Zim upstart draws line in pay-TV sand
Kwesé TV take on dominant MultiChoice
A David and Goliath contest looms for control of Africa’s growing pay-TV industry — tipped to be worth $6-billion by 2021 — which for a long time has been dominated by the Naspers-owned MultiChoice.
The new kid on the block challenging MultiChoice’s dominance is Kwesé TV, owned by Zimbabwean telecoms magnate Strive Masiyiwa, which has aggressively rolled out its service to 25 countries across sub-Saharan Africa.
Some of the countries in which Kwesé TV has operations include South Africa, Nigeria, Kenya, Rwanda, Ghana and Zambia as the new pay-TV operator spreads its reach far and wide across the continent, entering markets where MultiChoice has a presence.
Upsetting status quo
Through the acquisition of rights to broadcast niche sports channels such as NBAtv — through which the exploits of global basketball icons such as Lebron James are beamed across living rooms in sub-Saharan Africa — Kwesé TV has set its sights on upsetting the status quo in the pay-TV industry across the continent.
An industry insider this week said the acquisition and holding of exclusive sports rights was crucial in maintaining a high average revenue per user in the sector, as sports channels were a key draw for subscribers.
“Kwesé TV is investing in exclusive sports rights because sports competitions are programmes that people are willing to pay to watch, especially in sub-Saharan Africa,” the insider said.
Kwesé TV holds the rights for ESPN — which dropped MultiChoice in 2013 — and also holds rights for next year’s Fifa soccer World Cup in Russia.
Is MultiChoice feeling the heat from Kwesé TV’s strategy, which is to snap up exclusive rights? Increases to input costs Brand de Villiers, MultiChoice Africa CEO, said the immediate effect of new role players was an increase in content right fees due to the competitive nature of the bidding processes.
“This is most evident in the area of sports rights and causes massive increases to the input costs of a business — unfortunately these costs ultimately get passed on to consumers by the operator who purchases these rights,” he said.
MultiChoice’s foray into Africa has had mixed success, which will make it hard for the company to ignore Kwesé TV’s mission to upset the status quo.
Although MultiChoice enjoys scale, operates in 50 countries, wields 56% control of Africa’s pay-TV industry and has scooped up 65% of pay-TV revenue in the second quarter of this year, the rest of the continent is challenging terrain.
De Villiers said the commodity slump which had affected economies in sub-Saharan Africa had not spared the company.
“The abrupt end to the most recent commodity up-cycle has resulted in severe economic pressure, with numerous countries experiencing massive currency devaluations over the last few years. Like many other operators in these markets, we have been impacted by these economic factors,” he said.
Making a loss
Renier de Bruyn, an analyst at Sanlam Private Wealth, said MultiChoice was currently loss-making in the rest of Africa, with the exception the strong subscriber growth in South Africa, which was slanted towards lower-end packages.
Competition for sports rights forces up costs Brand de Villiers MultiChoice Africa CEO
“The material depreciation of African currencies over the past few years has pressured margins due to a large portion of MultiChoice’s content cost based in US dollars. Also, large investments were made to build a digital transmission network, but a delay in analogue to digital switchovers by governments across the continent has hampered the adoption of digital TV,” De Bruyn said.
But currency volatility is just one of MultiChoice’s challenges. It has also faced criticism in the court of public opinion over being expensively priced, its insistence on accepting US dollar payments, failure to unveil new content and perpetual repetition of programmes.
Media reports earlier this year suggested that Naspers could dispose of its pay-TV business and linked Africa’s largest mobile operator, MTN, to a possible purchase of the stake.
But Sa Eva Nebie, Africa and Middle East research analyst for Dataxis, a French-based global firm which specialises in telecom, TV and media business, said despite the litany of challenges faced by MultiChoice, the pay-TV business was still lucrative.
New challenges
“Even though we have witnessed the company cutting prices in some countries, it remains positioned as a premium service and contrary to many operators in the region is high average revenue per user. The reason why it can maintain a high ARPU is because of its dominance in English- and Portuguesespeaking countries,” Nebie said this week in an e-mailed note.
“Nonetheless, in the medium to long term, competition will intensify with the development of operators such as Kwesé and StarTimes. This market transformation will bring up new challenges for MultiChoice, including sports rights ownership and happens at a time when several key countries like Nigeria or Angola are facing economic turmoil correlated with the fall in oil prices.”
Other key players in the Africa pay-TV business include Canal+ (which has 15% of market share), Zap (6%), Azam TV (2%) and Zuku (2%).
Massive investments
The pay-TV industry in Africa presently accounts for $4.7-billion in revenue and payTV viewership increased to 23.7 million in the second quarter of this year, an 18% increase from 20.2 million in the same period in 2016.
Of the potential $6-billion in revenue that the industry could be raking in by 2021, Kwesé TV is intent on scooping up nearly a third, as it massively expands into sub-Saharan Africa.
A dominant factor in the growth of the pay-TV industry is the boom the continent is undergoing with massive investments in internet connectivity and a steady migration to digital terrestrial television.
Kwesé TV has subscription options of three days, seven days and for a month — priced at $5, $9 and $29 respectively.