Icasa wants evidence streaming cripples MultiChoice revenue
THE INDEPENDENT Communications Authority of SA (Icasa) has yet to be convinced that streaming giants such as Netflix and Amazon are the reason behind MultiChoice’s massive loss in business.
MultiChoice, which operates DStv, claims it lost over 100 000 DStv Premium subscribers in its last financial year from the “unregulated” competition it faces from “over-the-top” (OTT) Internet streaming services like Netflix.
This was revealed by MultiChoice SA’s chief executive Calvo Mawela yesterday when he presented his argument to Icasa’s panel on the final day of the communications regula- tor’s public hearings, held from Monday.
The hearings were an enquiry into subscription TV broadcasting services.
Icasa is looking into addressing MultiChoice’s “market dominance” by further regulating it. However, MultiChoice has argued that if Icasa proceeds with more regulations, it will kill DStv’s business and hand the South African market to the online streaming giants.
According to MultiChoice, Netflix and other international streaming companies “do not pay tax” in South Africa, and also don’t contribute levies to organisations such as the Media Development and Diversity Agency or Universal Service and Access Agency of South Africa, nor do they pay broadcasting licence fees.
MultiChoice argued to Icasa’s council that it must not go overboard with regulations, and that whatever it implements should apply to the whole pay TV sector – including services like Netflix.
“We understand that OTTs have come in to the market and they have had serious growth and their revenue figures have substantiated that,” said Nomonde Gongxeka-Seopa, an Icasa panel member.
“What we are missing though is how this had an impact on the pay TV market, which you haven’t provided us with.
“You have provided us with graphs on how OTTs have affected pay TV stations in countries like the UK and the US, but we need research within the South African market to convince us that these OTTs are competing with pay TV.”
Icasa has given MultiChoice until May 31 to provide it with “empirical evidence” that there is a direct link between the presence of OTTs and its drop in revenue and subscriber numbers before they make a decision whether it will further regulate pay TV stations.
“We need to see that there is a direct link between the presence of OTT in and your revenue and your subscriber base in such a way they are really significantly impacting on the competition dynamics specifically for the South African market.”
Mawela warned Icasa that heavy-handed regulations for pay TV could cost thousands of jobs.
“Netflix will never employ a lot of people around the world like we have. It employs about 4 000 people for the whole group,” said Mawela.
MultiChoice has 8 000 employees in South Africa alone. He said most of its staff were black, and that most of the people it employs are women.
At the end of its last financial year, MultiChoice’s staff complement was 87% black, and 51% black women.
It is also a Level 1 B-BBEE contributor, paying R10.4 billion to black suppliers in the last financial year.
While there will be jobs for South Africans working in the broadcasting sector at multinationals like Netflix and Amazon, those companies won’t have the local focus MultiChoice does.
MultiChoice SA chief operating officer Mark Rayner believed that OTTs would fundamentally disrupt the pay-TV industry and that Icasa was not paying enough attention to these developments.
“The internet will fundamentally change TV and the audio- visual sector forever,” Rayner said.
“We are seeing a huge behavioural shift in the way people consume content.
“Audio-visual services are increasingly being watched on other devices, not TV sets.”
The “massive disruption” caused by OTT services in the pay-TV market “is similar to how OTT services altered the newspaper and music industries. It will happen very fast,” Ranyer said.
“This is something we worry about.
“This is what keeps the lights on at MultiChoice at night.
“This is changing our world forever.”
He said MultiChoice was facing significant new competition in the streaming space, not only from Netflix, but also from Google’s YouTube, Facebook, Apple, Amazon and others, and local services like Cell C’s Black and Liquid Telecom’s Kwese Play. He said Netflix would spend $8bn (R98.1bn) on content this year.
“That is unmatched by anyone else in the world.”
Icasa said MultiChoice needed to be aware of other factors that could have played a role in their loss of business.
“It’s possible that the economic climate in South Africa might have changed in that time and that is why you may have experienced a loss of subscribers,” said Botlenyana Mokhele, an Icasa panel member.
“For us to apply our minds based on the facts that are presented to support your argument, we need you to provide sufficient evidence,” Mokhele said.