He says MultiChoice is adding subscribers at a rate of 100000/year.
He also denies subscription fees — up to R469/month for DStv — are too high. Its rates, he says, are favourable when compared with prices charged for similar services in other markets. He also says MultiChoice will not engage in a price war. “You can damage your business that way,” he says.
Letele welcomes the fact that the market will be opened to full-scale competition. “I think it’s the right decision to let the market decide. It’s the fairest and wisest way of doing it.”
He cautions prospective competitors that pay TV is “not the gravy train it’s sometimes misconstrued to be”. He says investment costs are high and returns are not always guaranteed.
MultiChoice will not take the new competition lying down. Letele hints that the company plans to introduce new bouquets and channels. For example, it plans to introduce the Disney Channel later this month.
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