Founded in 2010 with approximately $40 million in total funding from the likes of New York’s Tiger Global, Sweden’s Kinnevik, and France’s Canal+, IROKO is a leading digital distributor of Nollywood content globally. Throughout the firm’s history, it has undergone several dramatic changes which have seen it increasingly target African consumers at the base of the pyramid.

Initially, in 2011, IROKO derived 100 percent of its $1.2 million revenue from monetising licensed content through Youtube’s Partner Program. However, in December 2011, the company launched, its proprietary video-on-demand platform. Founder & CEO Jason Njoku explains:

“At first it was simply… NollywoodLove on Youtube — where without curation I simply bought and uploaded, fast and furiously, as many movies as I could get my hands on and monetised with adverts… My ambitions far outweighed what I could achieve on YouTube and thus started the mass migration of a million dollar business away from YouTube.”

By mid-2013, over 50 percent of IROKO’s revenue came from the IrokoTV platform, while revenue from YouTube amounted to less than 15 percent. Initially, IrokoTV employed a freemium model with its audience enjoying free access to advertising-supported lower-tier content and paid access to premium content (IrokoTV PLUS). By the end of 2013, despite paying subscribers representing less than 3 percent of IROKO’s global monthly audience, IROKO’s paid subscription business, IrokoTV PLUS, became the business’ main revenue driver.

By Q2 2014, paying subscribers had grown to 5 percent of its global audience and in April 2014, the company announced that it was embracing a subscription-only model wherein the free, advertising-supported IrokoTV option would be discontinued in 140 of its 170 revenue-generating countries:

“I am literally betting the entire company and millions of dollars of revenue on a dramatic shift to a paid-only model… We start with 140 countries but expect to migrate everything over in the near future.” — Jason Njoku

In addition to identifying its core business model for IrokoTV, in 2014 IROKO also defined its core audience:

“When I think of the future of IrokoTV, I can only really see Africa and specifically Nigeria as our big markets… Africa is no longer the future. Africa is now.” — Jason Njoku

At the start of 2014, Africa represented only 2 percent of paying IrokoTV subscribers. By early 2015 however, African subscribers grew over 450 percent year-on-year to represent 11 percent of the IrokoTV subscriber base (with Nigeria being the fastest growing market globally).

Having determined its core business model and customer base, IROKO moved towards further integration of its activity chain. In Q3 2014, it launched ROK Studios, an in-house production, and financing studio that gives IROKO greater control over the cost and quality of content.

“We started off licensing movies for $100. Fast forward 3 years, we now license movies for four to ten, fifty-thousand dollars at times. So we spend a significant amount of our budget on content — $3-$4 million a year on content.

So at core, we’re a content company…[and] because we own the platform…we have thousands of [data points]…For example, I know the top 20 most-queried actors and actresses in Nollywood and that enables me to say ‘in these movies that we’re producing, we want those people in there, not because we think they’re popular but because we can see from the data that those guys are popular.’

Our goal for ROK Studios is stupidly simple: we want to improve the quality of Nollywood movies being made…in time, we will be able to produce 200 movies a year ourselves.” — Jason Njoku

IROKO also moved to better align its product offerings with the needs of its core audience. In March 2015, in response to unique user behavior driven by issues around the cost, quality, and availability of broadband data across its African markets, IROKO launched a new feature for its IrokoTV platform: it allowed subscribers to download data-optimized, DRM-protected content for offline viewing.

“In Nigeria (and Africa), peak viewing is between 10am — 5pm: office hours. During this time, the ISP networks people are using are enterprise level data. This is the opposite [of] every other [Western] market. Yet we believe viewing patterns globally are similar. The difference is/was data availability.” — Jason Njoku

By July 2015, IROKO fully embraced on-the-ground realities in its African markets. It focused its product and engineering teams around mobile and the Android platform. And it required users of the IrokoTV app to download content before viewing, a departure from the immediate gratification of traditional streaming that consumers with access to affordable, high-quality networks in Western markets were used to. (IROKO later enabled progressive downloads, the ability to play content before downloading is completed, for users outside of Africa.)

“We took one of the most ambitious steps in trying to solve the largest challenge for unlocking growth for our African viewers: accessing content…It’s where the market has always been, hence we begin to distort the product to this reality.” — Jason Njoku

In addition to aligning product features to market realities in Africa, IROKO has also taken an experimental approach to understanding consumer preferences and adjusting its pricing accordingly, with heterogeneous pricing for African vs. Western markets and mobile-only vs. mobile/desktop users:

“Consumer Internet in Africa is new…New customers need new prices, so our Africa mobile-only customers will receive one. We are building for folks without electricity…[so we] have to stay experimental…We still don’t have the definitive answers to Africa pricing yet. We’re still figuring it out.” — Jason Njoku

Embracing the Base of the Pyramid

As IROKO has evolved through the years, several characteristics are evident: aggressive cost management through activity chain integration, market-growing pricing strategies, identification and addressing of unmet consumers needs, and heightened focus on everyday African consumers at the base of the pyramid.

