While DStv subscribers constantly see their subscription fees increase with another likely DStv price hike set for April 2019, MultiChoice is actually making less and less revenue per individual DStv subscriber - in fact it's back at 2014-levels it last saw four years ago.
Here's why: The cause is the shrinking portion of MultiChoice's "most valuable p(l)ayer": the DStv Premium subscriber who no longer see MultiChoice's top-tier as offering enough value for the monthly money.
On Friday Naspers released its interim results for the 6 months to 30 September 2018 that revealed that MultiChoice had added another 400 000 further DStv and GOtv subscribers as well as Showmax users to its pay-TV business in South Africa and Africa compared to a year before.
That's great, although the portion of DStv Premium subscribers as part of the overall DStv subscriber base continues to shrink.
It means that more and more DStv subscribers don't want to pay to have DStv Premium - it's too expensive for what MultiChoice is offering compared to DStv Compact Plus and DStv Compact and not offering enough value in return for what it costs to have it.
While MultiChoice Group CEO Calvo Mawela earlier this year blamed the drop-off in the share of DStv Premium subscribers on Netflix's aggressive expansion in South Africa and Africa, Naspers on Friday said that the pressure leading to DStv Premium subscriber churn is due to consumers coming "under some disposable income pressure" and not because of competition from video streaming competitors like Netflix.
What the drop in the overall percentage of DStv Premium subscriber numbers means is that MultiChoice is making less average revenue per subscriber.
The term for this is ARPU, or average revenue per user. For the 6 months to 30 September 2018 MultiChoice's ARPU fell 3% from $27 (R347) a year ago to $25 (R335) currently.
As a sidenote, the ARPU as DStv subscription fee revenue includes the PVR Access fee and DStv BoxOffice income, but excludes Showmax subscription fees.
Naspers said that at MultiChoice South Africa going forward "the focus of the South African business remains retaining premium subscribers while driving subscriber growth in the mid- and mass-market tiers" and that "subscriber retention is underpinned by rising PVR penetration uptake of connected video services, and roll-out of additional services".
Now let's look at the DStv ARPU of R335 for the 6 months to 30 September 2018.
It is back at a level last seen in 2014, when the DStv ARPU was also R335.
MultiChoice's DStv ARPU across its African pay-TV business was R335 for its financial year that ended 31 March 2014, R349 for end-March 2015, R347 for end-March 2016, R353 for end-March 2018, and R344 for end-March 2018.
It means that while MultiChoice has more pay-TV subscribers than ever before - 13.9 million in total of which 7.2 million are in South Africa that remains MultiChoice's biggest market, and a combined 6.69 million in the rest of Africa - on an individual basis they are less "valuable" than before.
Think of an airline. While an airplane has first, business, premium economy and economy seats, or mostly business and economy seats, airlines make more money from first and business class passengers - although they're fewer and the number of seats in those cabins are less - than the rows and rows of cheaper paying economy class passengers.
With the MultiChoice Group planning to list on the JSE during the first half of 2019, MultiChoice is going to have to work harder to grow and retain DStv Premium subscribers.
MultiChoice will have to do more to give DStv Premium subscribers more added value and making these pay-TV consumers feel as if it's worth it to pay for the top-tier, like getting a dedicated monthly TV guide magazine, possible exclusive offers, and more bells and whistles like Showmax that used to only be accessible for DStv Premium customers.
