MultiChoice, the leading pay-TV operator in Africa, is evolving its digital terrestrial television (DTT) service, GOtv, into a streaming platform. The company plans to launch the GOtv Stream app today, December 1, 2023, in Nigeria, its largest market. The app will allow users to watch live TV channels and on-demand content on various devices, without the need for a decoder. The app will be free to download and use, but users will need an active GOtv subscription and an internet connection.
The move is part of MultiChoice’s strategy to adapt to the changing consumer preferences and market dynamics on the continent, where streaming services such as Netflix and Amazon Prime are gaining popularity. However, could this be the right move?
MultiChoice has been operating in Africa since 1994, offering satellite and DTT services under the brands – DStv and GOtv. The company has over 20 million subscribers across 50 countries, accounting for about 40% of its revenue. MultiChoice has successfully provided diverse and quality content, including sports, movies, news, and local productions, to its customers.
However, the company has faced several challenges in recent years, such as currency fluctuations, regulatory pressures, and competition. In its full-year results report, the company admitted that its middle market was under pressure from the hostile economic environment, including high unemployment rates, consumer indebtedness, rising inflation and interest rates, and load shedding. This resulted in a drop in premium subscribers over the period, declining by 6% as of 31 March 2023.
In 2023, MultiChoice reported a net loss of $1.2 billion in Nigeria, mainly due to the naira’s weak performance against the US dollar, which resulted in a 40% devaluation of the Nigerian currency after the country floated the naira. In early March 2023, MultiChoice’s shares were worth more than $7.86 each. But on March 13, when it announced that its South African revenue growth would be lower than expected, its shares dropped to around $6.41 each. It also had a much lower profit margin because of its fixed costs and the extra expenses of Showmax, its streaming service. This was the beginning of a six-month slump that saw its share price plummet by $1.7 billion.
One of the main threats to MultiChoice’s business is the rise of streaming services, such as Netflix and Amazon Prime, which offer cheaper and more convenient alternatives to traditional pay-TV. In 2015, MultiChoice launched Showmax, its streaming service that offers a variety of local and international content, including movies, series, sports, documentaries, and more.
In March 2023, MultiChoice announced a partnership with Comcast’s NBCUniversal and Sky, two of the world’s leading media and entertainment companies, to relaunch Showmax as the leading streaming service in Africa. The new Showmax or Showmax 2.0 as the company calls it, will be powered by Peacock, a streaming platform that has over 20 million paid subscribers in the US. MultiChoice has invested $27 million in Showmax. A recent report by Omdia Research, a tech research-based firm, shows that Showmax now accounts for 40% of the continent’s streaming market.
However, the streaming market is not easy, especially in Africa. Also, adoption cycles don’t happen the same way in this region as in other markets. For example, despite Nigeria having the largest market, Netflix has had a hard time growing and retaining its subscriber base. Most people have low disposable income. Netflix had only 1.6 million subscriptions from Africa after six years in the market.
Moreover, the inflation that has hampered its operations has also impacted its customers. The rising cost of living has led many consumers to downgrade to more affordable forms of entertainment. Two weeks ago, the Nigerian House of Representatives called on the National Broadcasting Commission (NBC) to engage with MultiChoice after the company announced a 19% price hike for its DStv and GOtv packages. The lawmakers argued that the price increase was ill-timed and unfair, given the economic hardship that Nigerians are enduring. This is the second time that MultiChoice has raised its prices this year, following the previous increase on May 1, 2023. In Nigeria, more than two-thirds of the population, live in multidimensional poverty. And food expenses consume a large portion of their income.
Perhaps, an alternative for Multichoice to retain its customers and reduce its costs is to offer a pay-as-you-go service, which would allow customers to only pay for the content they consume, rather than a fixed monthly subscription. This would give customers more flexibility and choice, and also reduce the burden on Multichoice’s infrastructure and bandwidth.