MultiChoice, the brand behind DStv, GOtv, etc, is being unbundled from the Naspers empire, for listing on the Johannesburg Stock Exchange. Naspers is the largest company in Africa by market capitalization.

According to www.iol.co.za, yesterday, Naspers has evolved in recent years into two distinct business lines, which are a high growth global Internet business with international focus and African video entertainment business.

Naspers noted that given their divergent paths, there was no longer a strategic rationale for keeping both business lines together and there are no synergies between them.

The unbundling and listing will result in Naspers’ shareholders holding a direct interest in MultiChoice rather than holding that interest through Naspers.

Meanwhile, in its pre-listing presentation, MultiChoice highlighted how it is the leading entertainment platform in Africa.

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Netflix is a massive threat to DStv, and the South African company has said many times that the streaming service is biting into its Premium subscriber base.

While DStv subscribers in Africa have increased in recent years, its Premium package has lost subscribers. This has been attributed to its high prices and competition from Netflix.

Largely, the company is dividing its operations into two: the high growth global internet business and the Africa-focused entertainment business. Typically (but not always – eBay spurn out PayPal, a better business), when you break companies like that, you keep the high growth in-house and strategically kick the underperformer out. That is what Naspers has done here: the global internet business which includes Tencent investment stays under Naspers while the one we have come to know the company in Africa (yes, the MultiChoice) leaves. With that structure, investors can see value which Naspers is creating in the global internet business where it is clearly killing it.

As Guardian noted in the quote above, the threat of Netflix is real, and to a large extent Naspers has given up. Yes, it does not want to fight because it cannot necessarily do much. In a piece in Harvard Business Review, I explained this dilemma (sure – MultiChoice is not a baby in this game). Simply, there is a global march to online streaming and cable and satellite TV providers are imperiled. Yes, they cannot do much because the world is going to converge on the web for entertainment. Naspers understood that and that is why MultiChoice with DStv and GOtv has to leave home, fast.

But the report also marks the final public disclosure we needed to assess the state of cord cutting at the end of 2018. Altice revealed a net loss of 15,000 cable TV customers in the fourth quarter. We already knew that Charter lost 36,000, Comcast shed 29,000, and Verizon 46,000 for the same period. AT&T lost 391,000 for both cable and satellite TV and satellite-only provider Dish Network shrank by 334,000. Net net, that’s 851,000 fewer paying customers for pay TV.

It looks like the legions of cord cutters set a new record for the quarter and are up significantly from a year ago, when one research firm calculated almost 500,000 departed, at the time a historic high.

And there’s more bad news for the industry. Unlike last year, the number of people signing up for cable-like bundles of channels over the Internet also may be shrinking now. Most of the services, such as Sony’s Playstation Vue TV and Google’s YouTube TV, don’t disclose their subscriber numbers regularly, if at all. But AT&T does, and it revealed a net loss of 267,000 DirecTV Now subscribers in the quarter. Dish, which also discloses for its Sling TV service, increased by just 47,000, about one-quarter the gain of a year earlier. Most of the Internet cable packages raised prices by $5 or more a month during the year, cutting into their appeal to cord cutters—most of whom, after all, are motivated by trying to save money. (Fortune Newsletters)

Sure – those numbers are U.S. numbers. Yet, the trend is global. It is just a matter of time for Africa to catch up at scale and that will happen as broadband becomes cheaper. My prediction has been that by 2022, we will have parity in that domain.

For Naspers, it wants to clean house fast to avoid deterioration of financial ratios on its high growth international internet business by this largely post-peak unit called MultiChoice.

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There’s a popular line in product lines management, “when it’s not working, cut it off.” No one derives joy in losing money with reckless abandon, while growth trajectory looks gloomy.

There will always be admirers for Cable TV, but to keep pace with what goes on in the online version of the business, you have to invest heavily, more than your internet competitors, and yet there’s no guarantee for profits. A quandary of some sort.

Naspers doesn’t want its global internet business to be tainted by the conundrum going on in the cable tv space, so a separation became a good move. Maybe it would be a reverse of what GE did with its financial arm, and then became more ‘troubled’ afterwards, leading to countless restructuring and transformation undertakings.

By the time broadcasting rights for sports is dominated by streaming platforms, then we know that the paradigm shift has become palpable, at the moment, movie watchers are having their day.

Each movement brings with it a sizable loss of jobs, streaming platforms cannot have the kind of workforce DStv commands here, including technicians that install the dishes. May our innovations never increase hunger in the land!

The MultiChoice’s 13.9 Million Subscribers

Jay Jay Okocha is in trouble: a judge has ordered his arrest for non-payment of taxes to Lagos state government [technically for not submitting documents for government to know how much he will pay on taxes!]. With no standard football pitch in any major Nigerian prison, it will be a nightmare for Austin Okocha. The taxman is awake in Nigeria as that is the only productive unit in government – the revenue is growing at double digit.

A Lagos Division of the Lagos State High Court in Igbosere has issued a bench warrant for the arrest of former Super Eagles star, Austin Okocha, over tax evasion charges.

Mr Okocha – or Jay Jay Okocha as he is popularly known – has repeatedly failed to appear before the court to answer why he allegedly failed to pay his income taxes.

Adedayo Akintoye, the judge, issued the warrant for the arrest of the former Eagles captain on January 29 and thereafter adjourned until February 19.

