MultiChoice, the pay-TV company that operates SA’s largest direct broadcast satellite service, DStv, has hit out at calls by the SABC for the communications regulator to place a limit on advertising revenue received by subscription broadcasters.
The SABC is proposing that regulations be put in place limiting subscription services such as DStv to no more than 25% of the total television advertising revenue in the country. It says this will level the playing field and throw free-to-air broadcasters a lifeline in a tough operating environment.
The SABC says restrictions should also apply to streaming services such as Netflix. The regulator has said the advertising regulations need to be refreshed to take account of the changing environment characterised by growth in streaming services.
According to recent figures by global professional services firm PwC, advertising revenue in SA rose 2.8% year on year in 2018, reaching R29.5bn. It is expected to reach about R35bn in 2023.
MultiChoice spokesperson Collen Dlamini said on Monday capping the share of advertising revenue for pay-TV operators would serve no purpose.
“SABC is missing the point. We are not a threat for free-to-air broadcasters, but it’s the unregulated online players that are taking the lion’s share,” Dlamini said, referring to platforms such as Google, Facebook, Netflix and YouTube.
However, a recent report from PwC shows that the biggest advertising medium by revenue globally is the internet, but that in SA the internet still trails behind TV advertising.
MultiChoice says online is the fastest-growing segment in the SA advertising market. Dlamini said capping the advertising revenue of pay-TV broadcasters would be an “absurd idea and it would be impractical for Icasa [Independent Communications Authority of SA] to implement”. He highlighted that advertisers would always choose where they want to advertise a product based on their requirements.
The battle over advertising revenue is the latest in the saga pitting MultiChoice against the SABC as the public broadcaster pushes to unlock new revenue streams.
Icasa has been holding hearings on the review of advertising regulations, which date back more than two decades. Current regulations largely seek to protect consumers from excessive advertising and children from inappropriate advertising content, and to ensure that broadcasters retain editorial independence and integrity.
Icasa recently indicated its intention to repeal rules that allow pay-TV operators to carry the public broadcaster’s free-to-air channels for free. This would allow the SABC to commercially negotiate carriage fees for its channels, which have been freely available to pay-TV operators all along. The SABC has also previously proposed that pay-TV operators should collect TV licence fees on its behalf, a suggestion vehemently opposed by MultiChoice.
The public broadcaster, which has been in financial trouble for several years and has often required government bailouts to continue operating, is arguing that the law enjoins Icasa to promote stability in the sector, meaning that the regulations should enable licensees to be financially sustainable and deliver on their mandates.
The SABC says in the past four years advertising revenue has declined across all TV and radio outlets, with the need therefore for greater regulatory intervention for free-to-air broadcasters to survive.
In a detailed submission to Icasa on Monday, MultiChoice argued that despite some fluctuations, free-to-air broadcasters including the SABC still have a 60%-65% share of the television advertising market, with only a limited number of channels between them.
Pay-TV as a whole holds less than 40% of the market, even though they have hundreds of channels, MultiChoice said. Therefore there is no need to consider further limitations on pay-TV. Furthermore, such limitations fall outside the scope of the Icasa inquiry as the regulator is largely limited to the scheduling of adverts, their timing, frequency and duration.
The “government should promote ad revenue remaining in SA and/or ensure that global online companies pay local tax. Icasa needs to promote all broadcasters’ viability through an enabling and less restrictive regulatory framework and, ultimately, regulatory parity with the new services,” MultiChoice said.
The SABC is desperate to boost its finances as government funding has all but dried up and advertising and licence-fee revenues are under pressure, partly because of the Covid-19 crisis.
The public broadcaster is heavily reliant on advertising and revenue from licence fees to stay afloat. It receives about 80% of its revenue from advertising and sponsorships, 14% from TV licence fees and 3% from government grants.
“It is the SABC’s view that these [advertising] regulations can either break or make a broadcaster; as such, it is crucial for the authority [Icasa] to be cognisant of all dynamics, including the funding model of the SABC,” the public broadcaster said in its submission.
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