‘We’re not replacing MultiChoice’
Innovative streaming service promises to produce more original, local entertainment
● Netflix CEO Reed Hastings revealed in an interview with Business Times in Los Angeles this week that the world’s biggest videoon-demand (VOD) player had no intention of challenging one-time Naspers subsidiary MultiChoice’s dominance of live sports broadcasting on the continent.
“Other firms will do sport and news; we are trying to focus on movies and TV shows,” he said. “There are a lot of areas that are video that we are not doing: sports, news, video-gaming, user-generated content. We don’t have live sport,” he said.
The emergence of Netflix among other VOD operators has disrupted SA’s media landscape and in particular the dominance of pay-TV operators such as MultiChoice in recent years. MultiChoice, which recently listed on the local bourse, has seen a decline in subscribers in its Premium segment as consumers have either chosen cheaper options or cut the cable altogether in favour of internet-based offerings.
Since listing at the end of February, MultiChoice shares have gained just under 15%, compared to a 0.3% rise in the JSE all share.
Hastings is no stranger to Africa. He has travelled throughout SA, taught maths in Swaziland for two years with the Peace Corps, and visits close family in Maputo. So he is keenly aware of the South African entertainment and connectivity landscape.
“We’re not replacing MultiChoice at all. They serve a need that’ s independent of the internet, via low-price satellite. There is no intention of capturing that audience. If they’re growing, it’s because they serve a need.”
Though Reed ruled out any collaboration with MultiChoice on its satellite delivery platform, despite collaborating with another pay-TV service, Sky TV in the UK, he did not close the door. He stressed that Netflix saw itself as an internet-based service, and would pursue the opportunities offered by evolving broadband in Africa.
“If you look in other markets like the US, how Comcast carries us on set-top boxes with their other services, it could happen with MultiChoice, the same as with all the pay-TV providers.
“We’re really focused on being a service over the internet and not over satellite. Our service doesn’t work on satellite. Where we work with Sky is on internet-connected devices. We’re happy to work on internet-connected devices. We tend to work on smart TVs, but need broadband internet for that.
“Broadband is getting faster in Nigeria, Tanzania, Kenya and SA — we can see the positive trendlines — so it’s more likely we will work with broadband internet companies.”
Hastings firmly believes that one content provider’s success does not depend on pushing another down.
“HBO has grown at the same time as we have, so we can see our success doesn’t determine their success. What matters is amazing content with which the world falls in love.”
SA saw its first home-grown Netflix original, a quasi-superhero series called Shadow, debut this month, following closely on the heels of Nigeria’s first original, a comedy series about business succession, called Lionheart.
‘What matters is amazing content with which the world falls in love’
At this stage, says Hastings, there is no clear indication of what kind of content from this continent would work on Netflix.
“I would say it’s the content buyers taking guesses. If they’re right, we will do more content like that. Our members today watch everything; it’s not very different from country to country. We have a global service and then we’re adding some local content. We’ve got an economic incentive to do local content, because that helps us grow.
“We’re trying to figure out what shows serve our members best, and we’re doing that in Japan, Turkey, SA, Egypt and Jordan. We’re trying to curate great content from around the world.”
In the next five years, says Hastings, Netflix can be expected to have more original content, and far more of this will be local.
“We will be more global than we are, less US-centric, with significant productions in many countries of the world, and a lot more sharing of the world’s best content.”
Most significantly, says Hastings, we can expect more Netflix in Africa, and more Africa in Netflix.
We are good at finding audiences that are much bigger than any storyteller has been able to find before Greg Peters Netflix chief product officer
● It may have started out as a better way to rent movies, but now Netflix is revolutionising the US film and TV industries. That’s not news. The next big shift, however, is likely to be the transformation of content production worldwide, and Africa is squarely in the Netflix sights.
Netflix chief product officer Greg Peters told Business Times in Los Angeles this week that SA and Nigeria were among the many key markets in which it expected to make significant investments in content.
“We’re looking to increasingly find storytellers from around the world, especially ones who haven’t been able to tell the story they want because traditional production partners are not willing to tell it, or they can’t find a big enough audience,” he said.
