Thursday, December 1, 2016

While MultiChoice adds 600 000 subscribers by the end of September and DStv Explora uptake remains strong, DStv Premium subscribers are declining.

While MultiChoice is adding DStv subscribers, the African pay-TV operator is now losing one specific type of subscriber, with one of its products that is no longer resonating as strongly with consumers as representing enough value for money: DStv Premium.

MultiChoice has released its results for the six months until the end of September 2016 that shows an increase in revenue and subscribers - but one specific type of DStv subscriber is not growing and in decline: DStv Premium subscribers.

After a previous slump of losing 164 300 pay-TV subscribers, MultiChoice bounced back by adding almost 600 000 subscribers (591 968 subscribers to be specific) during the reported six month period. GOtv added 150 000 subscribers across Africa compared to the previous year.

Interestingly, this growth is not coming at the high-end of its offering range, represented by its DStv Premium product.

MultiChoice's results for the six months until the end of September 2016 shows that while the lower end of the pay-TV customer base remains stable, the top end is contracting. Naspers says net subscriber additions now come from mainly middle and lower tiers.

While lower-end subscriptions remain stable at 52%, the subscriber mix is changing, with DStv Compact growing from 26% to 30% of the total, while DStv Premium is sliding from 22% to 18% (2.24 million subscribers to 2.005 million).

DStv subscribers who paid for DStv Premium are switching down to DStv Compact and new customers are opting for DStv Compact outright.

Looking at this graph from Naspers' presentation, it can be seen that the growth in DStv subscribers numbers are now coming from the middle - DStv Compact - while DStv Premium declines.

But why? Naspers and MultiChoice are not giving reasons but worsening economic conditions impacting on discretionary consumer spend is obviously making subscribers think twice about what they're actually getting in real terms, for what they have to pay and whether DStv Premium is worth it.

In addition, MultiChoice has also been changing the value offering of DStv Premium and DStv Compact (the others DStv packages as well, but for this report lets focus on these two specifically) over the past year.

This value change can be said or stated in two ways, depending on how you want to see it: MultiChoice has been diluting the value of DStv Premium by not adding enough exclusivity, products and services to this product - or, MultiChoice has been increasing the value of DStv Compact by adding a lot of the former exclusive products, services and functionality of DStv Premium to DStv Compact.

In essence the the totality of what DStv Compact offers has grown faster than DStv Premium, or stated another way, what DStv Premium offers subscribers hasn't grown as fast or kept up with what's made available to lower tiered DStv packages.

Over the past year MultiChoice added several TV channels to lower-tiered packages, but not nearly the same exclusively to DStv Premium.

HD channels were originally for DStv Premium subscribers only. (At 30 September MultiChoice offered 27 HD channels to subscribers).

The video-on-demand rental service DStv Box Office was originally for DStv Premium subscribers only. DStv Catch Up was previously for DStv Premium subscribers only.

The subscription video-on-demand service (SVOD) ShowMax was made available to DStv Premium subscribers first, but can now be accessed through all active, internet-connected DStv Exploras, irrespective of the DStv subscription.

There's also been several unencoded, so-called "open" weekends, weeks and half month periods during the past year where lower-tiered DStv subscribers got access to a lot of of premium content and channels for free that DStv Premium subscribers have pay for - ranging from Disney to M-Net.

For DStv subscribers clearly the perceived "value gap" between DStv Premium and DStv Compact in terms of what they get has narrowed, compared to the "price gap" they have to pay.

(Click on the graphic above and it will open bigger.)

In November, M-Net CEO, Yolisa Phahle, in an interview, alluded to the decline in the popularity of DStv Premium. She said the DStv Premium market could be reaching saturation point, but that the future still offers significant growth opportunities for subscription television.

Uptake of DStv Explora decoder remains strong
Naspers' video entertainment division that comprises MultiChoice running services like DStv and GOtv in South Africa and across the African continent says in its six months' report that it has come under pressure due to sliding African currencies, since TV content is procured in dollar.

Video entertainment revenue declined by 8% to $1,6 billion, while trading profit in the video entertainment segment fell by a third to US$331 million, from $492 million previously.

At the end of September 2016, MultiChoice now has 11 million pay-TV subscribers across Africa.

MultiChoice says that the "contraction in the South African economy continues to impact our customers" while "increased competition and the rand depreciation contributed to rising international dollar-based content costs".

"Despite the current environment, we have not compromised on delivering unrivaled local and international content, demonstrated by our dedicated coverage of the 2016 Rio Olympics on 7 HD channels, the coverage of the Euro 2016 football and the best local and international shows such as Isibaya and Suits."

In a statement Naspers says "the focus remains on giving subscribers the very best local and international content, while managing costs, improving customer service and retaining customers in an environment where there is intensifying competition from global players such as Amazon, Netflix, Apple and Google".

"ShowMax, the subscription video-on-demand service, is growing steadily".

Naspers says "DStv Catch Up was made available to DStv Compact customers, as well as a decoder payment plan, which boosted the uptake of our personal video recorders (PVRs)".

MultiChoice says that uptake of the DStv Explora decoder "remains strong and customers who make use of the Explora continue to report high levels of satisfaction".