Iroko cuts 150 jobs in Nigeria, other African countries to checkmate losses
Nigeria’s video streaming service, Iroko has kicked off a companywide lay-off this week that would affect 150 jobs across its offices in Africa including Nigeria. The company would also be reducing its investment focus on the continent as a measure to contain losses.
As a soft landing for the affected workers, the company said it is speaking with a number of companies that are keen on recruiting its trained telesales agents.
“We are still working on the numbers. The ambition in this terrible job market is to try and give our departing teams the best odds of success in what is, unfortunately, one of the worst job markets in decades,” Jason Njoku, founder and CEO of the company said in a statement.
The company will now focus on North America and Western Europe where it has recorded the highest average revenue per user (ARPU), with 80 percent of revenue coming from the regions.
Njoku projects that by taking out Africa growthrelated costs, the company is reducing $ 300,000 per month in expenses to only about $50,000 per month.
“Still high, but once things normalize we should have a clear path to free cash flow + profits in 2021,” he said.
Iroko’s business has been severely affected by the COVID-19 pandemic. The company’s fortunes began to head downhill in April when revenue dropped to 70 percent. This also affected the agents’ productivity. The company distributed its content through a network of agents who earn commissions. While April saw the peak of productivity, it began to decline in May and continued till July.
With an i mminent loss facing it, Iroko tried its hands on productivity hacks, shrinking the team sizes, and increasing the supervisors. They were all futile including its work from home policy.
“We couldn’t adjust prices as the primary aim was to defend revenues and cash flows, so cutting subs revenues and vanity subscribers were not going to contribute to salaries come month’s end, nothing really worked. Internationally, we were effortlessly growing. All of the macro and individual issues plaguing West Africa were essentially not major issues in the West,” Njoku said.
Iroko’s challenges may have also been accelerated by growing competition in the on-demand streaming service market.
Although the COVID-19 forced a lockdown and many people took to digital platforms such as Zoom to conduct their business video-on-demand services like Netflix also reported massive downloads and new subscriptions. Netflix also expanded its service in Nigeria, forging alliances with several Nollywood producers including Ebonylife TV in June.
The alliance requires Ebonylife TV to adapt two literary works by authors Lola Shoneyin (The Secret lives of Baba Segi’s Wives) and Wole Soyinka (Death and the king’s Horseman) into a series and film respectively. Netflix also announced that Abudu’s company will produce two yet unnamed original shows, licensed films, and another series.
Following its deal with Netflix, Ebonylife TV announced in July - the next month - it was going to pull the plug on PAY-TV platform, DSTV to begin life as a video streaming service. It finally left DSTV in August. Although it is yet to fully launch its streaming service, Ebonylife TV is believed to be planning a massive onslaught on the market that will see it grab significant market share.
Iroko is also fending off unwanted advances from Nigerian regulators who recently released a new guide that mandates the sharing of licensed content with other platforms. Jason Njoku has been a vocal critic of the new code released by the National Broadcasting Commission (NBC). Earlier in August, the authorities accused Njoku of not investing in Nigeria.
“The involvement they do is like a creative investment that allows them to take artistic, cultural materials, original to the Nigerian people and export, maximize the profit, suck it out Nigeria, and still take abroad,” Armstrong Idachabe, directorgeneral of NBC said during a show on Youtube.
Njoku also suggests the naira devaluation has had an adverse effect on Iroko’s revenue. The exchange rate crisis in Nigeria has seen prices of its subscription plans not able to cover the costs of the services. It has faced a similar situation in 2016 and 2017 when devaluation led its N3,000 subscription to drop to $8.33 ( 360/$). The situation is worse now that the naira is trading at N477/$. N3000 subscription now amounts to $6.3. Njoku does not see the naira getting any stronger in the short term.
“Some are saying it is just starting and will end up at 550-600/$ before year’s end. What we are seeing now is distorted as the access to FX has been cut off for almost 6 months. A lot of our costs are in dollar - AWS, tech tools, etc.,’ he said.