Pricey picture
In spite of looming competition, MultiChoice has announced plans to hike the price of its premium DStv service. With competitors soon to be breathing down its neck, MultiChoice is going to have to do a lot more to justify its prices to consumers.
From April 1, DStv’s premium service will cost R469/month, an increase of 6,6% from R440/month now. MultiChoice is so confident about its offering — or is it that it’s so disdainful of its new competitors? — that it feels it can impose a price increase just months before these new rivals launch their services.
Telkom Media and On Digital Media, two of the new licensees, are seen by analysts as likely to present stiff competition to DStv. Telkom Media, which is 66%-held by the fixed-line operator, has secured more than R7bn in debt financing to take the fight to MultiChoice. It is building state-of-the-art studios at its head office in Gauteng and is preparing to launch a wide range of channel bouquets offering everything from movies to documentaries and music to 24-hour news.
Telkom Media has said it will offer these bouquets from as little as R100/month. Its top-end package will cost about R350/month, more than R100 less than the premium DStv product. (It must be noted that it is impossible to make meaningful comparisons until Telkom Media announces details of its bouquets and confirms pricing.)
With a fight for viewers looming, though, MultiChoice is going to have to improve its offering to keep its subscribers sweet. The broadcast quality of many of its channels leaves a lot to be desired. It compresses the video on some of its channels so heavily that on large-screen TVs — especially liquid crystal displays — images are blocky.
It does this to save satellite bandwidth costs but with more of its customers, especially those who subscribe to its premium bouquet, buying high-definition TVs for the first time, the quality of its broadcasts could soon prove a liability. If competitors can provide high-quality video in wide-screen format for high-definition (HD) TVs, MultiChoice will begin losing well-heeled customers — and therefore advertising — to rivals.
The pay-TV operator has promised to launch HD channels later this year but this is the least it must do to fend off rivals effectively — Telkom Media will undoubtedly launch with at least a few HD channels to lure people who have bought HD TVs.
What MultiChoice needs to do is introduce tiered bouquets based on content. For example, if you want to watch mainly sport, you ought to be able to subscribe to a lower-cost bouquet that is skewed towards the SuperSport channels but excludes many of the premium entertainment and movie channels.
Sources say Telkom Media plans to offer tiered bouquets so MultiChoice will have little option other than to do the same.
It ought also to give away its decoders to prospective customers. MultiChoice needs to draw a lesson from the cellphone industry, which gives away handsets in return for locking customers into contracts. Even users of the company’s personal video recorder decoders, who have to stump up an extra R55/month — a fee that smacks of monopoly pricing — have to buy the machines up front.
Ironically, though, the biggest competitor to DStv may not even come from traditional operators. South Africans increasingly share portable hard drives packed full of the latest US and British TV shows — downloaded, advertising-free content which hasn’t been aired here yet. It’s not legal, of course, but the practice is widespread and isn’t going to stop.
The only way pay-TV operators such as MultiChoice can compete is to broadcast the latest shows sooner and in better quality — downloaded content is sometimes of poorer quality — and offer more local programming.
First published as the column Technology & You in the Financial Mail of March 14 2008
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