Naspers cashes in on pay TV

2009-11-28 10:28

MORE satellite television dishes are going up

across the continent, helping Naspers weather the storm of the recession better

than most media companies.


In the six months to September, 352?000 households entered the

Naspers pay television unit, Multichoice’s network of subscribers.

This pushed

the total subscriber number to 3.7?million households.


South Africa accounted for most of the new subscribers with

238?000. The balance came from the rest of the continent.


“We have started focusing on the black middle class because it is

our main growth driver for pay television.

"We are producing more local content

programmes for the market and we are considering some channels focused on this

market.

"This is in addition to the local soccer league and associated programmes

that we broadcast,” says Naspers chief executive Koos Bekker.


Bekker also attributes the growth of pay television to the biting

recession as people look towards home entertainment.


Multichoice’s cheaper “compact bouquet” delivered most of the

growth, with 132?000 new sub­scribers.


Bekker says the network’s premium and compact subscribers have

remained stable.


“We have trade going both ways and at the moment they balance each

other out in most markets,” Bekker says.


Even across the continent, the group is focusing on local content

and football is leading that charge.


Naspers, through SuperSport, is among the largest funders of sport

on the continent.


The company funds local soccer leagues in Nigeria, Ghana, Kenya and

Zambia and in other smaller countries.


This focus has helped the pay television business to increase its

revenue by 15% to R8?billion over the ­period under review.

This led to an

operating profit of 26% for the unit.


This made it one of the shining lights in the performance of the

­media company, which also has print and internet businesses.

The internet

business posted an operating profit of 45%.


Its print business, which is mainly in SA and Brazil, recorded

stable revenue and circulation.


Its operating profit fell by 32% to R327 million, from R484 million

last year.


Naspers finance director Steve Pacak said the group’s advertising

revenue, which makes up 14% of ­total revenue, was down 6% compared to the same

time last year.


Bekker expects advertising revenue to improve because of the Fifa

World Cup next year.


Until then the company will continue to watch its costs and look at

innovations to boost profitability.


“At the moment the biggest cost driver we have is the cost of local

sport in different African countries. In some instances if we don’t go and

improve the venue and bring cameras, the event simply will not be broadcast,”

Bekker says.


Media analyst at African Analysis, Davis Moore, says pay television

will continue to be Naspers’s primary source of income for at least the next

decade.


“The only growth they are really showing is from their cheaper

bouquets such as the compact bouquet. These will not be earning them as much

profit as they would get from the premium bouquet.

Their hope is that these

compact customers will eventually upgrade their subscription to the premium

version.


“In the meantime, revenues are ­under pressure from lower

advertising budgets, as well as the fact that Multichoice is still heavily

subsidising their decoders, in the region of 50% of the final purchase price,”

Moore says.


He says that growth from the group’s internet companies will help

offset the shrinking revenues from the print division.


“Both pay TV and internet are much less susceptible to the

recession, and should weather the current storm much better than print.

"One can

expect more closures of magazine titles and books from their print division in

the short term. In fact, I would not be surprised if Naspers totally divested

themselves of print in the medium to long term,” he says.


Naspers’s revenue increased by 6% to R13.5?billion for the period

­reviewed. The company operates in Asia, Eastern Europe, South America and

Africa.

This geographic spread of its operations and the ­asset mix among local

media companies make it difficult to compare their performance.


This week Naspers announced a 19% rise in operating profit while

Avusa last week reported a 56% drop in operating profit to R77?million.

Avusa’s

revenue dropped 5% to R128?million.


) Naspers is the owner of City

Press


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