War for eyeballs hots up in SA’s television industry
Fantastic growth is in the tea leaves of local television broadcasters — but only if they can keep up by investing in digital platforms
SA’s film and television industry has the potential to grow by close to R100bn over the next five years, according to data from consulting firm Accenture.
Roman Magis, principal director for video, advertising and content at Accenture Africa, says its research shows that by embracing digital technologies, SA’s broadcasters could generate an additional R93bn in value by 2026.
That additional benefit could come from advertising revenue as well as investment in local film productions — particularly from global streaming platforms with deep pockets.
Local players who invest in technology such as digital platforms of their own also stand to benefit — from additional advertising revenue as well as growth in customer numbers.
However, Magis warns that as much as there’s an opportunity for the local industry, Africa’s players need to make sure they can capitalise on it or risk being outpaced. The way to do this is by investing in online platforms.
"The entry of global players is threatening the local SA market share and forcing local media organisations to rethink their traditional business models to take up the competition in the global context," he says.
Accenture’s data says the SABC, the public broadcaster, "has held a monopoly share of the industry," covering 77%-91% of the population. It has sustained itself mainly via advertising revenue, which made up 70% of its earnings of R6.46bn in 2019.
Competition for the now cash-strapped public broadcaster has so far come from free-to-air player e.tv, with a 90% reach and R1.6bn in revenue; as well as pay-TV provider MultiChoice, which has a population reach of only 15%-20%, with 8.4-million local customers.
However, pay-TV operators earn only a portion of their revenue from advertising. This may seem more sustainable, but "they too have been disrupted by newer models", such as digital broadcasting platform Netflix.
And the pie for advertising revenue seems to be getting smaller in favour of online platforms.
According to the National Association of Broadcasters, revenue from TV advertising grew from R6.6bn in 2014 to R7.5bn in 2018, reflecting a 3.3% compound annual growth rate in comparison with 14% growth during the pre-2014 period. Overall, television revenues comprising subscriptions, advertising and licences amounted to R35.4bn a year.
Magis says interest from international companies is a big opportunity for the local industry.
"Amazon is not as present in SA, but Netflix has become quite embedded. It has indicated that it is going to have Africa as a content hub, which points to additional investment and content on the continent."
Netflix doesn’t comment on viewership numbers, country and territory subscriber numbers or spending on producing and licensing content. That said, it is expected to invest $17bn on original content globally in 2020.
Magis says 5%-8% of Netflix’s production budget is likely to come to Africa. "The show Queen Sono has been successful, even outside SA, pointing to the creativity and manpower in Africa that such a company can continue to invest in."
Netflix says it has numerous projects in Africa "in various stages of production". In addition to Queen Sono, the company says Blood & Water will also make a return for a second season. The streaming service also announced another young adult title, Jiva! for SA and an as-yet untitled Akin Omotoso project from Nigeria.
Besides its own original productions, the company is licensing more content from across Africa including Kalushi in SA, Cook Off in Zimbabwe and other titles in Nigeria, Ghana and Mozambique.
Between the various players in broadcasting, MultiChoice as a pay-TV provider has the most financial muscle to take on international competition. But even with more than R5bn in cash on its balance sheet, its pockets aren’t as deep as those of Netflix.
In June, MultiChoice, a former Naspers company, said it would add content from Netflix and Amazon Prime Video to its service in a bid to attract new customers.
This comes after years of complaining by MultiChoice CEO Calvo Mawela that international operators have an unfair advantage.
The new deal will help the US companies gain a bigger foothold in Africa, where MultiChoice has close to 20-million customers across 50 countries, while helping MultiChoice to keep subscribers on its platforms with a variety of content from Netflix and Amazon.
According to data from Digital TV Research, the penetration of streaming players such as Netflix is still a mere 4% in Africa against 82% in North America, 69% in Western Europe, 34% in Latin America and 37% in Asian emerging markets.
"It’s a bold move," says Magis. "MultiChoice can’t compete with Netflix. But with this platform it is further positioning itself as the sole entertainment provider in Africa ... instead of having separate subscriptions for international streaming services, Netflix and Amazon content will be built into MultiChoice platforms."
MultiChoice is clearly the one that’s read the message in the tea leaves about the wave of international competition coming to Africa. Perhaps its presence in 50 countries gives it better perspective and the finances to do so.
Either way, e.tv and the SABC have to find ways to position themselves beyond their current business models or risk falling too far behind the curve.
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