Unhitched from the parent company, Naspers, Multichoice rocketed into the top 40 of the JSE this week as it listed separately.
The price settled at R98,53 on Friday.
The company is banking on how much Africans love watching television.
With data prices in Africa outstripping costs in developed markets, pay television is still a growth story. Kenyans spend 5.13 hours a day watching TV; South Africans are agog for 4.37 hours a day while Nigerians are glued for just a minute less at 4.36 hours a day.
In the US, Latin America and Europe, television viewing hours are coming down fast as streaming takes over. So, high data costs work in Multichoice’s favour.
And, Multichoice believes that the trend toward streaming video content is still very nascent in Africa; its sees massive growth potential in both pay TV and in over the top (OTT) services – the industry term for streaming or what most of us know as consuming video on your phone or on another device.
While satellite dishes are ubiquitous across SA, Multichoice’s listing material shows that penetration is only at 41% of households; in Angola, it is at 31%; in Zambia at 20%; Nigeria only 17% and at 14% in Kenya.
Only 0.1% of the population on our continent is yet hooked up to any streaming service while this figure in the US is at 41% and at 12% in Europe.
“Given lower pay-TV representation, the rest of Africa represents significant subscriber growth prospects,” Joe Heshu, Multichoice’s spokesperson told Fin24.
“Africa and Middle East are expected to grow four times the global average in pay-TV subscriptions between 2018 and 2022,” he added.
Netflix is an African minion
While the media narrative has presented Netflix as a significant competitor to Multichoice, the data does not support the story.
Netflix is still an elite minion in South Africa and the rest of Africa.
Multichoice has 13.9-million subscribers across the continent; this makes it four times larger than its second biggest competitor, the Chinese-backed Star Times and Canal+Afrique.
Travel in Kenya, Nigeria, Zambia and many other Sub-Saharan African countries shows that DSTV is a ubiquitous brand. You find it in every nook and cranny. This dominance is driven by a very big local content production budget.
Multichoice commissions or produces 4 500 hours of programmes a year in 17 languages. It dominates and challenger brands have struggled to catch up. But its big trade secret is that Multichoice knows how to collect revenue in a cash economy – it has over 1000 payment points across Africa and what it calls a “capillary distribution network” – this means that it knows how to sell in what can be majority informal markets.
Still, it’s a challenging market and the rest of Africa is only just moving toward break even after decades of investment, Multichoice told the investor community on its roadshow ahead of the listing.
While Showmax, the Multichoice video streaming service, is not a very well-known brand yet, it is, in fact, growing fast.
“It is early days for OTT platforms given the high data costs and lack of infrastructure, but we treat all competitors seriously, including Netflix. We see two times higher usage on all our OTT platforms (DSTV Now and Showmax) than on Netflix,” said Heshu.
Opening up a mid-market
South Africa’s low growth market is placing enormous stress on households and one of the first things to go is a premium subscription, should you have it. Heshu would not provide numbers on switch-offs, but its data shows that it has introduced a new bouquet to address the problem of people not being able to afford the R809.00 per month premium subscription fee.
Multichoice has created a mid-market bouquet for about R385/month and this now accounts for four in 10 subscribers while the mass market (basic) bouquet accounts for 36%. This means that Multichoice has now decreased its premium client to 23% of the total subscribers which is a good thing as it is this segment that is most likely to hot-tail it out to cheaper services as they come on stream.
The trouble with the regulator
Multichoice’s listing this week was one of few points of light in a difficult market but it has a risk from the regulator. The Independent Communications Authority of SA (Icasa) is hopping mad that Multichoice went ahead with its listing even before an interdict against the hearing by the civil society group, Khulisa, could be heard.
Heshu told Fin24 that, “Multichoice is satisfied that all the necessary regulatory approvals in relation to its listing on the JSE have been properly sought as required. We have engaged constructively with Icasa to resolve the matter."