Netflix CEO Reed Hastings. Picture: REUTERS
Netflix CEO Reed Hastings. Picture: REUTERS

MultiChoice Group’s (MCG's) announcement that it would be including Amazon Prime and Netflix subscriptions in some of its bouquets drew positive reaction from analysts this week.

While the three brands can be seen as competitors, in some ways they are not unlikely bedfellows. Each has something that the other needs.

Netflix needs a delivery mechanism for its content and MultiChoice needs to provide content that it currently does not offer.

“It’s a brilliant move by them [MultiChoice]," says Nesan Nair, senior portfolio manager at Sasfin Securities. “Sometimes if you can’t beat the enemy, join them. Netflix and MultiChoice now have content, especially local content, that they can share.”

Netflix’s intention has never been to replace MultiChoice; it has hinted at partnering with the predominantly pay-TV business. In an interview with Business Times in March last year, Netflix CEO Reed Hastings said: “There are a lot of areas that are video that we are not doing: sports, news, video-gaming, user-generated content. We don’t have live sport. They [MultiChoice] serve a need that’s independent of the internet, via low-price satellite. There is no intention of capturing that audience. If they're growing, it’s because they serve a need.”

Netflix has always maintained its position as an internet service, but to reach new markets it needs a high level of broadband penetration and connectivity on a continent that is still far behind.

According to Internet World Stats, broadband has a 39.3% penetration in Africa, well below the world average of 62.9%.

Graphic: RUBY-GAY MARTIN
Graphic: RUBY-GAY MARTIN

For Hastings’ comment that there will be more Netflix in Africa and more Africa in Netflix to ring true, he needs to deliver content, and MultiChoice can provide it.

“Netflix is a content provider and MultiChoice is a delivery mechanism. With decoders you don’t need an internet connection,” says Nair, who adds that this will give Netflix a larger audience on the continent.

Arthur Goldstuck, MD of World Wide Worx, says MultiChoice needs to look for ways to keep its customers and expand its revenue streams. It appears to be following the emerging model called “super-bundling” that pay-TV in other parts of the world are adopting.

“Sky in the UK, which also has basic and premium bouquets, has included Netflix in one of their bundles — inside the same platform as the subscribers’ bouquet. Comcast in the US has a similar arrangement,” says Goldstuck.

MCG CEO Calvo Mawela says: “Straddling both the linear and OTT [over-the-top or connected services] segments allows MCG to capture the best of both worlds.”

According to Mawela, the total addressable market for pay-video services in Africa is estimated to be about 47-million households by 2023, while the forecast for traditional pay-TV is about 44-million. On the OTT front, it is projected that the market is about 8-million households, with an overlap of 5-million households potentially subscribing to OTT as an add-on to a linear subscription. MCG has fewer than 20-million subscribers.

As part of its strategy, MultiChoice says it is in the best position to “capture both worlds”, linear business (DStv and GOtv) as well as the emerging OTT opportunity of DStv Now and Showmax.

What MultiChoice declined to comment on was the potential cannibalism of its Showmax offering that the new partnerships might create. It says it will “share the news of our partnerships with the major subscription video on demand [SVOD] players in the coming week”.

Goldstuck says: “The different streaming platforms offer different types of content, with Showmax offering a strong local catalogue as well as live news and sport, while Netflix offers original content.”