The rumblings at Auckland Park, the seat of the public broadcaster, are a microcosm of broader debates within state- owned entities about the structural transformation required to ensure they meet their public service obligations while remaining competitive in a shifting marketplace.
It is not dissimilar to the changes under way in the energy, ICT, logistics and other sectors where the state operates as both regulator and player. Viewed in this way, the cost of failing to migrate from analogue to digital has created a path dependence at the SABC that makes the cost of structural transformation in public broadcasting high. While comparisons are often made between the SABC and MultiChoice, they are unhelpful due to the scale of operations the SABC oversees. They are helpful insofar as they illuminate big issues that confront the business model and turnaround SABC group CEO Madoda Mxakwe and his team are expected to deliver.
MultiChoice runs a platform of diverse content offerings (including SABC’s radio offerings) with 3,521 permanent employees. While the company has 8.4-million 90-day active subscribers across the continent — compared with the SABC’s 20-million — there are financial and operational comparisons that are worth considering.
The SABC has fewer than 3,000 permanent employees. So even as a traditional broadcaster with numerous radio, television, sales and licensing offerings, its permanent headcount is lower than that of DStv — a platform and aggregator of content, more focused on licensing than creating content. The SABC’s salary bill is R1bn lower than that of MultiChoice.
The real difference lies in the top-line number — MultiChoice brings in less advertising revenue than the SABC, but manages to collect R28.4bn in annual subscription fee revenue, whereas Auckland Park is hard-pressed to collect R1bn in licensing fees. So, while subscription fees constitute 69% of revenue for MultiChoice, licensing fees constitute just under 14% of SABC’s revenue.
Cost recovery from the user in the MultiChoice model is critical to total revenue, while the large numbers marshalled by the SABC remain an attraction for advertising and sponsorship. However, the meagre investment in content by Auckland Park has led to many consumers across the income and class distribution “voting with their feet” and opting (at greater monthly cost) for DStv.
To justify licensing fees you need compelling content. To create compelling content you need to make investments in the local content ecosystem, negotiate content licensing ad procurement effectively and position the SABC as a compelling digital substitute to pay TV. Only then can a clear comparison be made.
The point is that while comparisons with MultiChoice may not be analytically useful, they present a comparison between the linear and the exponential. The creator and the aggregator — the old and the new. Yet it does not seem there is a clear focus in the public conversation on what it means to “modernise” the SABC, and how that relates to the proposed layoffs.
Do we know how many new jobs will come with the digitisation of broadcasting infrastructure, and the implications of this, for the viability of state-owned Sentech? It is no doubt a political issue that the department of communications & digital technologies is pondering.
The SABC’s employees seem to be collateral damage from delayed transformation at the SABC and our path to convergence between ICT, telecoms and the media. Surprisingly, the capital expenditure of the SABC has declined three-fold since 2016, at a time when the business most needed to transform how it operates. That capex (and its interface with the turnaround envisaged) may be the most important issue yet for the survival of the 84-year-old public broadcaster.
Alongside defending jobs, right now we need to ask questions about that spend, and how it could generate more advertising revenue, compelling content and licence fees.
• Cawe (@aycawe), a development economist, is MD of Xesibe Holdings and hosts MetroFMTalk on Metro FM.
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