However, on February 19, the prosecution had not effected the arrest forcing the judge to, again, adjourn till April 15 and ordering that the warrant be executed by then.

The football star is facing a three-count charge instituted by the Lagos State Ministry of Justice bordering on failure to furnish his income returns and nonpayment of tax.

Yet, as government does its work, many things are changing. It follows those popular Chinua Achebe words: “Eneke the bird says that since men have learnt to shoot without missing, he has learnt to fly without perching.” Simply, some companies are restructuring, moving headquarters to Mauritius.

Today, nearly all the investing companies in Nigeria (venture capital firms, private equity firms), have moved headquarters to Mauritius. Yes, they are no more Nigerian companies even though 100% of their operations are done in Nigeria.

Tax. Tax. Tax – I said the three-letter word, three times! Jay Jay needs not dribble here: he should allow Nigeria to score.

Who can motivate your team? Before Ole Gunnar Solskjaer arrived, Manchester United was talking of shipping Pogba, but today he is doing great things for the Red Devils, as I noted few days ago. Until you find what can motivate or who can motivate your team, you may struggle to take that mission to the mountaintop. Simply, you must find the Solskjaer in that business.

Arianna Huffington, Founder of Huffington Post, quoting my work, wrote: “Writing in the Harvard Business Review, Ndubuisi Ekekwe, founder of the non-profit African Institution of Technology, notes how over-connectedness is actually bad for the bottom line. “We’re also jeopardizing long-term productivity by eliminating predictable time off that ensures balance in our lives,” he writes.”

Yes, to get to the mountaintop, you need to motivate, making sure that the motivation is linked to workplace performance. Based on many research works, workplace performance has positively correlated with work-life balance despite the point Elon Musk made via a recent letter to Tesla employees.

Yet, it goes beyond motivation. The key question for you is this: are you motivating the right people in the firm? Until you can motivate the right people, your mission will certainly fail. Yes, you must recruit, train, and then Call to Mission the right people to find success.

The disciples and indeed the Apostles practically executed the mission they were called. But I can assume that at the beginning none might have expected it the way it happened. From companies to nations, those that answer great missions typically shape everything. But sometimes they do pay severe personal penalties. At different levels, a Call to Mission requires extremely committed people. Even in your business, you must have that capacity to find and recruit people that can help you execute a great mission. You must prepare them. Equip them. And push them to come and get glory. Our Jesus has a great template on how to accomplish missions: build and prepare an extremely committed team.

The Call to Mission

On the feed on OyaPay exit, a community member dropped a great line “… businesses don’t usually fold because of lack of capital. They usually fold because of lack of cash flow.” If you have managed a business, no matter how small, you will understand the potency of that line. When people say Cash is King, they do not necessarily mean physical cash in your drawers or cash registers. They mean the capacity to have liquidity through superior cash flow framework.

I will add one line at the other end of it: the most important cost that matters in scaling (online) businesses is marginal cost. (From Wikipedia, in economics, marginal cost is the change in the total cost that arises when the quantity produced is incremented by one unit; that is, it is the cost of producing one more unit of a good.) If you take care of that cost, you will find new markets and territories. Remember, in a perfect internet market, marginal cost is near-zero, meaning that web products tend towards being free. So, if you want to scale and thrive on the web, the marginal cost (practically, your transaction cost and distribution cost) of your product must be close to zero. Sure, I do not expect you to sell at zero!

This is the heart of the freemium model where you get many things free, which is possible because of the aggregation construct, where companies provide those digital products and then create an ecosystem to sell adverts. The firms benefit more than the suppliers by providing the platforms [Facebook makes money for photos supplied by families. Sure you like the Likes]. As shown in the Figure, great companies deliver the near-zero marginal price for high quality product, making it challenging for anyone that carries a non-zero marginal price to compete, exacerbated if the product is even not top-grade. This is one of the biggest challenges digital entrepreneurs face.

As you watch the marginal cost and have a laser-focused attention to cash flow, you will not meet surprises in that business.

Marginal Cost And How To Price Digital Products

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• To succeed in any business, three key skills are essential: knowledge of product, marketing and finance. The truth is that not many business owners and entrepreneurs understand how important the third component is; and that is where majority of the problems lies. Consumers will always demand for cheaper prices or even free offerings, while producers – in their bid to appear ‘nice’ and outdo competitors, go on to plan their own downfall, by offering deals and going on expansion drives that are clearly unsustainable. You cannot have access to free money forever, so your business should be able to take care of its financial needs. Just know that when the party is over, consumers will always move on, while you are left alone to rue your past misdeeds.
• Yes, cash flow and marginal cost are lifelines that must be kept at optimal levels as business structures navigate growth. Keeping a balanced scorecard between funding, payment and sales models is essential if the outlook must remain positive. However, there is another risk factor that must be managed-Profits. Yes, misrepresentation of short term profits is a big risk. Embarking on an aggressive growth plan by leveraging short term profits as an indication of cash flow adequacy will certainly pile up opex and marginal cost. To this end, if funding options are no at near zero rates, good start ups run the risk of kissing the dust. In Africa, caution is the deal maker!
• You’re so right. Cashflow is so important that it’s sometimes necessary to sacrifice potential profits for cashflow i.e. for money to come in faster. We in the real estate industry are especially faced with this dilemma on a daily basis. In general, it’s good for businesses to understand this and plan for it