I have written on MultiChoice’s grand unification plan. The company continues to look for business models to keep it on top, and rule its markets. In this TC Daily newsletter piece, the plan is evident. Simply, the company is experiencing erosion on average revenue per user (ARPU) as Netflix continues to attract some of its most affluent customers; the ARPU has dropped from $25 five years ago to $18 today.
But the company is not giving up, it has a triple strategy which includes (1) make its satellite TV the best it could be via sports rights in Africa (2) offer a digital offering via Showmax, and become an (3) aggregator where its main future competitor, Netflix, is added in the DStv Explora Ultra.
Since 2015, the DStv has been losing premium subscribers. Its premium subscribers are a combination of those who pay for the premium bouquet as well as those who pay for the compact plus bouquet.
The reduction in demand for the premium packages means that while the company is reporting more subscribers (19.5 million), its average revenue per user is down to $18 this year from $25 five years ago.
While more people are signing up to DStv’s cheaper bouquets, it is not far-fetched to assume that it is losing its higher paying customers, who pay as much as $57 per month to Netflix and other streaming services.
Cheap data. One problem Netflix has had to battle with on the African market is the cost of data. While Netflix costs $7.99 for a basic subscription, users still have to pay for the internet to use the service.
It may explain why DStv’s new approach is a mix of launching its own digital offerings (Showmax) as well as a recent attempt to become an aggregator by adding Netflix to the DStv Explora Ultra. (Source: TC Daily newsletter)
NB: DStv can make money on Netflix via DStv Explora Ultra by carrying it. But there is a risk: it is helping to make its competitor popular to its customers. Netflix can see this as a cheap advertisement knowing that once broadband cost drops in Africa, many users will go to its website, bypassing DStv, to sign up for its services. Largely, Netflix may be generous on the contract with DStv, seeing everything as a cost of entering a new market, Africa.
What do you think? Is MultiChoice making a mistake on this?
Prof this is a cardinal mistake. As a Kenyan i have slowly seen Multichoice loose customers. Some of the die hard customers are football fanatics and kids. There are apps that allow you watch the games free if you have internet. For kids Netflix offers a wide range and offers option of seeing what you want. Multichoice needs to tread carefully in this. Netflix may use and dump them like hot soup. Only affordable broadband stands in the way of Netflix dominance and shaking of the entertainment scene in the continent.
I don’t think that MultiChoice is making a mistake. With every industrial revolution, there’s a foreseeable inevitable end. While some business leaders spearheading ‘the old ways’ might choose to stay oblivious of this, others will choose to make the most of the moment while optimising their operational models for the future.
MultiChoice has chosen to make the most of its competitor while it can, knowing that when broadband costs drop (which is bound to happen) some of its customers will gravitate towards its competitors anyway.
On the other hand, Netflix and Showmax sitting side by side on Explora Ultra might serve to strengthen the Showmax brand in the digital TV market. With great shows, they can position themselves as less of a second-rate option (which send to be the case) as viewers get to see that they are a worthy alternative.
Netflix is a strong competitor, they are perceived by the market as the industry leader – the marketing values of this perception, DStv understands well.
Netflix has the brand strength and resources. If they strategize right, they will definitely hold a fair share of the market. DStv has wised up to this and accepted it.
Principle-In-Practice: Keep your enemies close.