Wednesday, January 31, 2018

MultiChoice finally dumps controversial ANN7 channel from DStv; admits 'mistakes were made - but no corruption' as DStv is looking for a new black-owned TV news channel.

Naspers' MultiChoice pay-TV operator on Wednesday afternoon announced that it's finally dumping the controversial ANN7 (DStv 405) TV channel from its DStv bouquet and admitted that "mistakes were made" but that an internal investigation found no corruption.

MultiChoice SA CEO Calvo Mawela won't release the full report to the public.

At issue is whether Naspers' pay-TV division illegally influenced the South African government's policy on encryption of set-top boxes (STBs) for the stalled digital migration process from analogue to digital terrestrial television (DTT), by paying the SABC and ANN7 to carry their channels, and through them, get them to apply pressure on the government.

MultiChoice on Wednesday admitted that it "has not performed a due diligence test on any channel ownership," and that "given the experience with ANN7, the committee is of the view that in future such due diligence should be instituted and be made compulsory for all new start-up channels."

In November 2017 explosive, leaked meeting transcripts between MultiChoice and the South African public broadcaster the SABC, as well as #GuptaLeaks contracts between MultiChoice and the controversial ANN7 D(Stv 405) channel became public, showing massive payments from DStv to the Guptas, have raised multiple serious questions over corporate impropriety.

MultiChoice told the SABC it would pay the broadcaster R100 million for the SABC News channel but but only on the strict must-have contract clause condition that the SABC must support MultiChoice's stance on conditional access (CA) for digital television.

MultiChoice also dramatically upped its payments from R50 million per year to R100 million per year and then R141 million per year, as well as a questionable, additional R25 million payment to the Guptas for the low-rated, bad quality, mistake-filled and often criticised ANN7.

MultiChoice is paying ANN7 more despite its barely there low ratings than eNCA (DStv 403) that has more than 50% of the overall TV news audience share.

It's all created the perception that MultiChoice has paid kickbacks to both the SABC and ANN7 to use its influence to get set-top box (STB) encryption dropped from government-subsidised STBs in the switch to digital terrestrial television (DTT).

MultiChoice and Naspers have denied the kickbacks allegations and the MultiChoice board announced that MultiChoice is starting an internal investigation of itself.

On Wednesday MultiChoice at a news conference at its MultiChoice City headquarters in Randburg and in a press statement said "mistakes were made in handling ANN7 - but no corruption".

MultiChoice is now dumping ANN7 at the end of August when the current contract ends and said procedures will be "tightened and controversial issues to be escalated to the MultiChoice board faster" in the future when controversy arise around something like ANN7 where thousands of DStv subscribers started a petition for the channel to be removed.

MultiChoice said that a contract for a "new, black-owned news channel is being put out to tender" to replace ANN7 that critics have said was doing slanted, biased news that's sowing division in South Africa.

MultiChoice SA CEO Calvo Mawela admitted that MultiChoice's internal investigation found that the pay-TV operator it had failed to do due diligence on ANN7 and did not raise initial concerns it had over the channel to its board.

"While we are pleased that the investigation into the ANN7 contract did not discover any corruption or other illegal activity, the questions we have faced throughout this process have been sobering," said Calvo Mawela.

"Today we hold our hands up to our mistakes and set out a path to restoring public trust," said Calvo Mawela, who won't be releasing the actual report the the media and the public.

MultiChoice said that the millions of rand it paid and is paying to ANN7 as part of its carriage agreement "are within acceptable parameters associated with the establishment and cost of producing a news channel".

Calvo Mawela said "this has been a humbling experience for MultiChoice. While we entered into an agreement for the ANN7 channel at a time that the extent of State Capture was unknown, we fully understand the outrage of the public regarding endemic corruption in our country and accept we should have dealt with the concerns around ANN7 far more swiftly."

"There’s also no doubt that we managed our communication of this issue poorly."

A new channel to drive down the eNCA costs
After Wednesday press conference it looks even more clear that MultiChoice decided to start ANN7 in part as a tool to drive down costs in channel carriage negotiations and agreements with eMedia Investments over eNCA (DStv 403), the most watched TV news channel where costs soared.

The existence of ANN7 would mean that eNCA was no longer the only player and that MultiChoice could "threaten" to walk away and drop it in carriage negotiations.

"The negotiations with ANN7 began at a time when MultiChoice wanted to add local black voices to reflect more diverse local news coverage on the DStv platform," said MultiChoice in its statement on Wednesday.

"In addition, annual payments to had escalated substantially, heading towards R500 million per year. The commercial rationale was to assist in the development of the new ANN7 channel by contributing to their costs and allow it a reasonable term of three/five years to develop. Should it fail, MultiChoice would let the agreement lapse at the end of the period, as allowed for in the contract."

MultiChoice says "the payments made to ANN7 were not abnormal relative to other local news channels carried on the DStv platform".

"MultiChoice paid an amount to ANN7 for a start-up 24-hour local news channel that was substantially lower than that paid to The terms of the agreement were renegotiated and payments increased when it became apparent that ANN7 needed to improve quality on the channel."

"In addition, the R25 million upfront payment to ANN7 made on 15 September 2015 was neither abnormal nor unusual. Other channels have previously received upfront payments as part of the channel negotiations," said MultiChoice.

MultiChoice admits lobbying issues that need attention
About lobbying the government, MultiChoice also said there is room for improvement on MultiChoice's side.

"Given the fluid nature of lobbying, which is part of the broadcasting and telecoms industry globally, MultiChoice should study international best practise and formalise its lobbying process<' the company said.

"The new process should be adhered to by all involved to ensure that an acceptable line is not crossed in such activities."

MultiChoice admitted that when concerns were raised about the owners of ANN7, "MultiChoice management should have acted more swiftly to escalate issues to the MultiChoice board for formal consideration and decision".

Yet another new local SA TV news channel
MultiChoice says that it "continues to believe that the wide range of foreign and local news channels
(SABC News and eNCA) on our platform – representing widely divergent views, needs to be
supplemented with another local voice. In particular, a black-owned and run channel that represents the majority of people in this country."

"It must be owned, managed and run by a black South African company, free from any political or other interference. It must be able to provide independent, non-partisan and critical news coverage of
current affairs."

MultiChoice said the TV news channel "must take into account South Africa’s history, diversity of cultural backgrounds, language and socio-economic circumstances in the way it produces