OK, Tell Me More?
MultiChoice, DSTV’s parent company, lost more than 100,000 premium subscribers in 2017 and another 40,000 so far this year.
Hmm, Go On?
It appears DSTV is feeling the pressure from streaming and on-demand services like Netflix. In fact, MultiChoice’s CEO feels that the lack of regulation over Netflix in SA has given it an unfair advantage, and points to it as the main cause of DSTV’s decline. You’d think that decades of operating as a monopoly with exorbitant pricing would have given MultiChoice its own unfair advantage.
MultiChoice has pointed out that Netflix does not pay licencing fees or make contributions to the Universal Service and Access Fund. It also doesn’t pay any local taxes since it has no offices or employees in SA. All of this means Netflix has much lower operating costs in South Africa compared to DSTV.
Companies that have operated as a monopoly often turn to regulation when threatened by new competition. The hope is that the new and typically smaller organisations can’t afford the costs of compliance, which would drive them out of business and keep the existing firms in control of the market. However, this kind of move really wouldn’t be in the best interest of consumers – Netflix costs ~R165 per month whilst DSTV Premium comes in at a steep ~R959 per month.
What Could Happen?
The space is heating up – as we mentioned earlier this year, regulators already have their eye on the pay-TV sector. It will be interesting to see if the focus is on the regulatory burden or encouraging competition.
Netflix is also in a better position to compete on price point locally. Given their international reach, they have a much larger user base over which they can spread operational costs. Whilst DSTV boasts ~13.5 million subscribers across Africa, Netflix has ~140 million across the globe.
Another factor MultiChoice must consider is the impact of shrinking disposable incomes, mainly in SA – the proportion of subscribers with DSTV who make use of the premium version has fallen from 20% to 14% in the last two years. You can see it graphically below.