Soft­en­ing the blow

Finweek English Edition - - Companies & markets - BELINDA AN­DER­SON

M-NET HOPES THAT pro­gram­ming ini­tia­tives that it be­gan putting in place two years ago in prepa­ra­tion for los­ing its freeto-air two-hour win­dow, Open Time, will “at least” halve the rev­enue knock it an­tic­i­pated would be the case with­out any changes.

CEO Glen Mar­ques says M-Net had faced the choice of in­vest­ing in new con­tent or cut­ting costs to mit­i­gate the loss in rev­enue. It chose the for­mer. Open Time ended on 31 March.

Mar­ques said M-Net could have lost be­tween R80m and R90m in rev­enue (more than the R60m it thought at the time of the rul­ing against it) from re­duced ad­ver­tis­ing in­come due to lower sub­scriber num­bers be­tween 5pm and 7pm. But it hoped the cre­ation of an­other new soap – Bin­nelanders – would boost view­er­ship and even at­tract new sub­scribers.

Mar­ques says that could be con­sid­ered a risky strat­egy, as a new soap re­quired sig­nif­i­cant in­vest­ment. Bin­nelanders was also in com­pe­ti­tion with the highly pop­u­lar SABC soapie Sewende Laan but, so far, M-Net has been pleased with the re­sponse to its new se­ries.

M-Net re­cently moved Bin­nelanders into a daily half-hour slot af­ter mov­ing Egoli from its hour-long slot on Thurs­day evenings. With Open Time in place, M-Net used the 5pm to 6pm slot as a “pro­mo­tional win­dow” for pro­grammes on some of the niche DStv chan­nels, such as kykNet and GO. How­ever, most view­ers would in fu­ture have ac­cess to those, says M-Net, so it would from now on re-screen the pre­vi­ous evening’s Prime Time se­ries for those who missed it the night be­fore.

By clos­ing its Open Time win­dow – started in the early days to help M-Net build its sub­scriber base – and in the run-up to com­pe­ti­tion in the pay-TV space, Mul­tiChoice cre­ated a DStv “lite” op­tion for sub­scribers. The op­tion – DStv Com­pact – costs R199/month for 26 chan­nels plus an hour of Egoli and Bin­nelanders ev­ery week­day. The full ser­vice of­fer­ing – DStv Pre­mium – costs R439,90/month for more than 70 video and au­dio chan­nels.

Mar­ques says though it’s still too

early to tell, it will be watch­ing view­er­ship pat­terns closely to see if its strat­egy is pay­ing off. It also hopes to lure new sub­scribers.

Mul­tiChoice, M-Net’s host plat­form, had 1,3m sub­scribers in SA at end-Septem­ber 2006 (par­ent Naspers has just closed out its full-year pe­riod to end-March and will re­port on the latest num­bers in June). Both the com­pact of­fer­ing and the num­ber of PVR sub­scribers had reached 65 000 at that stage.

Naspers is ul­ti­mately M-Net’s con­trol­ling share­holder (also Fin­week’s par­ent com­pany) and should soon own al­most all of the shares in M-Net and Su­perS­port if SA’s com­pe­ti­tion au­thor­i­ties give it the thumbs up for the ac­qui­si­tion of John­nic Com­mu­ni­ca­tions’ 38,65% stake.

M-Net had two years to pre­pare for the loss of Open Time but was warned as early as 2002 that the reg­u­la­tor would re­view its li­cence con­di­tions. An Icasa process de­cided the fate of the free-to-air win­dow in June 2005 af­ter the SABC, and Cax­ton lob­bied for the win­dow to be closed. They said it gave M-Net an un­fair ad­van­tage as far as ad­ver­tis­ing rev­enues were con­cerned.

Icasa chair­man Mandla Langa said at the time of the rul­ing that though many of the 248 000 free-to-air view­ers who watched MNet dur­ing Open Time would prob­a­bly be dis­ap­pointed, as 41% of those fell into the up­per in­come band of con­sumers, they could eas­ily af­ford an M-Net sub­scrip­tion.

The De­part­ment of Com­mu­ni­ca­tions (DoC) re­cently re­leased a dis­cus­sion doc­u­ment on its plans to mi­grate from an ana­logue to a dig­i­tal ter­res­trial TV en­vi­ron­ment. The doc­u­ment sug­gested that the process of li­cens­ing new pay-TV play­ers should be put on hold un­til af­ter that and gave the in­dus­try two weeks to re­spond to its pro­pos­als.

That sug­ges­tion pro­voked much con­ster­na­tion. Cax­ton jour­nal­ism Pro­fes­sor at the Univer­sity of the Wit­wa­ter­srand, An­ton Har­ber, wrote in a col­umn in Busi­ness Day that the in­dus­try was “reel­ing in shock” at the min­is­ter’s barg­ing in on Icasa’s li­cens­ing process and treat­ing with “con­tempt” those who wanted to in­vest bil­lions in SA’s me­dia in­dus­try.

But DoC spokesman Albi Modise says the doc­u­ment is “not sacro­sanct” and will take the in­dus­try views and those of other rel­e­vant play­ers into ac­count. The DoC had no in­ten­tion of dis­rupt­ing the pro­cesses of the reg­u­la­tor and wouldn’t put the pay-TV li­cens­ing pro­cesses on hold if in­dus­try and other rel­e­vant play­ers dis­agreed strongly.

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