Thursday, February 4, 2016

Weakening rand predicts a bigger than usual DStv price hike in 2016; subscribers will keep paying and growing as 'DStv is seen as a status symbol'.

The ongoing weakening of the rand foreshadows a possible bigger price hike this year than usual for South African DStv subscribers as local pay-TV subscribers will have to bear the brunt of the currency that continues to slide.

 MultiChoice signs international content and channel deals and buys the bulk of television content in dollar.

It means that the rand's ongoing plunge in 2015, continuing in 2016, will likely have the same impact on DStv subscribers' monthly bill - a steep increase similar to what's been happen to food, electricity and medical aid prices.

While MultiChoice for the first time ever hiked prices for a second time in one year for DStv subscribers in other African countries like Uganda and Kenya following massive depreciation in local currencies in 2015, South Africans were spared as the pay-TV operator absorbed the cost.

Last year's depreciation, coupled with the rand's ongoing weakening in 2016, spells a bigger than usual subscription increase for DStv subscribers since the local currency has lost a third of its value since 2015. MultiChoice usually announces at the end of February what the increase will be that comes into effect by April.

MultiChoice was asked if this year's DStv price increase would be inflation-related or a steeper above inflation increase given that there wasn't a second price increase in South Africa.

MultiChoice declined to give a specific answer and in a general response says it is busy finalising by how much DStv fees will increase by April.

"We review our subscription fees once a year as part of our business planning process, which we are currently finalizing. Part of this review is considering the impact of the current exchange rate, as the majority of our costs to bring our customers the best entertainment are in foreign currency," says MultiChoice in response to a media enquiry.

"We want to keep bringing our customers the best international and local entertainment first, access to top sporting events and the latest news and documentaries. Once this process is finalized, we'll communicate the new fees effective 1 April 2016 to our customers".

MultiChoice forked out R12,6 billion on acquiring content as well as on programming and production costs between April 2014 and March 2015 and another R5.8 billion between April and September last year for its DStv subscribers in South Africa now totaling 5.5 million.

SuperSport paid around R6 billion recently in a new deal for the English Premier League broadcasting rights for sub-Saharan Africa.

Despite worsening economic conditions and bigger pressure on South African consumers' discretionary spending, pay-TV growth in South Africa despite pay increases continues to show strong growth as the South African TV market and overall TV viewership figures grow.

Despite having to pay more every year, existing South African pay-TV subscribers are not abandoning their subscription television and more are signing up - unlike in America where the trend of so-called "cord-cutting" and pay-TV subscriber losses are accelerating.

'DStv is a status symbol'
"DStv is a status symbol among aspirant media audiences and consumers and the growing South African middle class," says Dr Musa Ndlovu, a media expert and a senior lecturer in media studies at the University of Cape Town's Centre for Film and Media Studies tells me.

"Pay-TV offers a wide variety of programming choices like news and entertainment for a growing middle class audience, compared to 'domestic' terrestrial TV stations," says Dr. Musa Ndlovu.

"The growth of pay-TV subscriptions should also be seen against the declining trusts in government and interest in politics. DStv feeds into the culture of leisure and entertainment, pervasive among some in the middle class and technologically it provides better satellite-based quality reception. The picture is clear."

"Some families 'club' together' to pay for it, and the decline of a reading culture corresponds with the rise in TV consumption," he says as two more reasons that's fueling the ongoing pay-TV uptake in South Africa.