EDITORIAL: MultiChoice must adapt to change or will risk certain death
"Nothing is certain except death and taxes" is one of the most famous and durable sayings, often used by political and business leaders as a way to fend off questions about their potential to deliver on the latest lofty promise. For anyone running a business today, especially in the fast-changing world of technology, "taxes" (companies are notorious for allegedly finding ways to escape paying their due) should probably be replaced with "innovation". Death should still be there, as it is what awaits those who fail to adapt to new realities.
Looking at how technology in recent years has transformed customer behaviour and taste for everything from news to public transport, it is rather worrying to see that MultiChoice, Africa’s dominant pay-TV operator, is looking to government regulation to fend off the assault from streaming services such as Netflix, the company that started life as a DVD rental firm less than two decades ago. Netflix is now worth more than the iconic Walt Disney, which has been around since the 1920s.
Of course, we’ve been here before, with MTN and Vodacom having in the past argued for government regulation to shield them from over-the-top services such as Facebook messenger and WhatsApp, now also owned by the social media company, which allowed consumers to make calls virtually for free. In the old days of the Telkom monopoly, no one could imagine the transformative influence of the internet. The idea of a video conference call between Johannesburg and Sydney costing almost nothing would have seemed ludicrous just 10 years ago.
The cellphone firms were slow in adapting to the change, as if they had forgotten they were once disrupters themselves, with Telkom playing the role of the dinosaur that, so eager to protect its monopoly over fixed lines, was blind to the new opportunities.
Telkom has seen the light and is looking like a much more solid company as a result, mainly because it has become a key player in cellular, providing competitive data packages, and is also competing in the internet. And shareholders are showing how impressed they are with CEO Sipho Maseko, with the company, still 40% held by the state, outperforming both Vodacom and MTN, which have dropped about 10% at the JSE in 2018 so far.
MultiChoice, owner of DStv, was once a disrupter itself, following in the footsteps of Sky Television in the UK. Sky’s growth has been so phenomenal it is now the subject of a bidding war that may fetch northwards of $34bn for its shareholders. The disruptive influence of Netflix, of course, is not too far removed from the drama, with all the suitors seeing control of Sky as key to resisting the threat from Netflix.
Sky, which like DStv owed its dominance to its control over sport broadcasting rights, has also suffered in the wake of Netflix’s rise, with its subscriber numbers falling about 6% between the start of 2014 and the end of 2017, while Netflix’s jumped 170%, according to Wired magazine. Wired also published some sobering numbers on the demographics of the firms’ audiences, with Netflix dominating among younger people, who are demanding something services like DStv aren’t — cheap and flexible.
The business model that compels one to buy an R800-a-month package for hundreds of channels they don’t want in order to get access to the handful they are interested in will not do for a generation that’s more likely to stream a song from Spotify than buy a CD. No amount of regulation is going to change that.
The example of Sky, and the fact that its suitors are willing to pay such big numbers for it, may well be a source of inspiration for MultiChoice and DStv, which after all has brand recognition and millions of subscribers across the continent. Sky is still attractive because it has embraced innovation and is seen as a credible rival to Netflix, going as far as offering an alternative to its own expensive, contract-based service. It owns Now TV, which ditched old-style contracts and prices while still giving viewers access to popular sport and movie channels.