TStv, a new pay TV company, is beginning a journey to challenge the largest company in Africa by market valuation. Naspers which owns MultiChoice operates the DStv brand across sub-Saharan Africa. DStv is a digital satellite TV service which leads its category in the region. It is well funded by South Africa’s Naspers which has a valuation of $100 billion, more than 30% of the total market value of the Nigerian Stock Exchange.
DStv (Digital Satellite Television) is MultiChoice’s digital satellite TV service in Sub-Saharan Africa, launched in 1995, providing various bouquets offering general entertainment, movies, lifestyle & culture, sport, documentaries, news & commerce, children, music, religion and consumer channels to MultiChoice subscribers.
So TStv wants to challenge DStv. It will be a battle. Clearly, TStv is the underdog in this game and it will be an epic show. Naspers has crushed any challenger in this space and it combines to dominate the nearly 23 million subscriber pay TV market in Africa. TStv is coming with the following:
- Affordable every man and woman pricing: It believes that it can peel off the subscribers from DStv by pricing more competitively. DStv is a premium platform but it is relatively expensive. TStv thinks it can deliver great service at better price to get customers to switch.
- It has government support: The Nigerian government is on board, promising a tax break within the first three years. This is typical for any creative industry participant. But meeting the requirements is not necessarily easy.
- Savvy marketing: TStv understands the game. It has done more to get a buzz of its products through clever marketing than most that came before it. That may be its strength as it begins this uphill battle to take on Africa’s most valued company.
The Strength of DStv
For me, I do think the biggest asset in DStv in Africa is sports. I know that it has control over most European league broadcast agreements in sub-Saharan Africa, including Nigeria. For the very fact that it controls Premier League (England) and Spanish League (La Liga), many people will stay with it. In short, I expect more than 40% to stay because of these TV rights. That is the challenge for TStv. How are you going to break into the party without sports? Nigerians love sports.
DStv is a tested brand in pay TV and commands the lion share of the market controlling 11 million subscribers in the 23 million subscriber- sector. Nigeria’s is a key market with 4.4 million customers. DStv has deep contents including entertainment and it continues to invest massively with its war chest as a very rich company.
Naspers Limited’s payTV and entertainment unit, DSTV has disclosed that it has it has a total of 11 million subscribers across Africa. The disclosure was released to media experts across Africa to promote DSTV’s media and sales offerings to advertising and media agencies.
DSTV’s subscriber base grew by 8% year on year from 10,2 million to the current figure. Nigeria leads its African footprint with 40% of the total subscriber base. By implication, DSTV and GoTV put together have 4.4 million subscribers in Nigeria.
Out of the 11 million subscriber base, GoTV, DSTV’s extended subsidiary catering for the entry level payTV market seems to be growing slowly than expected. The unit was reported to have a total of 2.5 million subscribers across 11 countries in Africa.
DStv operates GoTV which is an affordable pay TV missing some of the premium contents you find in the main DStv. Yet, as noted in its disclosure, the market is not growing very well. In other words, customers continue to patronize DStv despite its high cost and the availability of a cheaper alternative. But it is very possible that GoTV does not really offer much value.
Naspers has the funding to continue to produce exclusive contents which will keep people in DStv. You can see the advantages of DStv as follows:
- Experience: It has more than 20 years of experience in this business. It was started in 1995 and it knows what works and does not work
- Premium contents: From sports to entertainment, DStv is the undisputed category-king. The Magic channel which is designed along the Nigerian Nollywood loving customers is one of the best in the continent. This is a moat as it has covered the sports and entertainment making it more challenging for anyone to come up with anything else.
- Beyond African contents: Besides the Magic channel, DStv has great Indian movies, Hollywood and Latin American contents. These expanded content portfolios are the reason why customers remain with it despite the relative cost
- Bundle Showmax and DStv: If things become more challenging, Naspers will bundle Showmax (DStv’s online video on demand) and DStv so that if you have account of either, you can enjoy both. No one comes close at its scale in these two market segments in Africa. With that bundling, DStv will keep its customers.
The Challenge Before TSTV
TSTV is structured to become like GoTV but the problem is that GoTV is not really doing well. In the pay TV business, content is king. If you do not have the content, the pricing makes no difference. Right now, GoTV is not doing well despite being cheaper because the contents are not there to attract customers.
Besides GoTV, StarTimes is another competitor that TSTV has to deal with. Owned by Chinese investors, StarTimes is cheap, and affordable and largely promising with growing customer base, now at 10 million. People still want the premium contents. GoTV is cheaper than StarTimes. But of course, StarTimes offers news analysis which gives it a minor edge. This could be a consolation to TStv. If StarTimes broke into the markets with good pricing before DStv responded, it does mean with decent contents, customers can be swayed. I do think GoTV may be struggling because of limited valuable contents.
The video on demand players like iROKOtv and Netflix are also competitors. Anything that engages a customer time is a threat to pay TV. Of course, these online contents are mainly shows and movies at the moment in Africa without the live programming you get in TV as in sports. Nonetheless, they are competitors to TStv and that does not help its vision. DStv parent company Naspers owns ShowMax which gives it another major advantage across emerging channels.
TStv will need more assets to compete against GoTV and StarTimes which are closer to its market segments than DStv. HiTV tried the same strategy many years ago, coming with cheaper pricing but struggled. StarTimes is from China and that gives it strong financial backing. TStv will have to do more. The market is still at infancy but the competition is also huge. Both DStv and StarTimes control more than 90% of the market.
TStv will begin operations on November 1 2017. Nigeria welcomes it as we want more options and choices in the markets.
Beside Nollywood and foreign programming, there are opportunities for documentary of Nigerian history, culture, technology and other things. Also, there are many growth opportunities ahead. So, TStv could find its moments as it begins its operations in Africa’s most populous nation. Nevertheless, it has to plan very well as it takes on the Goliath of pay TV in Africa. Sure, Goliath has been beaten in the past and that should be encouraging for TStv.
At the end, I do think we will have Apple iOS and Google Android scenario here. DStv will be the Apple while StarTimes/TStv will be the Android. The latter set will be everywhere while the former keeps the profit. So, at the end, DStv with its premium contents and higher pricing will keep more than 60% of the profits in the sector. That profit is what Naspers is really interested in.
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