Pay TV group MultiChoice may spend more than R10bn in the financial year on local content to differentiate itself and stay ahead of competitors in TV broadcast and online streaming.
Africa’s largest pay TV operator hopes such outlay will drive up customers for Showmax which it aims to make the leading streaming platform on the continent.
Local content — film and television projects native to a specific country — have proved to be a lucrative way to gain subscribers. There is growing piles of cash being poured into local productions as operators fight for market share.
Earlier in year, Netflix said that it spent more than R2bn on film and TV projects in SA in 2016-22.
For MultiChoice, the stakes are now higher as Netflix has been focusing its deep pockets on its own local productions such as Blood & Water, Queen Sono and How To Ruin Christmas.
On Tuesday, the DStv operator said its local content library is now more than 76,000 hours, representing 50% of total general entertainment content spend for the year to end-March 2023.
The group spent R20.9bn on content in the period.
The group did not say how much it is going to spend on content in the year, but the aggressive spending trend to stay ahead of rivals indicates it will spend as much if not more on such content.
“Yes, there is a big investment that we are going to make in Showmax focusing on local content. We are going to leverage our sports offering, which will be underpinned by the EPL [English Premiere League],” group CEO Calvo Mawela told Business Day.
This comes as MultiChoice’s annual profit swung to a loss for the period and withheld a dividend to boost its investment in Showmax
The company, valued about R43.6bn on the JSE, said that R16.5bn has been made available to fund Showmax’s operations and its ambitions as greater internet connectivity is providing consumers with more viewing options.
“The group continues its shift from a traditional Pay-TV platform to a broader ecosystem focused on segments that address African customer needs and are underpinned by technology,” the company said.
“The core video entertainment business, but specifically navigating the affect of the ongoing economic and energy challenges in SA, will remain a central focus for the 2024 financial year,” it added.
At its recently held capital markets day, Showmax said it aims to make a profit in the next four years, driven by its investment in local content and a partnership with US entertainment giant Comcast.
Mawela said a launch date for the revamped Showmax is yet to be announced “but we expect it to be in the last quarter of this calendar year”.
Overall, the group’s net profit went from R2.88bn to a net loss of R2.92bn despite a higher revenue and a small drop in operating profit as net foreign exchange translation losses more than doubled and impairments of R2bn.
The earnings reduction was because of higher unrealised foreign-exchange losses on the translation of the group’s dollar liabilities and a rise in foreign-exchange losses associated with repatriation of cash from Nigeria at the parallel market rate.
The overall subscriber base continued to grow, largely because of growth in the rest of Africa, as the group added 1.7-million 90-day active subscribers, an 8% rise, bringing the total to 23.5-million. The bulk of these, about 60%, are in the rest of Africa, with the rest in SA.
Advertising revenues improved by 7%, helped by the 2022 Fifa World Cup and local content. But persistent power and the tough economic conditions in SA hampered the local subscriber base.
“Permanent high stages of load-shedding, interest rate hikes and elevated inflation levels have left a large portion of the group’s customer base unable to watch or afford video entertainment services. Though SA 90-day subscribers grew by 0.3-million year on year, lower levels of activity, represented by active days, were experienced, which resulted in a 2% decline in SA revenue,” the company said.
Free cash flow narrowed close to half at R2.86bn.
Trading profit and core headline earnings, the group’s two preferred earnings metrics, decreased 3.3% to R9.99bn, while the other advanced 1.7% to R828m.
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