Three years ago, SA welcomed the launch of three local video on demand (VOD) services. Finally, here was a way to use the Internet to watch television.
The Internet has widened access to entertainment and media products and services and has created new opportunities for companies. However, before long two of those services, Vidi and Altech Node, were forced to close because of lack of demand.
But the third and least-known company, Discover Digital, tweaked its business model and has found a niche despite stiff competition from Naspers-owned ShowMax and international players such as Netflix and Ontaptv (all of which entered the market about a year ago) .
To crack it where others have failed, Discover Digital has had to gobeyond VOD. It is building content and services to allow telecoms operators in emerging markets to take branded VOD services to customers easily, as part of their bundled offerings.
Discover Digital already manages MTN’s VU platform and it wants to broaden that.
Discover Digital founder Stephen Watson says the company came about when it was decided to digitise the video store concept by building kiosks, and rapidly evolved to Internet TV and VOD.
"Our story is a real David-and-Goliath one — two giants have already fallen, but we have remained profitable as we have built a model that is sustainable, based on a smaller subscriber base with understanding that this is still an immature market," says Watson.
Discover Digital sees itself as a services company for telecoms operators, Internet service providers and broadcasters. It also believes that bundling VOD as a value-added service with partners’ products becomes a great tool for customer acquisition and retention.
Discover Digital has secured content rights from some of the world’s biggest production houses, including Sony Pictures, BBC, MGM and NBCUniversal.
"As a smaller business, we had to be much smarter in the way we built our technology and acquired our content," says Watson.
The company has been forced to innovate, in the face of uncertainty about the mechanics of SA’s switch from analogue to digital TV. Discover Digital initially planned on offering its VOD using a digital terrestrial TV platform. It wanted to produce its own set-top box to offer VOD services. But repeated delays in the migration to digital forced it to halt production of its first hybrid digital-enabled set-top box. It has since focused on producing Internet Protocol TV (IPTV) boxes for its customers.
Discover Digital is also available beyond SA borders, in Zimbabwe and Zambia, and plans to add two more African countries.
The VOD market is growing. Research firm BMI-TechKnowledge forecasts that VOD users will increase from 692,000 to 917,500 active-user households by 2020.
Vodacom will introduce a VOD platform early 2017 that will showcase content from existing players like ShowMax and will target the high-end market. It already has a VOD platform called Video Play that shows local dramas and other content from SABC, e.tv and DStv’s Mzansi Magic.
Vodacom CEO Shameel Joosub says the company is not trying to compete with the existing VOD players hence it has reached deals with some of them to make their content available to its customers.
The take-up in the VOD market is slowly gaining momentum, helped by innovation to tackle challenges such as broadband availability.
ShowMax, which was launched just over a year ago, has added its service to DStv’s platform and also allows its subscribers who are unable to stream to download programmes and watch them at a later stage. ShowMax says each time it adds a new platform, its customer numbers spike. "Thanks to the accelerating rollout of fibre and fixed-LTE services, decent fixed Internet connections aren’t the limiting factor they once were, so we think we’ll continue to see further growth from this channel," says ShowMax’s head of communications Richard Boorman.
Asked if ShowMax plans to introduce local content, Boorman says: "We’re taking the content production side of things slowly — we’ve got some initial tests in the works and we’ll take things from there based on the results."
Research firm Frost & Sullivan expects high growth in the adoption of VOD services, mainly due to the growing popularity of Netflix. Frost & Sullivan digital transformation research analyst Deepti Dhinakaran says the market shows huge opportunity for "value-for-money" services, especially in SA, from "providers that offer the right mix of content at a competitive price with a sophisticated, user-friendly interface. Service segments such as triple-play and IPTV have high growth potential."