The market research further showed that streaming hit a new high, clearly illustrating the changing use patterns.<\/p>\n
Broadcast fell to 20% of all viewing in July. Cable channels came in at 29.6%, and streaming services led by YouTube, Netflix, and Hulu accounted for 38.7%.<\/p>\n
The long-term trend spells more gains for streaming services as consumers increasingly cancel their cable TV subscriptions in favour of on-demand entertainment choices.<\/p>\n
Netflix co-CEO Reed Hastings said the trend was so significant that people could expect the end of linear TV over the next five to ten years.<\/p>\n
MultiChoice\u2019s DStv service is not immune to these challenges and has seen significant declines in its premium subscriber base for years.<\/p>\n
Its latest results revealed<\/strong><\/a>\u00a0that South Africans continue to dump DStv Premium and Compact Plus packages in favour of more affordable services.<\/p>\n DStv Premium subscriptions, which include Premium and Compact Plus packages, declined by 6% over the last year.<\/p>\n Mid-market subscriptions, which include Compact and Commercial packages, declined by 3% year-on-year.<\/p>\n The impact is seen in DStv\u2019s average revenue per user (ARPU), which declined from R269 to R256 over the last year.<\/p>\n MultiChoice felt this impact on its top and bottom line. Its South African revenue declined 2% to R35 billion due to a 3% decline in subscription revenues.<\/p>\n Share of viewing time. Source: Nielsen<\/p><\/div>\n MultiChoice\u2019s management is well aware of these challenges and has launched a few initiatives to diversify its revenue streams.<\/p>\n These include selling Internet packages, pumping billions into its Showmax streaming service, and acquiring a large stake in sports betting service KingMakers.<\/p>\n However, none of these new revenue streams are guaranteed to produce big profits. In fact, it can be challenging to make them work.<\/p>\n Let\u2019s take sports betting as an example. MultiChoice has already lost a tremendous amount of money after investing nearly R6 billion in KingMakers, formerly known as BetKing.<\/p>\n Between 2020 and 2021, MultiChoice bought a 49% stake in KingMakers in multiple transactions worth $393.5 million \u2013 equivalent to around R5.9 billion.<\/p>\n KingMakers did not live up to its promise. It managed to increase its revenue, but the costs associated with this growth were far higher than anticipated.<\/p>\n As revenue increased, the company\u2019s profits have done the opposite. Since the MultiChoice acquisition,\u00a0KingMakers\u2019 losses have grown to a record high<\/a><\/strong>.<\/p>\n In the last financial year, KingMakers recorded a loss after tax of $28 million (R500 million).<\/p>\n Its expansion plans also did not work as expected, and KingMakers exited operations in Kenya and Ethiopia.<\/p>\n MultiChoice announced in its latest results that an increase in the discount rates in Nigeria prompted a R2 billion write-down in the value of KingMakers.<\/p>\n MultiChoice said sports betting creates a natural extension to its video entertainment platform to enhance its product set further.<\/p>\n \u201cThe global sports betting market is experiencing a growth surge. Africa comprises only 2% of global sports betting revenue and is poised for significant momentum as it plays catch-up,\u201d it said.<\/p>\n It sounds great on paper, but making the business work is easier said than done.<\/p>\n Fox, for example, is winding down its Fox Bet online wagering business. Some smaller sports betting apps have also called it quits, unable to survive in an expensive, competitive landscape.<\/p>\n The reason is that it is a small-margin business. The money wagered with sports betting apps can be eye-watering, but that does not tell the whole story.<\/p>\n Sportsbooks return much of that money to winning customers. The percentage companies keep, known as the \u201chold\u201d, is usually less than 10%.<\/p>\n KingMakers\u2019 bigger losses despite increased revenue show the challenging business model behind sports betting.<\/p>\n Considering the migration from linear broadcast pay-TV products to streaming services, it looks logical for MultiChoice to make Showmax its next focus area.<\/p>\n MultiChoice executive Yolisa Phahle said<\/strong><\/a>\u00a0Africa is the final frontier for subscription video-on-demand (SVOD) growth which is why many international players are targeting the continent.<\/p>\n Phahle is confident that Showmax can become the leading streaming service in Africa, especially following its partnership with Comcast.<\/p>\n MultiChoice expects a step-change in customer numbers by leveraging this partnership and launching new products and price offerings.<\/p>\n MultiChoice is ramping up its investment in Showmax and local content to facilitate this growth. It wants to create ten times more local content within ten years.<\/p>\n MultiChoice expects Showmax to have the same 3 to 5-year J-curve as its global peers in the streaming industry.<\/p>\n \u201cWe are aiming to generate revenue of more than $1 billion after five years, with a trading profit breakeven target in full-year 2027,\u201d she said.<\/p>\n \u201cWe are targeting EBITDA margins of 25% and free cash flow margins of around 20% at scale.