As video streaming begins to show signs of profitability in the medium term, MultiChoice is positioning Showmax to benefit from an expected boom in Africa to help it achieve a doubling of subscribers to 50-million in five years.
In April, MultiChoice entered into a joint venture with Comcast’s NBCUniversal and Sky to create a new Showmax platform. The business will be 70% owned by MultiChoice and 30% by NBCUniversal. The companies are revamping the platform, which will be relaunched in February.
Africa’s biggest pay-TV operator is investing millions of rand in Showmax, which is reflected in the group’s disappointing financial performance for the six months to September.
CEO Calvo Mawela said betting platform SuperSportBet and Showmax are “two exciting growth opportunities that will be a catalyst for us to double our customer base and generate more than $1bn (R18bn) in revenues”.
“There was a short period during the Covid years when global streaming operators invested aggressively in scaling their business and this resulted in questions being raised about the streaming business model.
The number of smartphone users in Africa.
— IN NUMBERS: 450 million
“All evidence suggests that streaming will be profitable soon as operators have revised their content costs, subscriber prices are increasing everywhere, and financials are improving,” Mawela said during the financial results presentation to analysts.
He said consolidation in the streaming industry would probably strengthen some existing operators while non-profitable ones would be forced to close. “It is critical that we make our move now before others reorganise themselves and make a play for Africa, which is seen as the last remaining growth market.”
With 450-million smartphone users and 250-million football lovers on the continent, this represents a significant possible market for the new Showmax.
“The most exciting part is that it will make the EPL [English Premier League] available to a new market that loves it but is unable to acquire a (satellite) dish, or wants to watch on the go. This is the first stand-alone EPL offering globally. The EPL has made unique programming available to complement live matches, going deeper than ever before behind the scenes.”
Mawela said MultiChoice was “ahead of the curve with a scalable platform that is ready to benefit from first-mover advantage”.
In the six months to September, Showmax, which is set to benefit from rising connectivity and smart device uptake, reported a 46% rise in revenue to R600m, and a 13% increase in its subscriber base; but Mawela would not disclose the actual number of subscribers on the platform.
During the presentation, an analyst suggested a ballpark figure of around 20-million streaming customers and an eventual audience of 30-million for traditional linear pay-TV in Africa. But Mawela would not comment on the speculation.
In South Africa MultiChoice’s customer base declined 5% to 8.6-million subscribers. Ssome cancelled their subscription due to load-shedding or because they could no longer afford it, and the group disconnected 311,000 non-paying customers. For the first time in many years, the premium offering posted growth of 5%, lifted by three major sporting events, especially the Rugby World Cup.
Revenue from South African operations declined 3% to R16.5bn, due in part to a 4% drop in subscription revenue and a reduction in decoder revenues.
Casparus Treurnicht, portfolio manager and research analyst at Gryphon Asset Management, said MultiChoice has struggled with “declining popularity in a space that is increasingly getting more and more competitive. In the past, it was very difficult to get content to subscribers, but technological advances allowed competitors better access at a more affordable rate. It was inevitable that MultiChoice was going to lose subscribers.”
However, MultiChoice appears to have proved that “Africa wants African content as well, but the price must be right. This remains to be seen.”
Group revenue declined 1% to R28.3bn due to weaker local currencies in a number of countries where the company operates, and to consumer pressure. Revenue from the rest of Africa was flat at R10.5bn, and operations on the continent added 100,000 new subscribers to end the period at 13-million. MultiChoice said weaker currencies, including Nigeria’s naira, remained a significant impediment to profitability, with average first-half exchange rates falling sharply against the dollar.
Philip Short, a senior equity analyst at Flagship Asset Management, said: “It is difficult to envision a scenario where currencies such as the naira will not continue to have a negative impact on the business. Forex movements are a general concern as well. A flattish rest-of-Africa subscriber base is worrisome given expectations that this is a growth part of the business.”
Commenting on the outlook for MultiChoice, Short said: “I think they’ll need to run hard to just stand still. They’re facing forex headwinds, competitive dynamics with cheaper streaming services, and a weak consumer cutting back on discretionary spending.”
Mawela insisted MultiChoice has a compelling growth strategy in place. The second half of the group’s 2024 financial year, which ends in March, “will be an important period in our journey to expand our ecosystem beyond Africa’s leading linear pay-TV operator into a broader ecosystem of interactive entertainment and consumer services”.
The relaunch of Showmax, combined with KingMakers’ entry into the South African market with SuperSportBet and Moment’s platform launch “are all important milestones as we accelerate growth and drive additional scale, creating a ‘world of more’ for customers and additional value for shareholders”.
