Picture: SUPPLIED
Picture: SUPPLIED

Pay-TV operator MultiChoice may be forced to change its business model to remain competitive as the Independent Communications Authority of SA (Icasa) drafts new rules to challenge its dominance.

Icasa is set to introduce measures to open up the pay-TV industry, primarily doing away with exclusive programming, despite objections by MultiChoice, which has the lion’s share of that market in SA.

The continent’s biggest pay-TV operator listed on the JSE in February and is now valued at R55bn, servicing about 14-million people across 50 countries in Africa.

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Instead of hanging on to its traditional satellite business, MultiChoice may have to shift its focus more towards its content streaming businesses to stay competitive if the regulations become a reality, said Tefo Mohapi, technology analyst at iAfrikan Digital.

Icasa recently published its draft findings following an inquiry into subscription television broadcasting services. The findings highlight remedies to boost competition and lower subscription prices in the pay-TV market.

These include reducing contract duration, specifically for sports rights, and splitting content rights and selling them to more than one broadcaster.

If the regulations — released for comment about two weeks ago — are implemented as is, MultiChoice, which owns DStv, could find itself having to find a new way to differentiate itself in the market.

MultiChoice dominates the market in part because it has exclusive contracts for premium and international content, such as the local Premier Soccer League, the English Premier League, the Spanish La Liga, and the Uefa Champions League.

Mohapi also suggested that MultiChoice could look to stream sports exclusively as this was a major drawcard for viewers currently.

Byron Lotter, portfolio manager at Vestact Asset Management, said MultiChoice may have to change its pricing structure to remain competitive, especially with the possibility of new regulations in the offing.

He said local competition had been on the rise.

Because of loftier pricing for some of its packages, free-to-air players like the SABC, eTV and soon-to-be Kwese Free TV offer an alternative for price-sensitive consumers. Internet streaming specialists like Netflix have taken away premium subscribers for DStv and its streaming properties, DStv Now and Showmax, said Lotter.

Despite Icasa’s intentions, some analysts think the new regulations are not good for competition and actually benefit foreign players like Netflix and Amazon.

"Icasa has regulated the only local operator and given the advantage to offshore businesses, which defeats the whole point of what they’re trying to achieve," said Lotter.

MultiChoice said Netflix and other international streaming companies "do not pay tax" in SA or broadcasting licence fees.

It said new rules should also apply to so-called over-the-top services.

"Regulation in most cases is bad for competition. The less regulation, the better," Lotter said, adding that with or without regulatory efforts, there would still be competition in the market — as seen with the entry of players like Viu, which announced a partnership with the SABC to stream popular local shows like Uzalo and Skeem Saam.

"We have consistently submitted throughout our engagement with Icasa in the process under way that we are not convinced that there is any basis for intervention in the dynamic and rapidly evolving video entertainment sector," MultiChoice said.

MultiChoice’s share price is up 18% since its listing, closing at R124.43 on Monday.