MultiChoice — it’s in the name
Subscription video on demand (SVOD) is the media distribution model that a group like Netflix has historically played in. The world also has AVOD, which is advertising-supported (a tier that Netflix is now using in addition to SVOD) and transactional video on demand (TVOD), which is essentially pay-per-view.
Acronyms aside, the world of media has changed rapidly in the age of the smartphone and uncapped internet. It really wasn’t that long ago that BlackBerry Messenger dominated instant messaging, as people were thrilled to be able to chat to their friends more often without using up SMS balances. Then along came WhatsApp and everything changed. Similarly, streaming changed the game completely for content delivery and how we consume video.
The days of waiting all week for your favourite movie and then suffering through ad breaks are very far behind us. Consumers have been spoilt with on-demand services and there’s no going back.
The only limiting factor here is access to broadband internet, as this separates the haves from the have-nots in terms of access to streaming services.
MultiChoice knows this and so do the company’s investors, with concerns over the future of the DStv subscriber base. Not only are higher-income households moving off the platform entirely, but those who remain on the platform are demanding more aggressive pricing from DStv to compete with Netflix and Disney+.
The sports broadcasting rights have historically been the key differentiator, as you can’t watch the latest Springbok game on Netflix. Ironically, Drive to Survive on Netflix did incredible things for Formula One, yet you can’t watch any of the races on that platform, either.
The next phase in the streaming wars will surely be based on sport. Netflix missed a trick of note with Formula One. While few could’ve predicted the success of Drive to Survive, the biggest beneficiary has been the sport itself, with Liberty Media Corp (which owns Formula One) reaping those rewards. Netflix should’ve put in place some kind of streaming deal with Liberty, linking the live sport to the popular documentary. Hindsight is perfect, I guess.
Instead, Formula One backed itself (quite correctly) to have sufficient global relevance to justify offering its own direct-to-consumer platform. F1 TV Pro is an excellent product (I’m a subscriber), with South African pricing coming in at a level where an annual subscription is significantly cheaper than a month of DStv Premium.
It has proved to be very popular here and around the world, something that SA Rugby has surely noticed. Would you use a pay-per-view model to watch the Springboks? I know I would!
Strategic advantage
With its core DStv business under attack from practically every angle, MultiChoice needed to do something to show investors that the business can transition from being a satellite operation into a next-gen media outfit. Showmax has been fulfilling that role, with MultiChoice executing an interesting strategy of targeting DStv subscribers. That seems counterintuitive, as Showmax is arguably an alternative to the DStv bouquet delivered over satellite. Nonetheless, the “add to bill” approach took friction out of the process for DStv subscribers to join Showmax and it seemed to work.
In the latest interim period, Showmax grew its subscriber base by 50% year on year. Driving this growth is a strategy around Showmax Originals (content you can’t get elsewhere) and a distribution partnership with Disney+. It’s clear that DStv has been incubating this business and experimenting with different content and distribution strategies to figure out what works.
MultiChoice has a significant strategic advantage in local content. This is a challenge for Netflix, which spends an absolute fortune trying to create content that resonates with audiences across the globe. This creates an opportunity for regional powerhouses to stand a chance against the US giant.
But to truly compete, the best international shows and access to leading sport events will be needed. In a big step towards securing its future, MultiChoice’s new deal with Comcast looks solid. With access to an extensive library of global movies and series, plus the all-important relationship with Sky for the English Premier League, MultiChoice will retain a 70% stake in the “new” Showmax and Comcast will come in as a 30% partner. The dark horse here is Canal+. With a stake of more than 30% in MultiChoice, the French media giant remains something of a mystery. Will French content be the next step in the Showmax dance?