Netflix poses big threat to Naspers

Andile Masuku

THE GROUND is shifting in the world of commercial media and broadcasting. In the US, Netflix will soon have more active subscribers than all of the country’s cable television networks combined. Here at home, streaming and video-on-demand (VOD) are not growing nearly as swiftly, but it is definitely getting more competitive as home-grown heavies, ShowMax and Kwesé TV, look to fend off their massive foreign rivals, Netflix and Amazon Prime Video.

The online video-on-demand concept has skilfully harnessed the democratisation potential delivered by the internet to upset an industry that has profited grandly for decades, by relying on throwing billions of rands at maintaining monopolistic advantages like centralised distribution, and near-exclusive access to expensive cutting edge broadcasting technologies.

However, Africa presents a complex challenge for large broadcasting incumbents looking to service an ever-growing demand for content.

Lag behind Despite Africa continuing to lag behind the rest of the world in terms of internet penetration, the continent is steadily closing in on the global average in terms of smartphone adoption. Aided in part by lower mobile device prices, smartphone use in Africa doubled over the last two years.

By the end of 2015, 46 percent of the continent’s population had subscribed to mobile services.

That is equivalent to more than half a billion people – leading to speculation that hundreds of millions of Africans will completely leapfrog desktop computers, laptops, tablets, and even set-top boxes and television sets as they embrace mobile.

It is clear that these changes in Africa’s technological landscape are contributing majorly to the decline of the continent’s traditional broadcasting business.

It is telling that Bob van Dijk, chief executive of Naspers – the parent company of DStv – recently had to admit how badly their pay-TV business was doing.

Affordability DStv’s subscriber numbers fell by 288 000 in the year ending March 31, 2016.

Van Dijk cited affordability issues and foreign currency fluctuations as the reason for the decline in subscriptions, revealing that 70 percent of the company’s revenues were being generated by the group’s internet businesses.

A large chunk of that revenue was generated by Tencent Holdings; the wildly successful Chinese media company specialising in entertainment, web and mobile phone solutions – of which Naspers owns 34 percent.

Given this, and the fact that smartphone users on the continent now outnumber television owners by at least three to one, it is logical to infer that Naspers is wilting under the pressure of needing to innovate its offerings to navigate the global trend towards content consumption via the web as opposed to cable.

Part of that challenge is the need to adequately service Africa’s emerging mobile-first and mobile-only audiences.

This state of affairs might explain why DStv’s VOD subsidiary, ShowMax, is on the prowl for mobile telco partners that might help it hack growth.

Progress

Meanwhile, we are all closely watching the progress of Econet’s Kwesé TV, which might well flourish by leveraging access to the Econet Group’s mobile network footprint.

With Econet’s chairman Strive Masiyiwa promising that Kwesé will launch 60 channels across no less than 18 countries in Sub-Saharan Africa, it is quite clear that while the network remains committed to executing a primarily “mobile-centric” strategy, that will not stop them trying to capture a decent share of the continent’s traditional cable market – a market that DStv has dominated for decades.

Naspers would do well to watch their back.