Showmax will continue to haemorrhage cash for years to come as its owner, MultiChoice, works to scale the business to a point of profitability.
Africa’s largest pay-TV operator is confronting the reality that the growth and adoption of its streaming service is slower than had been initially projected.
MultiChoice, which is the subject of a takeover bid by French broadcaster Canal+, unveiled an updated version of Showmax in January 2024. The platform is underpinned by technology from US giant NBCUniversal.
In the group’s annual report, MultiChoice chair Elias Masilela hinted that the path to profit for Showmax is likely to take much longer than first expected.
“This ongoing evolution has presented the MultiChoice Group with unique and exciting opportunities to redefine how we connect with our viewers and how we deliver offerings that are both engaging and accessible.”
However, “building out a new streaming platform like Showmax takes time and significant investment — it has taken other players in this segment as much as seven years to become profitable”, he said.
The idea of investing billions in a technology-backed platform, running for years at a loss as it scales, and finally making profit much later is nothing new.
Amazon
E-commerce giant Amazon spent years in the red as Jeff Bezos ploughed an eye-watering amount of capital into developing one of the world’s most formidable logistics, payments and loyalty systems with little to no profit.
Showmax’s biggest competition, Netflix, started its streaming service in 2007 and took more than a decade to start operating in the black. The company said it now has more than 300-million paid memberships in more than 190 countries.
Even then, such a state of affairs remains quite jarring for SA’s more prudent investor community.
“Given the long lead time to break even caused by much lower Showmax revenues per user (compared to the linear business), we expect its development to impact negatively on the group’s profitability for some time to come,” Masilela said.
Nonetheless, “whether through expanding our service platforms, investing in local content or growing new revenue streams, we remain committed to continue evolving alongside our audiences”.
In April, MultiChoice said that since September 27 2024 it and NBC had provided $145m (R2.6bn) in equity funding to Showmax in proportion to their shareholdings.
In addition, MultiChoice provided another $800,000 as equity funding to cover its specific shareholder costs. This adds to the $164m spent by the DStv operator and NBC between April and September 2024.
A new Showmax group was created in 2023 that is 70% owned by MultiChoice and 30% by Comcast-owned NBCUniversal and powered by its Peacock technology. Expenses for the business and future profits are shared in the same ratio.
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