Icasa must act urgently to help local broadcasters compete with Netflix and Co
The past few weeks have been interesting and highly revealing for SA’s information and communications technology (ICT) sector. On the one hand, the Independent Communications Authority of SA (Icasa) has been praised for a successful spectrum auction that generated about R14.4bn for the national fiscus. The bidders — Cell C, Liquid Intelligent Technologies,
MTN, Rain Networks, Telkom and Vodacom — will likely be able to offer cheaper data packages and faster internet speeds to their customers.
On the other hand, in the broadcasting space, some global streaming companies, such as Netflix, Amazon and Disney, are seemingly salivating at potentially big investment returns in local content production.
On March 24, it was reported that Netflix had pledged more than R900m to SA’s creative industries at the fourth South African Investment Conference. According to Netflix, the commitment will cover four productions — one international and three local — which will be filmed in SA this year and next.
While Netflix’s investment is not large in relative terms, considering the billions companies such as MultiChoice and Showmax have poured into local content production over the years, it does indicate that over-the-top (OTT) players are setting up shop to be relevant, to compete in the local market.
Recently, global production powerhouse Disney announced that its streaming service, Disney+, would launch in SA on May 19 with a catalogue offering international and localised programming. In February 2022, Amazon went on a mega skills shopping spree to staff its Amazon Studios in SA to expand local production and presence.
In August 2021, eMedia, in partnership with MTN SA, launched its streaming service eVOD, stating it intended to develop local movies and series. In April 2021, MultiChoice’s Showmax indicated it would invest in creating local content for its audiences in SA and across Africa. In January 2021, TelkomONE invested R300,000 to produce three local web series aimed at growing its subscriber base.
Simply put, local content is king.
It is not irregular to propose that regulators, particularly Icasa, should recognise pointed movements in the market. Given the rising interest in the South African OTT space, it makes sense that Icasa formulates and adopts an evidence-based regulatory framework that characterises the disruptive effect of these players on the broadcasting landscape.
Movements in the market seem to indicate that
OTT players know that the future of audio and audiovisual content services lies in the internet-based linear and on-demand space. For another, it would seem to suggest that the competitive dynamics of the South African market have changed, and traditional broadcasters (particularly pay-TV) will need to work even harder to retain consumers.
Writing for News24, Sifiso Skenjana argues: “The expansion of OTT delivery systems, short-format user-generated content like TikTok, and the rise and growth of smart devices, bring new opportunities and layers of complexity in the competitive landscape for traditional broadcasters.”
It is not unreasonable to expect Icasa to invest in ensuring that regulation of the broadcasting market does not hamper the ability of local players to compete with global companies, which have limitless production budgets and tons of original and highly attractive content that will increasingly include more local content.
Thus far, it is unfortunate that the sector regulator has been reluctant to view the market within this prism one that more accurately reflects reality. One hopes that the delay in finalising the pay-TV inquiry is because the regulator is taking every step to embrace the fact that OTT players are slogging it out with traditional broadcasters for audiences.
Changed consumer behaviour increasingly favours OTT players, as does their global scale, huge financial power, bigger content libraries, declining data prices, streaming-ready speeds and, most importantly, the absence of a huge regulatory compliance burden of the kind that shackles traditional broadcasters.
I hope the regulator has an accurate grasp of the implications of its spectrum auction for the traditional broadcasting sector and the broader audio and audiovisual content services market.
For one thing, the licensing of spectrum will only intensify and entrench the dominance that Netflix has shown in terms of bandwidth consumption. It will soon be joined by giants such as Disney+ with the risk that, unless steps are taken to ensure parity and the burden on traditional broadcasters is eased, domestic players that create more jobs and contribute more to taxes will continue to fade.
Icasa needs to create a level playing field between traditional broadcasters and OTT services. First, and most critical, Icasa must conduct a holistic review of the regulatory framework to ensure it is appropriate for current and future market dynamics and that OTT services are brought into the regulatory net.
Under the current framework, OTT services are not under Icasa’s ambit, but it is recognised across the world that OTT services offer audio and audiovisual entertainment options to consumers. The difference between OTT services and traditional broadcasting services is mostly the transmission mechanism, where for the former the internet is the delivery technology.
In a world where content licences are technologyneutral, continuing to maintain regulatory differences in treatment is an outdated, artificial construct that needs to be resolved. A single licensing framework that applies to traditional broadcasters and OTT services, regardless of whether services are offered on a linear or nonlinear basis, is required; because nothing prevents OTT players from offering their services in both formats.
The country requires, before it is too late, a proactive, thought-leading, specialist regulator that looks after the long-term interests and sustainability of the sector.
Last, Icasa ought to review its existing regulations in light of future market dynamics and new technologies. For example, local content quotas on traditional broadcasters were necessary to avoid underinvestment. Given the important role that local content plays in maintaining viewership, it does not seem necessary to maintain this licensing requirement for traditional broadcasters.
Failure by Icasa to properly embrace changed market dynamics and adapt will raise the question of whether it is fit for purpose. I hope it is.