Activity Chain Integration

Early in its history, IROKO focused on the middle of the digital distribution supply chain. While it converted content into digital formats, indexed and provided content metadata, and uploaded content for consumer consumption, it did not produce any content (instead amassing a catalog of content licensed from rights owners), nor did it control the customer experience (instead outsourcing end-delivery of content to Youtube).

IROKO has since integrated its operations both forward and backward.

To exert more control over the customer experience and customer relationship, it launched the IrokoTV web platform in 2011 and its first app in 2013, and it continues to move away from third-party technical partners to an in-house technology infrastructure that allows it the nimbleness and flexibility to react to market conditions in what the CEO calls ‘Internet time.’

Moreover, to better control its costs & supply of content, in 2014 it launched ROK Studios, a data-driven, in-house content production unit that allows it to bypass costly content licenses, and in 2016 it launched IrokoX, a platform that provides content creation, distribution, and monetization support to independent third-party producers in exchange for 20% of revenues.

Market-Growing Pricing Strategy

IROKO, as a venture-backed company focused on rapid growth, has incorporated a growth & experimentation mindset into its pricing strategy.

For example, the company noticed the popularity of individually packaged CPG (consumer packaged goods) items which, while cheaper on an absolute basis, are more expensive on a per-unit basis than bundled items. Leveraging this insight, the company introduced unlimited weekly Android access to IrokoTV for 100 naira which resulted in 100 percent growth in Nigerian subscribers within the first 30 days. (In comparison, the equivalent weekly cost of the company’s annual package is less than 60 Nigerian naira.)

“We don’t use margins structures when we think about pricing, we think about what the customer can legitimately afford…[and we work] to reduce the entry level price for IrokoTV in Africa. We’re growing the market.” — Jason Njoku

Unique Solutions for Unique Consumer Needs

After IROKO developed its proprietary web and mobile IrokoTV platform, it noticed unique behavior from its African audience and ultimately sought out and discovered the underlying cause: high costs of data and poor bandwidth capacity. Indeed, the company has repeatedly said that the major challenge it faces in Africa is the ‘data burden’ which limits the ability of its target audience to consume IrokoTV’s content.

In response, the company has taken and continues to take steps to mitigate this burden. It moved away from streaming towards downloads, tasked its product and engineering teams to find technical solutions around data compression, and most recently it launched a kiosk and agent network across Lagos, Nigeria that will allow subscribers to visit any one of 100 locations and receive DRM-protected, IrokoTV content without need for broadband data using Wifi Direct technology:

“There are peculiarities which you have to embrace, otherwise you can’t win in the local market here. We’re going to go that extra mile because we are here and we know what it’s about…

We believe in the Nollywood community. What we are now doing is building future features which bring the communities closer together. But those features need folks to be educated — they need their hands to be held. Hence the introduction of the kiosks…

We have 65 deployed with a further 35 being deployed in Q1 [2017]…The core purpose of the kiosks are pretty simple: Customer Education; Product Evangelism; Product Customer Support; Transactions (collecting cash/facilitating mobile wallet, etc.); [and] Data Free Downloads (DRM protected).” — Jason Njoku

Targeting Customers at the Base of the Pyramid

Broadly speaking, IROKO’s evolution throughout the years has seen it de-emphasize Western markets to focus on African consumers given its belief that its future opportunity is larger there:

“The only reason we are large outside of [Africa] is because of terrible internet penetration on the continent. But that will change…We need to build the future…

African Diaspora = 30m. ~4m watch Nollywood. Sub-Saharan Africa = 850m. ~150–200m watch Nollywood.” — Jason Njoku

As it continues to adjust its product, pricing, and distribution strategies for the African market, IROKO increasingly serves average Africans rather than the middle class:“Our community, our folks who watch Nollywood, primarily live in the base of the pyramid.

[They] aren’t necessarily tech savvy. But they are our people.” — Jason Njoku

IROKO’s ultimate goal is to build a billion dollar business, and as it continues to embrace African consumers and create new markets for digital consumption of Nollywood content, it seems a significant part of its value will be created by consumers at the base of the pyramid.

Emeka Ajene writes on behalf of the team at Africreate, a research & advisory organization focused on innovation, insight, and impact in the African tech & SME ecosystem. This article originally appeared in full on the Africreate blog.

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