Showmax sets sights on profit in 2027

Showmax is looking to start making profit in the next four years, driven by its investment in local content and a partnership with US entertainment giant Comcast. The MultiChoice subsidiary has laid out an ambitious goal to make $1bn over the next five years. 

The group has been doubling down on its efforts in online streaming, signing a slew of deals in the past two years to set up Africa’s largest pay TV operator to become the continent’s largest streamer, or at least the biggest gatekeeper to paying audiences. 

“Africa is the final frontier for SVOD [subscription video on demand] expansion and Showmax will be one of the key drivers of our group's future growth and profits,” Showmax CEO Yolisa Phahle said as MultiChoice conducted its first capital markets day.

The group took its investment up a notch earlier this year, entering an agreement with media giants NBCUniversal from the US and the UK’s Sky, to create a new Showmax service.

This has resulted in a new Showmax group being created 70% owned by MultiChoice and 30% by Comcast-owned NBCUniversal, and powered by its Peacock technology. 

The partnership provides the Comcast group with an opportunity to push the global reach of its content and streaming technology in one of the fastest-growing video markets. At the same time, MultiChoice gets more content, deeper pockets and technology to boost Showmax. 

“Our partnership with Comcast provides the strategic levers to succeed and we have set ourselves aggressive growth targets over time,” Phahle says. 

The group now has ambitions of returning a profit from these investments by 2027. 

“We’ve set ourselves a break-even target by FY27 and we’re targeting ebitda margins of around 25% and free-cash flow margins of around 20% scale. In short, we are focused on becoming the leading streaming platform on the African continent,” she said. “We’re aiming to generate revenue of more than $1bn after five years.”

On the whole, MultiChoice looks to be trying to recreate its DStv offering, but in streaming form. MultiChoice has signed agreements with Netflix, Amazon, ESPN, Disney, Sky and NBCUniversal as a way to bring all streaming content under one roof as opposed to consumers having to pay multiple subscriptions. Then it hopes to control the pipeline from there. 

Joining forces and sharing costs also allows the group to ramp up investment in local content and this is seen as a key differentiator, along with sport. The group expects the production of original content to increase “materially over time”. That means producing 10 times more local content in 10 years time than it does today.

Local content production appears to be the strategy that all big players are trying to execute.

Rivals eMedia and Netflix have also been pouring much cash into original programming, with the US streaming giant revealing earlier this year it has spent R2.3bn on such content since 2016.

Netflix’s approach of creating local content in a number of countries where it operates has brought it much success in recent years. 

For SA’s media company, local content is how they first gained a foothold in the analogue broadcast market. This is now being extended to the digital realm of online streaming.

Last week, eTV’s parent eMedia said original programming on eVOD the biggest pull for new users on the platform, the group plans to invest R100m more in local content. 

While video streaming is still small in SA and the rest of Africa, the segment is growing. All SA’s big television broadcasters now offer online viewing options: eMedia with eVOD; MultiChoice owns DStv Now, Showmax and Showmax Pro; and government-run SABC now streams its television and radio content through SABC Plus.

gavazam@businesslive.co.za