“Our job is to provide a platform, both a production platform and then a distribution platform, because we are really good at finding audiences that are much, much bigger than any storyteller has ever been able to find before.
“We’re going to invest in every part of the world, including Africa.”
Peters emphasised the need for fresh stories, as opposed to those that repeated traditionally popular formulas.
Compelling stories
“We feel like it’s exciting that we don’t have a lot of restrictions. We want compelling stories, a strong vision, authentic storytelling, that can come from a whole different range of formats. To open up storytelling in ways that were not opened before.”
Peters was speaking at the end of a twoday Netflix event called Labs Day, which exposed a small group of media from around the world to the inner workings of the business.
Peters revealed that, when he joined Netflix in 2008, he was one of just eight people working on streaming. At that stage, the company was making most of its money from distributing movies on DVD through the mail, with subscriptions and orders managed entirely on the web.
Netflix was founded in 1997 to address CEO Reed Hastings’s frustration with fees for late returns of rented movies on VHS tape. A $40 (about R570) fine that global video rental leader Blockbuster charged him for the late return of the Apollo 13 video is regarded as one of the most expensive customer-service mistakes in business history.
Within 10 years, Netflix was driving Blockbuster into bankruptcy — even before the newcomer moved into streaming.
It had quickly switched its business mod- el from the traditional movie-rental approach to one based on an unlimited subscription, and that proved to be ideal for the fledgling streaming team.
“You could fit all of us into one small conference room. But we had this dream of bringing it in a way that was easier, more accessible, faster for our members to connect with by using streaming,” recalled Peters.
“That was a lofty dream, but back then we sort of had humble beginnings. We were only available on the PC. That was the only place you could stream content. The kind of content we had, which was, frankly, quite limited at that point in time, was just licensed content, and we were only available in the US.”
Gradually, more content was added. More devices were added. Within two years, the streaming business was ready to expand internationally.
“We launched first in Canada and then in Latin America, and then moved to Europe in 2012 in the UK and Ireland, and expanded from there until about three years ago. We actually launched in one day in 130 countries, making us available in 190 countries around the world.
“While we were expanding internationally, we were also growing our capabilities as a content producer from six years ago when we launched, first, House of Cards, to today where we are producing content, shows and movies around the world in over 30 countries.”
Peters headed international development at Netflix before taking on his current role. In that capacity, he oversaw its global roll-out, including the day of the streaming big bang, January 16 2016, when it went fully global, and also arrived in SA. That global sensibility today helps drive his product focus.
“We have more than 139-million members around the world. The majority of those members are from outside the US, and that ratio is going to get bigger and bigger in the years to come.
“And you see that shift also in the kind of original programming that we are doing. You’ll see more of these shows from around the world.”
For traditional pay-TV providers such as MultiChoice’s DStv, this strategy poses a far bigger challenge than endless TV series and cheap binge-watching — which already pose a massive threat in themselves.
Years ahead of DStv
Though DStv has rolled out massive infrastructure to support more than 13-million satellite subscribers across Africa, Netflix is able to leverage the networks built by numerous internet service providers and mobile operators.
It uses the world’s leading cloud computing platform, Amazon Web Services, to achieve global roll-out, instant updates and instantly localised content.
This means that, in technological flexibility alone, it is years ahead of DStv. The SAbased service is responding rapidly to the challenge, building on its own streaming services, Showmax and the DStv Now online version of its regular bouquets.
But MultiChoice also recognises the need to compete more aggressively in streaming, particularly once the next generation of mobile connectivity, 5G, becomes widely available across Africa.
More specifically, it must compete in the arena that Netflix is now making its playground: original content.
Already, the US company has aired its first South African Netflix original, shortly after acquiring its first Nigerian production. And this is just the beginning, as Netflix begins to make these two key MultiChoice markets its own.
Said Peters: “We’ve actually built a home for the world’s best artists to do their work and then to connect that work with audiences in a way that’s never been possible before. And we’re really at the earliest stages of what we can do, what we can bring to both our members, consumers, as well as creators.”