\u201d<\/p>\n However, making a few J-curve projections in Excel, which leads to $1 billion in revenue, is easy. Successfully executing a profitable streaming strategy is more difficult.<\/p>\n For example, CNN+, the streaming service promoted as one of the most significant developments in the history of CNN, was shut down one month after launch because of poor performance.<\/p>\n Even large streaming providers like Disney+, Warner Bros. Discovery and HBO Max struggle to make money.<\/p>\n In March, The Media Leader reported that major streaming services from Disney, NBCUniversal, Paramount, and Warner Bros had reported losses in excess of $18 billion since 2020.<\/p>\n This shows that streaming is a complex business for almost every entertainment company and is difficult to make profitable.<\/p>\n MultiChoice revealed that Showmax lost R1.2 billion<\/strong><\/a>\u00a0in the last financial year but would not disclose all historical losses.<\/p>\n MultiChoice CFO Tim Jacobs told analysts they would not disclose Showmax\u2019s historical losses and has no plans to do so in future.<\/p>\n However, the international examples show that MultiChoice will find it challenging to achieve its EBITDA target of 25% and free cash flow margins of around 20%.<\/p>\n Yolisa Phahle, Showmax CEO<\/p><\/div>\n Considering these challenges, it is unsurprising that\u00a0JPMorgan downgraded MultiChoice<\/a><\/strong>\u00a0from neutral to underweight in July with a price target of R80 per share.<\/p>\n An analyst note revealed that the Nigerian naira weakness negatively affected JPMorgan\u2019s revenue outlook for the broadcaster.<\/p>\n Other challenges highlighted include the significant investment in Showmax and the harmful effects of load-shedding on MultiChoice\u2019s South African operations.<\/p>\n The company admitted that its South African consumer-facing business environment faced severe challenges during the last financial year.<\/p>\n Higher interest rates, elevated inflation, high levels of unemployment, and load-shedding put pressure on people\u2019s finances.<\/p>\n These factors negatively impacted the South African pay-TV subscriber base and activity levels, with a noticeable increase in churn when load-shedding reaches stage 4 and above.<\/p>\n MultiChoice warned investors that sustained high levels of load-shedding significantly impacted the activity levels of the DStv customer base.<\/p>\n Based on these challenges, JPMorgan adjusted its revenue outlook for MultiChoice and said it expects trading losses in 2024 and 2025.<\/p>\n It adjusted its MultiChoice price target by 38% to R80 per share.<\/p>\n The MultiChoice share price plummeted on the downgrade and is now trading at its lowest level since the 2020 pandemic.<\/p>\n This article was first published by Daily Investor<\/a><\/strong> and is republished with permission.<\/em><\/p>\n MultiChoice is facing an uncertain future with declining broadcast numbers, and its strategy around new revenue streams is far from being a sure thing.<\/p>\n","protected":false},"author":341108,"featured_media":501998,"comment_status":"open","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"_sma_x_autopost_status":"idle","_sma_x_autopost_error":"","_sma_x_post_id":"","_sma_facebook_post_id":"","_sma_instagram_post_id":"","_sma_threads_post_id":"","_sma_x_attempts":0,"footnotes":""},"categories":[80335],"tags":[85,35,475],"class_list":["post-505196","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-investing","tag-dstv","tag-headline","tag-multichoice"],"_links":{"self":[{"href":"https:\/\/mybroadband.co.za\/news\/wp-json\/wp\/v2\/posts\/505196"}],"collection":[{"href":"https:\/\/mybroadband.co.za\/news\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/mybroadband.co.za\/news\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/mybroadband.co.za\/news\/wp-json\/wp\/v2\/users\/341108"}],"replies":[{"embeddable":true,"href":"https:\/\/mybroadband.co.za\/news\/wp-json\/wp\/v2\/comments?post=505196"}],"version-history":[{"count":1,"href":"https:\/\/mybroadband.co.za\/news\/wp-json\/wp\/v2\/posts\/505196\/revisions"}],"predecessor-version":[{"id":505204,"href":"https:\/\/mybroadband.co.za\/news\/wp-json\/wp\/v2\/posts\/505196\/revisions\/505204"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/mybroadband.co.za\/news\/wp-json\/wp\/v2\/media\/501998"}],"wp:attachment":[{"href":"https:\/\/mybroadband.co.za\/news\/wp-json\/wp\/v2\/media?parent=505196"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/mybroadband.co.za\/news\/wp-json\/wp\/v2\/categories?post=505196"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/mybroadband.co.za\/news\/wp-json\/wp\/v2\/tags?post=505196"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}![\"\"](\"https:\/\/mybroadband.co.za\/news\/wp-content\/uploads\/2023\/08\/Nielsen-video-entertainment-share-of-viewing-time-2023.png\")
<\/a>![\"\"](\"https:\/\/mybroadband.co.za\/news\/wp-content\/uploads\/2023\/06\/KingMakers-after-tax-profit-2019-2023.jpg\")
<\/a><\/p>\n![\"\"](\"https:\/\/mybroadband.co.za\/news\/wp-content\/uploads\/2023\/05\/Yolisa-Phahle.jpg\")
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<\/a><\/p>\n
\nNow read:\u00a0DStv Twitter account promotes crypto scam<\/a><\/h3>\n","protected":false},"excerpt":{"rendered":"