Icasa moves to open up pay-TV market
Multichoice objects to plan, saying this would virtually destroy its business and hand over the market to international internet streaming giants such as Netflix
The Independent Communications Authority of SA (Icasa) is set to introduce a raft of measures to open up the pay-TV market, despite objections by MultiChoice, the dominant pay-TV operator in the country.
On Friday, Icasa 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.
MultiChoice, which owns DStv, dominates the market in part because it has exclusive contracts for premium and international content, such as the local Premier Soccer League (PSL), the English Premier League, the Spanish La Liga, and the Uefa Champions League.
“These are the most popular competitions in SA … these sports rights are held by MultiChoice and this is considered to be its competitive advantage”, Icasa said.
The regulator said MultiChoice had conceded that sports rights had become increasingly expensive, having spent R2.3bn on local sports content in 2018 alone.
“The increasing cost of premium content is now beyond the reach of many broadcasters and new, smaller local OTT [over-the-top] service providers,” the regulator said.
Icasa pointed out that in 2015 e.tv lost the rights to broadcast the Uefa Champions League, citing the prohibitive cost. In 2007, the SABC lost its exclusive rights to the PSL to SuperSport, in a deal worth R1.6bn.
“Both broadcasters lost viewers as a result of failing to secure these premium sports rights.”
The current agreement between MultiChoice and the PSL runs for five years, through to the 2023/2024 season. The English Premier League agreement has been renewed until 2022.
“Effectively no new entrant will have access to these and other rights currently held by MultiChoice,” Icasa said.
The regulator said that apart from the high cost, premium sports content is also usually tied up in long-term exclusive contracts, meaning that such content is not readily available for new entrants to the market. Rights splitting, it said, would be a “a welcome potential remedy”.
The Competition Commission notes that while the splitting of rights allows for numerous players to have access to a critical input, due regard must be given to the design of the various rights packages. This is to ensure that all players may acquire sufficiently compelling packages to compete effectively in the market.
In its submission to Icasa in 2018, MultiChoice said the introduction of further regulations would virtually destroy the company’s business, and hand the SA market to online streaming giants such as Netflix. It said it had lost more than 100,000 DStv premium subscribers in the previous financial year due to unregulated competition from such services.
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 OTT services.
However, Icasa said in its draft document that MultiChoice’s claim is not “borne out by the evidence”.
“As far back as 2014, before the launch of OTTs in SA, MultiChoice already expected decline in the premium subscription numbers on the basis that the premium segment of the market was reaching saturation,” Icasa said.
Furthermore, the regulator said its analysis showed SA viewers tend to take up OTT services to complement, rather than substitute, subscription television services.