It will likely become increasingly more difficult for MultiChoice content cost centres –M-Net, kykNET and Showmax, as well as the division working on acquiring and retaining premium third-party linear TV channels carriage agreements on DStv – to justify spending on big-budget items, shows, projects and expensive TV channels if this premium audience is dwindling.
MultiChoice already ran into trouble with Blood Psalms from Yellowbone Entertainment that was supposed to have started last month on Showmax. The October debut of the most expensive TV series yet filmed in South Africa is now delayed by several months to possibly February 2022.
Blood Psalms is due millions of rand in unpaid money it requires to complete post-production work. The due payouts, as part of South Africa’s stalled film rebate scheme ran by the department of trade, industry and competition (DTIC), were abruptly cancelled. MultiChoice isn’t able to take over Blood Psalms enormous production costs financed through the film rebate scheme.
The Blood Psalms scandal has led to warning lights flashing for possible future big-budget local productions for pay-TV that might not be deemed feasible or worth the effort to make in South Africa if top-end subscribers don’t exist in big enough numbers to justify the spending and trouble.
While MultiChoice’s overall content cost and spending on general entertainment and sports content continue to grow, it also means that MultiChoice is facing increasing internal pressure on the type of content the pay-TV operator will and can spend money on.
The likely outcome, if DStv Premium subscribers continue to decline, is that less money will be allocated for the production of expensive local shows like Survivor SA on M-Net (DStv 101) only accessible for DStv Premium subscribers; coupled with the loss of more premium third-party TV channels like BBC First, and more money allocated for mass-market shows like Uyajola 9/9 on Moja Love (DStv 157).
Showmax growing but DStv Premium under pressure
On Thursday afternoon, MultiChoice released its interim financial results for the six months until the end of September 2021 that revealed that the pay-TV operator not only continues to bleed top-end DStv subscribers but that mid-tier subscribers are also abandoning its offering.
Overall, MultiChoice added 1 million subscribers in the six months to the end of September 2021 and now has 21.1 million pay-TV subscribers.
South Africa remains the pay-TV operator’s country with the largest subscriber base (12.2 million, 58%) with 8.9 million subscribers (42%) across sub-Saharan Africa (RoA).
In the six months under review, MultiChoice, however, lost over another 100 000 DStv Premium and DStv Compact Plus subscribers decreasing another 5%, and DStv Compact and DStv Commercial customers declined by 1%, from 2.9 million to 2.8 million subscribers.
The top-end loss is made up for ongoing lower-tiered subscriber growth, increasing from 8.7 to 8.9 million subscribers. The mass-market DStv Family, DStv Access, and DStv EasyView subscribers grew by 6%, from 4.4 million to 4.7 million.
The result is that MultiChoice’s monthly average revenue per user (ARPU) continues to decline, this time by another 2% from R278 to R273.
What it means is that although MultiChoice continues to have more subscribers, it makes less money per subscriber since it keeps losing DStv Premium and DStv Compact Plus subscribers, who are its most valuable subscriber segment.
Showmax subscribers are growing, however, with paying Showmax subscribers increasing by 42% and with overall online users rising 33% from the prior period, “representing a 3% gain in share of the African OTT market since December 2020,” MultiChoice says.
Sport is not luring DStv Premium subscribers back or stemming DStv subscriber churn as MultiChoice suggested would be the case earlier this year.
In June, MultiChoice Group CEO Calvo Mawela told investors that rugby broadcasts are one of the biggest drivers of DStv Premium uptake. The loss of rugby because of the Covid-19 coronavirus pandemic was a huge reason behind the ongoing decline in DStv Premium subscribers in the previous financial year.
“What we’ve seen is that as a result of the lack of rugby, you see people coming down, but as soon as rugby comes back, you see people going up,” Mawela said. However, while rugby and other sports returned to SuperSport the past few months, DStv Premium subscribers didn’t.
MultiChoice: Local content remains important
MultiChoice says about its latest six-month financial results that local content continues to be “a core part of the group’s differentiation strategy”.
MultiChoice says that it has “stepped up its investment in local content by producing 2 692 additional hours (41% year-on-year growth). As a result, the total local content library is now approaching 66 000 hours and represents 45% of total general entertainment content spend, which was the group’s full-year target”.
“In South Africa, local documentary Devilsdorp became the most viewed programme of all time on Showmax.”
“In Nigeria, Big Brother Naija delivered record viewership and advertising revenues and has become one of Nigeria’s most loved reality brands.”
“Reyka, a global co-production with Fremantle was broadcast to critical acclaim during Sunday night prime time, while a further four co-productions (Recipes for Love and Murder, Crime and Justice season 2, Pulse and The Fix) are currently in production. Interest in the group’s content is at an all-time high, with 121 series sold to international buyers, seven times more than last year.”
“In addition to compelling local stories, MultiChoice continues to broadcast the best of sport. The group renewed the rights to Serie A, the FA Cup, the European Football Championship and the new United Rugby Championship,” the pay-TV company said.
Hidden away in the small print of MultiChoice’s six-month financial results is relief for DStv subscribers fearing that they will lose The Disney Channel, Disney Junior or National Geographic when The Walt Disney Company launches its Disney+ video streaming service from around June 2022 in South Africa.
Disney’s channels were culled elsewhere as linear pay-TV channels like in the United Kingdom when Disney+ launched, forcing traditional pay-TV subscribers to switch to streaming. However, DStv Premium subscribers won’t abruptly lose access to Disney.
“On the international content front, channel agreements with Disney (including the kids and National Geographic channels) were secured to 2024,” MultiChoice says.