MultiChoice strategises to keep prices low
Hunting as a pack. That’s the philosophy behind how MultiChoice is working to keep costs down — by coming together and sharing expenses across its businesses at a time when billions are being poured into a new online streaming platform.
SA has seen growth in recent years in the number of streaming services that have entered the market, including US players Netflix and Amazon Prime, as well as Hong Kong’s Viu, which has differentiated itself through local content. MultiChoice has also invested heavily in the space and is home to three services — DStv, Showmax and Showmax Pro, which will soon be discontinued.
The group recently unveiled a new updated version of Showmax, underpinned by technology from US giant NBC Universal, set to be rolled out from January 23 for new customers, while existing customers will be migrated from February. The new platform will be available in 44 countries by February 12.
Making this happen will cost huge sums in technology, as well as film and TV content that customers can consume.
“This new Showmax requires an investment of around R3bn. But we’re not splitting the exact figures of what goes into the platform and what goes into content,” MultiChoice group CEO Calvo Mawela said during a media event.
“The R3bn gives you an idea of what it will take to make the whole product work.”
This is why the group’s pricing decision on the refreshed Showmax is seen as bold by many. While competitors such as Netflix have steadily been increasing their prices, Showmax dropped the price of its main entertainment package from R99 to R89 per month as it aims to draw in more subscribers.
Prices had been expected to rise in line with inflation, competitor rates, a bigger content library, local content production and the group’s investment in the platform, among many factors. Showmax’s standard package had been the same since the platform was launched in 2015.
In 2023, prices for DStv increased by an average of 4.3%, which was below SA’s average inflation rate of about 5.8% for the year.
MultiChoice SA CEO Marc Jury explained the group’s ability to “hunt as a pack”, essentially joining forces and sharing costs, allows it to ramp up investment in technology and local content
— this is seen as a key differentiator — along with sport.
For example, much of the content library on Showmax comes from DStv, with certain programmes made by the streaming platform ending up being shown on MultiChoice’s broadcast services. This helps to reduce the licensing costs normally associated with getting film and television shows from big international studios.
The group has taken this even further with its new investor for Showmax, NBC Universal, which now holds 30% of the streaming platform. Mawela says the decision to have NBC Universal take over the technology helped to lower risk for MultiChoice, which had built its own platform in the first instance.
“What we have learnt over the years, which is why we ended up in Prague with about 150 engineers, was ... first of all, these people, it’s hard to find them. Secondly, they cost a lot of money. So, if we were to shoot the lights out and see subscribers [growing] the way we want, in our analysis, it was going to cost us the same amount of money.
“The biggest risk was: would we be able to find those engineers in the shortest possible time? The answer was simply no. We knew how long it takes to get them on site.
“We’ve got somebody that has syndicated and is successful in so many territories. They’re prepared to work with us, understand our territory and make a commitment to deliver. We had someone who had the capacity to do this thing. So we chose not to go on our own, having learnt the lessons that we had to get engineers on site,” he said.
The group’s investment in Showmax was R500m more than the previous year for the six months to September, mainly due to dual platform costs that it says will normalise once customers have migrated.
The new Showmax is powered by NBC’s Peacock technology.
While video streaming is still small in SA and the rest of Africa, the segment is growing. All SA’s big television broadcasters now offer online viewing options. eMedia has eVOD and the government-run SABC now streams its television and radio content through SABC Plus.