The third annual PricewaterhouseCoopers' South African Entertainment and Media Outlook 2012-2016 Report has just been released - and the section looking at South Africa's white hot television industry estimates continued, massive double-digit growth for pay-TV in South Africa as TV viewers want better and more television - and are willing to pay for it.
According to the report, pay-TV households in South Africa are set to grow from 3,7 million in 2011 to a staggering 5,9 million by 2016 - with subscription television reaching a phenomenal TV household penetration of 81,4% penetration by 2016 in the country.
According to the report the bad quality of content and limited choices on the SABC channels are the main factors underlying the migration of viewers away from the SABC and to pay-TV.
The report also predicts that social media is going to be a strong factor fuelling the uptake of subscription television in South Africa as viewers talk and interact around buzz-making, must-see television, and notes that "quality local TV content is becoming increasingly important".
According to the report, PwC predicts, based on current trends and information, that the total television advertising revenue in South Africa will increase at a projected 7,8% compound annual rate to a staggering R14,6 billion by 2016. Meanwhile subscription spending on pay-TV is set to continue double-digit growth through to 2015 and to rise to R21,8 billion by 2016, compared to R12 billion in 2011. That is 12,7% compound growth annually.
Meanwhile community TV stations in South Africa are beginning to generate measurable audiences and meaningful advertising revenue. According to the benchmark report, the SABC is facing increasing competition from pay-TV providers which is attracting viewers. The SABC will face further increased competition after the launch of digital terrestrial television (DTT) as even more free TV channels are rolled out.
Massive TV market growth, fuelled by uptake of pay-TV
The overall TV market rose 13,4% in 2011, fuelled principally by a 23,8% rise in pay-TV subscription spending. Advertising growth in the TV biz however slower to 4,2% from the massive 28% increase seen in 2010 due to the 2010 FIFA World Cup.
According to the unbiased report, now conducted annually and which is fast becoming a must-read in-depth analysis of the local market, the online television advertising market - helped by an expanding broadband household base - is likely to more than triple during the next five years to R44 million in 2016 from R13 million in 2011. Advertising revenue from mobile TV is estimated to reach R40 million by 2016.
According to the report TopTV "does not have have a meaningful sports offering and has scaled back on its plans to introduce high definition (HD) channels and a personal video recorder (PVR)."
The report states that "TopTV has encountered several problems over the past year, including not being able to secure meaningful sports content, billing problems, and losing third-party channels from its bouquet as a result of dwindling subscriber numbers. However, TopTV has managed to replace some of these with new channels".
"DStv's PVR service has been extremely succesful with more than 650 000 subscribers already using the service, a 37% increase from 2011."
Increased competition
"With the increased competition in the market, and with the proposed introduction of DTT, consumers increasingly want to have a service tailored to their specific needs," says the TV report. "As consumers increasingly want to select what they would like to watch, it is increasingly becoming more and more difficult for service providers to differentiate their service offering."
"M-Net produces various reality shows, the most popular being Idols and the recently-concluded MasterChef South Africa. Not only does this provide unique content not available anywhere else, but it also enhances M-Net and MultiChoice's presence on social networks," says the report.
"We believe that the huge popularity of social networks will benefit the TV subscription market." The report also states that "quality local TV content is becoming increasingly important".
"Locally-produced content is very expensive - higher viewer ratings, which in turn generate advertising revenue, are therefore required to make the investment worthwhile."
Limited pay-TV competition
According to the report, pay-TV competition in South Africa is limited, with MultiChoice and DStv and On Digital Media (ODM) and TopTV the only players. "Even if new licences are issued for both pay-TV and DTT in South Africa, it would take significant time for new market entrants to gain traction in the market and therefore we don't expect a meaningful change during the forecast period [-2016].
Rapid pay-TV household growth
The overall subscription household universe is growing rapidly, notes the report. "The number of pay-TV subscribers rose by 700 000 in 2011, the largest single-year increase in South African pay-TV history. Between 2088 and 2011 the subscription household base nearly doubled. The availability of popular sports on pay-TV has proved to be a major lure. Enhanced services for the high-end subscriber and discount packages for the less affluent have helped to expand the market."
"During the past three years, subscription household growth averaged 23,8% compounded annually. We do not expect this steep pace of growth to be maintained. With a majority of TV households in South Africa now subscribing to a pay-TV service, future growth will necessarily be more limited."
"In addition, the launch of DTT in late 2012 will provide an enhanced TV channel selection that will be largely available free, providing new competition for pay-TV. We expect that a growing DTT market will cut into subscription TV household growth during the latter part of the forecast period."
"We predict two additional years of double-digit growth in the pay-TV subscriber base," says the report. "by 2016, however, growth will drop to mid-single digit increases."
"The overall number of subscription households in South Africa will increase from 3,7 million in 2011 to a projected 5,9 million by 2016. Subscription household penetration will reach 81,4% in 2016 from 52,9% in 2011."
"With a significant number of households now subscribing to pay service, the SABC is facing the prospect of ongoing share loss. The quality of content and limited choices available on the SABC channels are the main factors underlying the migration of viewers to pay-TV. The launch of DTT will exacerbate this trend as broadcasters such as e.tv and M-Net introduce new TV channels on DTT bouquets."
