Tuned in: More competition, greater entertainment in the pay-TV segment

Pay-TV in South Africa continues to enjoy substantial growth. MultiChoice, a subsidiary of Africa’s largest media company, Naspers, dominates the market. While several other television operators were awarded licences, only On Digital Media’s (ODM) TopTV is currently operational, and with limited audience share. On the other hand, DS tv, MultiChoice’s pay-TV offering, is a household name both in South Africa and across the continent as one of sub-Saharan Africa’s leading subscription television brands.

DIGITAL GROWTH: MultiChoice launched its satellite service DS tv in 1995. The service grew out of the company’s analogue output, M-Net, which is still available, although its subscriber base is declining.

DS tv has experienced impressive growth and continues to post significant subscriber increases. MultiChoice’s total subscribers grew by 977,000 in the year ending March 2011, with a continental total of 4.9m subscribers, 3.5m of which are in South Africa. The South African subscriber base expanded by 209,000 in the following six months, reaching 3.7m by the end of September. The company estimates it has penetrated 27-28% of the television market, including terrestrial, with a much larger market share in the pay-TV realm.

DS tv’s subscription base saw strong growth after it diversified the packages of channels offered, upgrading from just one bouquet to a range of options. “For the first six to seven years, we offered a single bouquet and grew off our analogue base,” Graham Pfuhl, marketing and sales director of MultiChoice, told OBG. “We launched DS tv Compact in 2005 to offer a lower-priced product to an emerging market. Our numbers shot up, and we followed it with new low-cost options. We’ve seen double-digit growth every year.”

Alongside the inaugural DStv Premium and DS tv Compact, the firm offers DStv Select and DS tv Lite at lower tariffs. The entry-level bundle, DS tv EasyView, is priced at R20 ($2.45) per month. As of March 2011, Premium packages accounted for 45% of subscriptions, and Compact orders represented another 30%.

In 2007, the Independent Communications Authority of South Africa (ICASA) – the sector’s regulatory body – ended MultiChoice’s 12-year monopoly by awarding four licences to other TV operators: Telkom South Africa, ODM, e-Sat and Walking on Water TV (WowTV). MultiChoice was also awarded a licence since it had launched at a time when there was no regulatory framework for satellite television. ODM launched Top-TV in 2009, while e-Sat opted for a content provider model, launching the 24-hour E-News channel on MultiChoice’s platform in 2008. Telkom decided against pursuing a pay-TV strategy, and WowTV, a dedicated Christian channel, is reportedly still in a testing phase.

In October 2011, South Africa’s National Consumer Commission ordered pay-TV stations to “unbundle” their channels and sell them separately. This elicited significant criticism, including from MultiChoice and TopTV, with executives highlighting the move’s economic distortions. Licensing international programming would become harder, emphasised ODM CEO Vino Govender, explaining that TopTV had already rejected an “a la carte” model, given that “content providers would have hiked the cost of channels substantially”.

NEW TECHNOLOGIES: Pay-TV operators recognise the need for services across multiple platforms. One example is the DS tv Drifta, which is a mini-decoder that functions like a mobile television that is linked to a customer’s subscription and can be used on a computer or tablet.

“We are bullish about these products,” said Pfuhl. “We see them as a supplement to traditional DS tv viewing. As technology improves, there will certainly be growth in television viewing on mobile phones.”

Operators are preparing for the introduction of digital terrestrial television (DTT). Digital migration in South Africa is scheduled for December 2013. DS tv will offer DTT, as well as satellite packages and new products for television markets that have fully migrated to digital.

According to a study by McKinsey & Co, some 221m consumers could enter the African pay-TV market as they reach annual income brackets of $1000 to $5000.