There must have been an emergency meeting called in South Africa, home of Multichoice, which owns pay television service DSTV, when Netflix announced it was entering Africa’s most advanced economy in 2016. By August, Multichoice’s parent firm Naspers had responded with the launch of its own online video on demand service to rival Netflix, the international provider of on-demand Internet streaming media with over 26 million subscribers worldwide. The battle will be among Netflix, ShowMax and other Video-on-Demand (VoDs) in South Africa. Several DSTV subscribers that are not on the service for sport are already moving over to on-demand TV service. More will do when Netflix launches. Apart from cost effectiveness of VoDs, Netflix is expected to pull its originals off DSTV.
Cost of Subscription
For years, Africans have been held to ransom by DSTV which is by far the best pay television service on the continent in terms of content. However, changing consumer behaviour over the past half-decade has increased demand for better subscription pricing. While some subscribers call for subscription prices to be slashed, others ask to pay only for what they use. People almost never watch television shows when they are broadcast anymore. The television consumer, like every other consumer, according to 5 African Consumer Trends for 2016, is tending towards on-demand service. But for lack of a better option, Africans have continued to subscribe to DSTV. Once Netflix launches in South Africa, a lot of DSTV subscribers who are on the pay TV service only for movies will move on.
When the popular streaming service first announced plans to enter South Africa earlier this year, its projection was ‘within the next two years’, but the company moved earlier than expected, apparently due to the presence of a ready market itching to get on the service. Some Africans have even devised means of circumventing Netflix’s geographic restriction to access the service from the continent, meaning they are ready to pay the current subscription fees charged anywhere else by Netflix. Now, industry sources, according to Mybroadband, say the on-demand TV service will launch in South Africa next month.
A survey by Mybroadband shows early adopters in South Africa are willing to pay R124.54 for a monthly Netflix subscription. ShowMax charges R99 per month for its premium service.
One challenge that has hindered the growth of online streaming in Africa is cost and quality of data. But the issue of quality is being addressed already with the advent of LTE internet service providers offering speed of up to 32mps. Cost is also going down in some parts of the continent and this is expected to continue with increasing demand.
According to the International Telecommunications Union (ITU), broadband is now affordable in 111 countries of the world, with the cost of a basic (fixed or mobile) broadband plan corresponding to less than five per cent of Gross National Income (GNI) per capita, thus meeting the target set by the Broadband Commission for Digital Development.
Mobile broadband is the most dynamic market segment. In 2015, 69 percent of the global population will be covered by 3G mobile broadband, up from 45 percent in 2011. The network is also expanding into rural areas, and ITU estimates that 29 percent of the 3.4 billion people worldwide living in rural areas will be covered by 3G mobile broadband by the end of 2015.
ITU estimates that between 2000 and 2015, Internet penetration has increased to 43 percent of the global population, from 6.5 percent, with the proportion of households with Internet access at home advanced from 18 percent in 2005 to 46 per cent in 2015. Although ITU figures also indicate that four billion people in the developing world remain offline, significant success has been recorded.
With lower data cost and changing consumer behaviour driving up demand for on-demand TV, DSTV and other pay television service providers alike, will struggle. The saving grace for DSTV is its sports offering. With the South African pay TV service holding the rights to air English Premier League among other sports on the continent for years to come, the arrival of Netflix and increased adoption of other VoDs on the continent may not hit DSTV just yet. However, what could be a nail in the coffin of the pay TV service will be the arrival of a sports online streaming service that allows you pay only for what you watch. If such comes on, it will be the answer to the undying request of consumers in Africa; no one will be left behind in its adoption if data services improve on the continent. DSTV and other pay TV services will have to drop subscription cost and allow users pay less for more if they want to retain them. However, Naspers is not caught unawares as its ShowMax has given it a level playing field to compete with the biggest names in online streaming. The media group will be hoping whatever it loses in pay TV can be recovered online.