Thursday , April 22 2021

The big risks that could see DStv lose subscribers



While MultiChoice's DStv subscriber numbers have grown in recent years, the company is under no illusions as to the challenges it faces.

In Naspers' financial results for the six months ended September 2018, the company said MutliChoice's subscriber numbers went up overall for its operations in Africa – but the "premium base in SA" was under pressure.

Its growth was seen as "mostly in the mass market", and 285,000 subscribers were added in South Africa in the first half of its 2019 financial year.

The drop in Premium subscribers was attributed to strong competition from streaming players, particularly Netflix.

With its subscription prices only a fraction of DStv Premium, Netflix offers a huge catalog of content on demand. This catalog is set to continue growing as Netflix spends billions or dollars on shows and movies.

It is not only DStv which is affected by Netflix, however, with satellite TV providers losing subscribers globally – while Netflix's user numbers climb, recently fit 139 million.

Risks to MultiChoice

There are other risks that MultiChoice and its DStv and Showmax businesses face on Netflix, though, which were detailed in a pre-listing statement by the company.

MultiChoice Group Limited – which includes MultiChoice South Africa, MultiChoice Africa, and Showmax – is expected to start trading on the JSE on 27 February, and was required to share the pre-listing document as a result.

In the document, the company listed several risk areas. These were:

Attractive programming

"The group may lose subscribers and revenue if it cannot acquire, produce, or retain attractive programming," said MultiChoice.

"The continued success of the group depends on its ability to continue to attract attractive general entertainment, sports and other programming on reasonable commercial terms."

It stated that movies and sports contracts with the group are for renewal from "time to time", and when these rights are not secured MultiChoice must seek "alternative programming".

This content may not be available on "commercially reasonable terms", or it has been sold exclusively to another provider.

"In the past, competitors have acquired rights to sports content in various territories, such as the English Premier League and UEFA Champions League," said MultiChoice.

It added that it may become "more difficult to maintain exclusive rights to programming" in the light of content rights coming under increased scrutiny by regulators.

Decoder subsidies

Another potential issue MultiChoice faces is decoder subsidies.

Satellite dishes and decoders are required to access DStv's packages and are a once-off cost to a consumer.

“The group currently subsidizes part of the cost of decoders and its installation to subscribers. Should a decision be taken to reduce or cancel the subsidy of decoders and installation, the group's offerings may become less attractive to new subscribers, ”said MultiChoice.

This would slow subscriber growth and decrease revenue.

Piracy

Piracy was not forgotten at MultiChoice, which stated that "unauthorized access to programming signals may adversely affect the group's revenue and programming arrangements".

"The delivery of subscription programming requires the use of conditional access technology to prevent unauthorized access to programming, or" piracy "."

MultiChoice said it mainly uses conditional access technology supplied by Irdeto, and needs to be updated continually to remain effective.

“The group will continue to incur substantial expenditures to replace or upgrade its conditional access technology in the future. Conditional access technology cannot completely prevent piracy, and virtually all video entertainment markets are characterized by varying degrees of piracy that manifest themselves in different ways.

It stated that if the group fails to adequately prevent unauthorized access to transmissions, programming services could be materially adversely affected and subscribers could switch to pirated signals.

Streaming services

As stated, MultiChoice has acknowledged the impact of streaming services on its business. This includes big pressure from global powerhouse Netflix.

“The group faces competition from global companies that deliver content to consumers over the Internet (including Netflix), often without charging a fee for access (e.g. YouTube) – or charging the lower fee than the subscription prices charged by the group.

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