OBG talks to Collins Khumalo, Chief Executive Officer, MultiChoice South Africa

Interview: Collins Khumalo

How much room is there for further Pay-TV penetration in the South African market?

COLLINS KHUMALO: The middle and lower end of the market certainly have room for growth. For those with lower disposable incomes, what we are seeing – mainly due to family structures in townships where you have three or four families living in a compound – is customers pooling together for a shared subscription and rotating monthly in terms of which family pays. Reaching these emerging segments is very much about offering flexibility in both consumption and payment options. At the top end of the market, where there is greater saturation, growth is mostly achieved through expanding average revenue per user by introducing additional services and top-up opportunities. The potential of smartphones as a television reception device has diminished significantly due to the arrival of tablets and mini-screen devices linked to pay-TV subscription packages. Through built-in decoders, these provide opportunities to make content available to customers anywhere without a reliance on mobile broadband access. In addition to monetising the additional consumption of content, it adds value to the customer and supports retention, as they are able to receive their content outside of their home.

How is South Africa’s analogue to digital migration strategy set to affect the sector’s landscape?

KHUMALO: The digital terrestrial television (DTT) trends taking place in developed markets are not necessarily going to play out in South Africa. There will be significant pressures on the free-to-air operators as the advertising pie in Africa, which is the free-to-air operators’ main lifeblood, is not big enough to support a multichannel free-to-air environment. In terms of the competitive pressure DTT will place on pay-TV, only time will tell. The potential of over-the-top players like Netflix and Hulu is constrained in the short term due to the limited availability of broadband, which limits the amount and speed of content that can be accessed in comparison to a digital satellite service. How the government ultimately decides to allocate spectrum and how the authorities intend to use it will be critical. Mobile operators can expect to pay a higher price for spectrum compared to what broadcasters might pay. So the question is whether government intends to make as much money out of spectrum as possible, or whether it intends to allocate it in a way that makes the most information available to the public at the most affordable price. For DTT to be rolled out successfully there are a lot of additional dynamics and complexities that policy-makers need to consider. The government has decided it will subsidise set-top boxes (STB) for those who cannot afford them. As a lot of money will be ploughed into these subsidies, it is important to ensure funds are channelled properly and have a continual impact. After the initial subsidy, what happens in a few years’ time when the STB does not work anymore? How do they then ensure that a needy household will continue to have access to digital TV?

To what extent do regulatory guidelines on local content influence channel offerings?

KHUMALO: Local content quotas, in my view, are far less effective than market-force economics. While globalisation is increasing demand for Western programmes, we all still want our children to have exposure and be acquainted with our native language and culture. If you look at the popularity of soapies in Africa, their very appeal and popularity is because they are in a language, and feature characters, that people in South Africa can relate to on a personal level.

As broadcasters, we can stimulate the demand required to support the need for a local production industry. The explosion of Nigeria’s film industry in recent years has taken place through the launch of dedicated African film channels that can be watched across Africa. Broadcasters introduced viewers to Nigerian films, and this created a rise in demand for an industry that previously was much smaller and localised.