It is evidently clear – the future of entertainment is online. Typically, technology-fueled behavioral trajectories begin in developed economies [they are always invented therein], and then ripple to developing ones. The penetration latency is always less than half a dozen years for most consumer categories. So, the report from Deloitte that for the first time, more people pay for online streaming service than subscribe to traditional pay TV, in U.S., is a big deal. From the report, 69% of consumers pay for Internet video versus 65% for cable or satellite TV. In total, 43% of all U.S. consumers do the combo – subscribe to both pay TV and Internet video. People who pay for online video typically subscribe to three streaming services, based on Fortune summary.

Cord cutting, or people dropping their cable or satellite TV in favor of online video alternatives like Netflix, has reached a critical milestone. For the first time, more people pay for a streaming service than subscribe to traditional pay TV, a new survey has found.

Sixty-nine percent of consumers pay for Internet video versus 65% for cable or satellite television, according to consulting firm Deloitte, which published the report on Tuesday. The proportion of people paying for Internet video has skyrocketed while the proportion on traditional pay TV has dipped in recent years. Just 10% of consumers streamed in 2009, rising to 55% last year. Pay TV subscriptions hovered above 75% for years, but Deloitte said they changed how the question was asked since last year’s survey.

As this inflection point arrives in key DStv African markets, it will have to do real battle to thrive. Do not expect it to be easy because the winner in this game will be a company that delivers the best product at the lowest possible cost. Yes, scale matters and winner-takes-all applies here. So, Netflix is a major threat in the horizon and that is why DStv is making noise and weeping when necessary for help from regulators in Africa. Of course, DStv is also transitioning online because it knows that when broadband price drops, most will receive their entertainment needs via the web.

The problem MultiChoice is facing today with the loss of subscribers is not really about Netflix. Simply, MultiChoice knew that the trajectory of entertainment was moving online and will continue to do so. Online is going to become the equilibrium state of “view entertainment”. Yet, MultiChoice did nothing. It is typical; I called it the monopoly hangover when I wrote about Interswitch. These entities are making so much money in the present model to creatively destroy it. Typically, someone else has to do it for them as that is the only way they can wake up.

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For the incumbents like DSTv, the major challenge at the beginning of potential disruption of their business usually hovers between ignorance and defiance, especially when the current model is bringing huge revenue.

The old mantra of “when isn’t broke, don’t fix” has remained engrained in their mentalities, so the inertia is real. It has now become clear that in the era of knowledge economy you can actually begin fixing, before it breaks; because these days business models don’t just break, they collapse!

DSTv has big advantage over Netflix in terms of winning markets across Africa on streaming services, just by leveraging on its customer base and transitioning them ‘seamlessly’, but it requires a lot of spending and willingness to fix what may not be technically broken at the moment.

What brought you success in the past may not be enough to guarantee your relevance going forward, herein lies the real hangover.

When Naspers’ MutiChoice (DStv, GOtv) Weeps Over Netflix

Date: 1997.

Let’s assume you are a consultant helping a small American bookstore on strategy. The store has $10,000 it wants to invest on expanding its bookstore.

But at the same time, a startup is going public. That firm is named Amazon.

You have two options:

• Put that $10,000 on Amazon shares
• Invest the $10,000 to expand the bookstore

What will you do?

Date – 2018

A $100 invested in Amazon in 1997 would be $120,000 as of 2018. So, the $10k for option #1 would have brought in $12 million for the bookstore if it abandoned the whole idea of running a shop.

The second option would have been bankruptcy since bookstores in most American cities are only available in museums. Yes, he fought but Amazon was too much!

Commentary

This insight came to mind when I visited a big mall in Pennsylvania USA yesterday. This is the picture of a mall that used to host thousands of cars on a weekend [you can see JC Penney there]. It was unbelievable how Amazon has dislocated the mall system – they even turned off the traffic lights because the limited cars coming to showrooms have no need for same.

Yes, the malls are showrooms – you want to buy a refrigerator in Amazon but you want to feel it physically in JC Penney before you click submit in Amazon.

A huge lesson as AI begins its journey into markets and industrial sectors: it may make sense, in some cases, to just save that money and put it in entities that make sense over trying to fight for fighting sake. May your antenna be alert to know when dislocations are happening to avoid taking the second option!

Last year, we told a real estate firm in South Africa to redesign its new mall plan to make it possible, in deep future, to serve as a residential estate in case ecommerce causes paralysis in South Africa. So, the new mall has an element that if malls business begins to crash, the properties can be easily retrofitted into a residential estate.

 By Nnamdi Odumody

As part of the reforms aimed at opening up the Chinese economy, a free trade port is being established at the Shanghai Free Trade Zone. A Free Trade Port is a port that capital, goods and people can enter and exit freely within a national territory and is exempt from custom duties and taxes.

In the Free Trade Port, Offshore Trade will be implemented. Unlike Entrepot trade, the latter does not need the goods transportation pass system from the port of transshipment. The companies operating offshore trade could do business without the limitation of a transshipment port. Offshore trade will decrease the cost of international trade operators.

