Great comments in our community on the MultiChoice (parent of DStv), Netflix and Amazon partnership. Some have called it a guerrilla warfare or battle; nothing like that though. In ancestral Africa, when three clans fight one another at once, be informed that a festival is taking place, not a war of strategic value. In other words, for Amazon and Netflix to fold parts of their African strategies into DStv, they want to improve margins in the easiest ways possible. DStv distributes the goods in Africa, while the American firms provide regular supply from their production studios. Expect Disney+ to join in coming years once it settles in the U.S. and Europe. Simply, DStv plans to become an operating system for video distribution in Africa, as a super-aggregator.
From the comments also, many do think that MultiChoice (DStv, GOtv) is a monopoly. While I do not sanction anti-market prices, it is important to note that MultiChoice’s raw materials – the European football- are free products for anyone to bid, and the company is not the primary producer with no apparent moat against anyone bidding. I have looked at the numbers, from an independent angle, the price growth in DStv has trail-correlated with TV rights costs in Europe. According to Statistica, revenue from Premier League broadcasting rights was $3 billion in 2013-2016; for 2016-2019, it shot to $5.1 billion. That is the raw material which DStv sells. Yes, it has gone up by close to 70%.
Raise your hand if you would not increase price when your raw material has gone up by 70%. If you did raise a hand, you are running a charity and once your funds finish (or your donors get tired), you would close shop. DStv is not running a charity and the 15% increase Nigerians experienced during that time might have happened because the company possibly got a discount as it was always the only one bidding for Africa! So, European football has to dance or it misses the revenue altogether.
Nothing stops companies like NTA, Channels, AIT, etc joining the bidding. My point is simple: anyone that holds these rights would at the end ask to be paid to recover its investments. Where we think we cannot take it, Enyimba, Rangers, Kano Pillars, etc, are still there.
So, when I read statements that Nigeria wants to force video entertainment companies to sub-license contents to competitors at a regulated price, you would ask, Why Not Ask Those Sub-firms to Go and Bid in Europe. So, DStv buys at say $100 and Nigeria will demand it sells for $50 knowing fully well that value makes sense when supply is not unbounded? Does not make sense to me how DStv will return in three years to pay Messi and C.Ronaldo equivalent of Abia State budget to keep them happy, kicking a round leather. Nigeria needs to live on FACTS as we make policies!
But DStv’s ambitions in Nigeria might hit a major wall if the new broadcast code by the regulatory commission goes into effect. The new code will prevent pay-TV and streaming platforms from making content exclusive and compel them to sub-license content at prices that it will regulate. (TC Daily newsletter)
Read more on this old piece where I explained further.
If MultiChoice does not increase rates, it has no business in Africa. It is irrelevant if the price in Nigeria is higher than what it prices in Ghana. It has made it clear that running a business in Nigeria is higher because it runs generators and hires private guards unlike in other economies where those are readily provided by governments.
The key reason why MultiChoice is increasing the price is thus: it is losing its best subscribers and to cover and service the loans it took to pay for the TV rights which have made it the best Pay-TV product in Africa, it needs to ask existing customers to pay more, and because TV rights are always going higher it has to budget more for the next cycle of licensing.
In other words, if it loses the most premium customers, it will not have enough money to pay for the TV rights. And if you ask it not to increase the prices on the existing customers, you have technically frozen its business. The product it sells was not created by it: England Premier League, Serie A, La Liga, etc decide their TV rights prices. As these brands continue to increase rights, and MultiChoice continues to see its customer base disintermediated, expecting it to keep prices static is not fair. What the court should have done is to demand that those selling TV rights freeze price increase and those leaving MultiChoice brands stop.