MultiChoice asked for a tougher regulation in South Africa because it was losing some of its best customers to Netflix. It wanted Netflix to be subjected to the same local rules it deals with. Of course, that would not happen since the South African regulator does not have full control of Netflix. It is one of the new challenges local companies would face in the age of internet where the unconstrained and unbounded web distribution structure makes it very challenging for global portals to be regulated in their favors. That was the thesis of my recent article in Harvard Business Review.
The pay-TV operator lost more than 100,000 premium subscribers in the previous financial year. It has lost a further 40,000 subscribers to date.
Whether we like it or not, MultiChoice, the parent of DStv and GOtv, is weeping. It may not be obvious but that does not remove the fact that the company is going through an industry redesign. Its market positioning is being challenged not by local competitors like TStv and KweseTv but by global internet portals like YouTube, Netflix and Facebook. In short, anything that engages people to avoid watching TV is a threat.
It is very intriguing when monopolies weep. It makes nice sound bites except that monetary values are lost, and jobs are always at risks. Many months ago, when TStv launched, with statements boasting of disruptions, I laughed. I called it a Goliath’s challenge, reminding Tekedia readers that TStv has no chance. MutiChoice through clusters of its properties are experts on dealing with distractions like TStv: it has GOtv to take care of TStv and if the Nigerian newbie elevates its game, DStv is there. But there is a competitor from the flank: Netflix.
Nigeria’s Consumer Protection Agency
MultiChoice increased the prices of most of its packages. The consumer protection agency in Nigeria took them to court in Nigeria. MultiChoice has been seen as a monopoly which means it cannot just increase price arbitrarily. The logic makes sense but when you go deeper, you would notice that even MultiChoice will ask for help: can Nigeria’s regulator also stop Netflix from increasing prices for its (Netflix) Nigerian customers?
A Nigerian Court has stopped DStv from increasing its prices in the nation. In July, MultiChoice, the owner of DStv, announced new monthly subscription rates, jacking up the Premium package by 7.5%; the new rates took effect from August 1. The consumers cried foul and sought help from the Consumer Protection Council, a consumer protection advocate funded by government, making a case that MultiChoice was exploiting Nigerian consumers
There is a real argument here when you consider that a local competitor, TStv, has essentially confessed that it was thoroughly beaten by DStv. The implication is that many would think that DStv has a solid positioning that it has to be brought to order.
MultiChoice Nigeria has appealed the temporary court injunction which froze its price hike. The company does believe that the new prices can stay (being the status quo, in its interpretation). Now, the Consumer Protection Agency (CPC) will have to argue in the Appeal Court. I expect this case to reach the Supreme Court of Nigeria.
Multichoice Nigeria, owners of DStv and GOtv, says it has filed an appeal and stay of execution following an interim court order from the Federal High Court directing the company to stop the hike in its subscription rates.The company, in a statement on Sunday, said the Consumer Protection Council had also been joined in the suit.
The cable company described the order, restraining it from effecting price changes, as a slight on the free market economy.
This is going to become a very important legal battle and will help to shape the understanding of the new global economy in the Nigerian market for some of our regulators. Our regulation is still operating with the industrial age framework.
The Main Issue
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.
I expect this case to end in the Supreme Court, and during oral arguments MultiChoice will make its case clearer to the Justices. It needs to explain that its competition is not bounded within the Nigerian geography. And that it has to pay and save money to acquire the TV rights which attract people to it. I do think MultiChoice is working to take this all the way unless Appeal Court gives it a better landing. At the end, the court will side with MultiChoice though they would ask it to reduce the increase a little.