Leading entertainment company, Multichoice Group will be adding a new streaming service to its offerings and has signed a partnership with Netflix Inc. and Amazon.com, the company said. This is expected to significantly impact all parties involved as well as entertainment TV consumers.
The South Africa-based group, owners of pay-TV services DStv and GOtv, broke the news in its latest annual financial report released Wednesday, which also showed a 5 percent growth in its subscribers base rising to 19.5 million, revenue growth of 3 percent at R51.4 billion, and a rise in core headline earnings by 38 percent.
Its shares on the Johannesburg Stock Exchange soared for the first time in several months after it released the report. While the impressive results would naturally push up its share price, reports indicate the surge was largely due to the announcement by Multichoice that it will start offering new streaming services which include a partnership with its United States-based ‘rivals’ for entertainment TV.
The company is launching DStv Streaming, a “dishless” digital streaming version of its current service that will not require the use of a satellite dish or installation. Far more significant is a plan to introduce the new DStv Explora decoder later this year, the first to carry and make over-the-top services Netflix and Amazon Prime Video available to subscribers across its markets.
The plan is to become a pay-TV super-aggregator and a content “one-stop-shop” that will carry even more such third-party services in the future. “It is where we see the opportunity to continue our aggregator journey,” said Imtiaz Patel, MultiChoice Group chairperson in an investors’ call Thursday after releasing the 2019/2020 financial results.
“We broadcast and stream our own compelling local and international sports content and also make third-party streaming services available on our platform. All of this is to be found on a single platform, with a single bill that provides convenience and choice to our customers through a one-stop-shop,” Patel said.
But away from the voiced “one-stop-shop” ambition, the deal could be seen as being in tune with the “If you can’t beat them, join them” saying, Abiola Odutola writes on Nairametrics. The duo – Netflix and Amazon – have been “giving Multichoice a run for its money, creating greater competition, offering cheaper and faster internet speeds that have enabled them to stamp their feet on the continent.”
Through its DStv and more affordable GOtv satellite services, Multichoice is a dominant force in the African pay-TV space but has seen its position in the bigger entertainment market threatened by the growing patronage of video-on-demand/streaming services. At some point, the Naspers-owned group launched its own online streaming service ShowMax and DStv Now to counter the recent entries of American players Netflix and Amazon.
The company still enjoys a fair advantage in the sub-Saharan market, but that is not enough to ward off stiff competition from international streaming giants that continue to rake in millions from the African audience. With a user penetration of 5.4 percent recorded in 2017 and expected to grow at 8 percent by 2021, revenues from VOD services are expected to double in Africa from $260 million to $452 million over the same period.
Multichoice will be placing its own VOD services alongside that of Netflix and Amazon Prime Video with Patel noting that local content and sport will be a key differentiator for Showmax. “Niche and general entertainment content from other providers will offer our customers more choice,” he said, “the multitude of offerings are leaving customers overwhelmed with what is called the paradox of choice and the need for greater simplicity.”
Another top executive described the deal as a win-win situation for the company. “There is little overlap between content on Multichoice’s Showmax, that is now 50 percent local, and a service like Netflix at the moment, hence we find deals with other video-on-demand services complementary,” Group CFO Tim Jacobs said in a phone interview with Bloomberg.
The global OTT market size was valued at $97.43 billion in 2017 and is projected to reach $332.52 billion by 2025, according to Allied Market Research. The South African company will be tapping into this in the form of commission for DStv subscribers who sign up and make use of the OTT services through its products. “What would typically happen is we would get commissions on whatever revenue gets generated by customers coming from our platform,” Jacobs said.
Negotiations are said to still be on-going and Multichoice is yet to provide details on how customers will sign up and use Netflix and Amazon, how the move will affect its monthly fee, or on the DStv set-top boxes and timing of the roll-out. But the strategy of adding foreign video streamers should help the company, to an extent, get back some of its lost market share, retain teeming subscribers, attract potential viewers and maintain its position as Africa’s biggest entertainment provider.