October of this year, the 19th National Congress of the Communist Party of China (“CPC”) was held in Beijing. The General Secretary of the CPC, Mr. Xi Jinping, announced a very ambitious development plan for China for the coming thirty years. He declared that China will stick to the “reform and open-up” policy. Hence, the government will give more reform power to the pilot free trade zone, and will explore the possibility of establishing a free trade port in China.

On November 10th, Mr. Wang Yang, a member of the Politburo Standing Committee of the CPC and the Vice Premier of the State Council, published an article in the People’s Daily (an official newspaper of the CPC). Mr. Yang defined the free trade port as a special area that is located within the national territory and outside of the customs; goods/capital/people can enter and exit freely.

In addition, most goods are exempted from duties and taxes. This area is a special economic function area at the highest level for an open process. It means that China will use more international and professional standards to establish the free trade port soon.

Offshore Finance is also expected to be part of the operations carried out in the free trade port. The offshore finance policies will include relevant measures to improve convenient procedures for capital flow, optimize cross border capital service for renminbi and other foreign currencies, enhance the innovation on cross border renminbi finance products, and facilitate the new out border finance model.

Nigeria Needs More Ports

The Lagos Ports are over congested causing the nation economic losses in billions of naira daily. Eastern Ports could provide a viable alternative by redesigning them as Free Trade Ports.

The Onitsha River Port which was built in 1983 by the President Shehu Shagari administration is a 1.2 million TEU port of destination that can clear goods from any part of the world, but the River will need to be dredged to allow smaller vessels come to the port from Lagos and Port Harcourt ports.

Oseakwa in Ihiala Local Government Area of Anambra State and Osemoto in Imo State are the deepest natural harbors in Nigeria and can be developed to become free trade ports of destination for goods from around the world. Osemoto has one of the potentially deepest seaports and lies only 18 nautical miles to the Atlantic Ocean. If pursued and completed as Public Private Partnerships by private investors and the South Eastern region governors, Osemoto seaport has the potential capacity of handling over 30 percent of marine traffic in Nigeria. At Obuaku, Azumini, Abia State, a free trade seaport can also be established there since it’s just a few miles to the Atlantic Ocean also.

The Ibaka Deep Seaport and Bakassi Deep Seaport projects promoted by the Akwa Ibom and Cross River State governments, respectively, can also be developed to become free trade ports since they are close to the Southeastern states, whose traders will utilize them to import and export goods, at affordable rates, rather than undergoing the stress of Lagos ports.

All Together

It is a very strategic thing for Nigeria to do urgently. Yes, the nation has to build ports in the South East and the South South to ensure the paralyses in Lagos ports are managed. There is no other better way to grow the economy of Nigeria than by building more ports across the nation. As we write, Lome Port has overtaken Apapa port on container volume. Part of the reason is that Apapa port is underperforming because of traffic. Nigeria can help reduce that stress by building functioning ports in South East and South South regions.

Lomé Port Overtakes Apapa Port as West African Regional Leader

In a previous article, I mentioned that the development and deployment of 5G has often pitched as a race between operators/countries and there seems to be an assumption that the country that dominates this race will gain a technological superiority and dominance. Russia is now formally in the 5G race as it plans to rapidly build its 5G networks and deploy 5G technologies as early as 2020.

In recent times, the United States Government accused Huawei of espionage but did not explicitly cite the development of 5G as a bone of contention. The US specifically mentioned that Huawei’s communication equipment could not be trusted and went a step further in warning its allies to neither trust China nor deploy Huawei’s equipment within their 5G networks.

Despite the warning, the US was unable to cite any evidence of risks/compromise in Huawei’s products. Of course, this creates doubt and makes one begin to wonder if this is an attempt to slow down China’s leading role within the 5G space or simply politics as usual. And if indeed there were a race among countries regarding the development and deployment of 5G, China seems to be leading, as a result of the Government’s support and aggressive technology ambition, which it calls ‘Made in China 2025’.

Countries like Australia, New Zealand, Japan etc. have thrown their weight behind the US stance and formally declared their intentions of excluding Huawei from their 5G networks.

In a further twist of event, the British Intelligence (despite a gruelling Brexit negotiation and a desperate need to formalize trade agreements) came forward with the suggestion that the deployment of Huawei’s equipment within their networks poses a manageable risk. The British Intelligence went further to ascertain that they have developed techniques capable of mitigating these threats within their networks. This is not particularly surprising to those familiar with the UK telecoms sectors as large mobile operators within the UK depend heavily on the use of Huawei’s equipment and technologies for their operations. This is besides the huge grant and funding awarded to higher institutions of learning within the UK to accelerate the development of communication technologies.

Like their British counterpart, the Europeans (especially the Germans), well known for their hard stance on privacy issues, have suggested that they could not find any evidence of espionage within their networks; specifically, that there is no evidence that Huawei is installing back door into its products for use within their networks and as such they may not exclude Huawei from their 5G networks.

Yet, countries like Canada are watching closely and are yet to formally announce their intentions of either excluding or including Huawei from their 5G networks. Canada could have other political or business reasons for sitting on the fence.

If indeed there are no evidence of espionage, as claimed by some of these countries, it makes one wonder if the US stance against Huawei is simply an attempt to stop Huawei’s (or China’s) supposedly ambition to dominate the 5G race or simply politics as usual.