Nigeria is a very fascinating country. We make rules that take us backwards in order to please our emotions that we are helping our people. But check deeper, those rules are meaningless. The latest is that Nigeria does not want exclusivity on new sports broadcast rights. Simply, if you have the rights to broadcast European football games, you are required by law to re-license to local TV companies.
It makes perfect sense since everyone has been looking for how to deal with MultiChoice’s DStv with its “high fees”. Why not force the company to allow NTA (Nigerian Television Authority) to broadcast the games, on free airwaves, for largely nothing: “This regulation removes exclusivity and mandates the sharing of all content upon the payment of commercially viable fees.” The “viable fees” is laughable because the budget of NTA will not get closer to help DStv cover its fees to the European football leagues.
Here is the fact: for decades, Nigerians were not watching European games live. The reason was not that those games were not played. What happened was no one was ready to pay for the rights to broadcast them. Then, amalgam of firms emerged, and we began to watch the games. HiTv did well, but the European leagues
jacked up the fees, and then it could not renew [as clarified below, it was the bidding process that inflated price, not necessarily EFL, English Premier League]. DStv stepped forward, with tons of money from its then alpha-parent company, Naspers – Africa’s largest on market cap – and paid the new amount. To compensate for the high fees, DStv raised fees on customers; a common sense business move.
Prof…a few points I would like to make. Firstly, the EPL never ‘jacked up the price of the right’ which forced HiTV to lose them. EPL rights are acquired through a bidding process and are sold to the highest bidder – there is no set asking fee. The fact is that it was HiTV themselves who ‘jacked up the price by making outrageous bids to prise the EPL rights away from SuperSport. It was a badly thought out strategy – overspending on rights before you’d built up a substantial paying customer base to support those costs. Before HiTV came along, SuperSport were paying just over $20 million a season for the EPL rights. HiTV won the rights with a bid of around $70 million. With the business already failing badly, HiTV tried to go for broke when the renewal of the rights came up 2 and half years later with an outrageous bid of $140 million!! Of course, they won again, but the whole thing collapsed a few days later when their funders declined to give them the bank guarantees required by the EPL to confirm the agreement. So the rights were then offered back to SuperSport.
Our government thinking is that DStv will pay the fees, and then re-license to local firms. That is possible provided the local firms can pay for it to cover its costs. I personally doubt that would happen. It is easier to cover the costs via subscribers than via local TV stations. To make that happen, exclusivity becomes critical. If NTA pays only 30% of DStv European costs, as re-licensing rights, and broadcasts all the games free, no one will sign up to DStv to help it cover the remaining 70%.
The Wrong Thinking
We keep thinking that DStv is the problem. Yes, partly, for its relative high margin, as reported in its financials. But the biggest challenge is that sports broadcast rights have been going up for years: “The cost of English Premier League broadcast rights has risen almost 8% to 9.2 billion pounds ($12 billion) for the next three seasons”. If you make it a direct correlation, it simply means that DStv should be increasing costs by 8% over the next few years. (That is not necessary since some of the rights are old).
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.
Largely, my point is that Nigeria is addressing a demand-supply relationship with rules that create distortions in the equilibrium point in ways that would destroy supply. As Samuel Nwite noted in this piece, there is a possibility that broadcasters would simply wait in Nigeria for the first company that would get the rights, and then ride on the rules to seek for re-license rights. Because no one would do that, the expectation is that Nigeria will return back to enjoying our local league games, with new kids growing to know players from Enyimba FC, Kano Pillars, etc. Provided Messi and Ronaldo would continue to be paid the annual budget of Abia state as salary, do not expect TV rights to go low. If that stays that way, never expect watching those games to be cheaper. Of course, if no one shows the games in Nigeria, the cost drops to zero for everyone!!