This week saw a dramatic step forwards in the South African TV regulator who is trying to bring some form of competition to South African pay TV. Right now Multichoice has a 98% iron grip on the market.
While it does not wish to throw the baby out with the bathwater and see Multichoice initiatives such as DStv, Showmax and GoTV become less profitable, it clearly wants to walk a dividing line that stimulates more paid TV services and creates competition.
In one graph it suggests that the Naspers owned Multichoice might be brought down to around an 80% market share over the coming two years, from the 98% it holds right now. And while the investigation document it published this week goes some way to suggest what is wrong with the market, it has still not yet published firm ideas on how to limit Multichoice’s power.
The Independent Communications Authority of South Africa (ICASA) has merely published a Discussion Document in the Government Gazette to get written representations in respect of an inquiry into Subscription Television Broadcasting Services.
This follows slow progress over the past year to establish which markets it is talking about – largely sports rights and pay TV – and is now stating clearly that it intends to launch an inquiry into the Subscription Television Broadcasting Services. Stakeholders have until 31 October 2017 to make written submissions before it publishes its findings.
Back in 2016 ICASA issued Digital Terrestrial licenses which were intended to both replace analog channels, but also stimulate pay TV services – so far that has not happened. Multichoice launched a 12-channel GOtv value bouquet alongside a 2 channel lite option on DTT, but others failed to come to market despite applying for the licenses. ICASA previously issued five subscription satellite licenses in 2007 and a further two since, but so far there are only three companies who have delivered a service.
Those original licensees were to MultiChoice, On Digital Media, eSAT, Telkom Media and Walking on Water TV. The Telkom service later became Super 5 Media and On Digital needed a financial rescue. This is literally because the content market is tied up by Multichoice and only 1.5% of homes decided on non-Multichoice services.
In sports programming South Africa has a law whereby those same sports rights must be made available to free to air broadcasters, as either as a delayed broadcast or as a pay per view service.
The worry is that until Multichoice has a viable rival, consumers locked into the service can simply have their bill raised every year.
At present there are 56 million people in South Africa, in 11.25 million households, and although TV has 80% penetration (9 million), only 6.4 million homes have pay TV. Currently because there is no significant TV license fee subscriptions drive 76% of all revenue in TV in South Africa, and Advertising just under 19%, leaving other forms of revenue such as infomercials, sponsorships and license fees at just over 5% between them.
Satellite delivered TV has a 99.1% market share for pay TV, hence the aim to build out Digital Terrestrial as a second delivery route.
Over the top is slowly taking hold in South Africa where some 25 million people have access to the internet and 46% of homes have some form of broadband. But much of that is cellular and includes high data prices, and low LTE penetration, so few can afford to use cellular for video delivery.
Despite that Multichoice has launched a defense against Netflix called Showmax and the local Digital Entertainment on Demand (DEOD) service has seen some growth OTT. The average internet connection speed in South Africa is just 3.7Mbps which is just enough to take video service over a fixed line.
Progress will continue to be slow, with legislation changes needed after this investigation is complete, relating to who can hold what percentage of content rights etc… without sharing them, and regulations likely on wholesale arrangements. But come late 2018 there may be more investors ready to take licenses and this time follow through and deliver services.