Wednesday, June 15, 2022

MultiChoice: Despite erosion DStv Premium subscriber segment remains important.

by Thinus Ferreira

MultiChoice says its top-end and most-valuable DStv Premium subscribers which saw ongoing customer erosion for a fifth year in a row remain important and that it's adapting to try and lower churn in this segment as customers cancelled because of affordability, emigration and a content slate not matching changing viewer needs.

MultiChoice meanwhile has set itself the target of spending half of its annual general entertainment budget on local content produced in South Africa and across sub-Saharan Africa by 2024, as it discovered that its content line-up for its mid-market DStv subscribers has been unhelpful in retaining them.

Speaking to investors on the company's annual investors call, following the publication of its latest financial results for the year ending on 31 March 2022, MultiChoice CEO Calvo Mawela said the company has been "reviewing its dependence on the Premium base by actively growing the mid and mass-market customer base".

During the period, the company's DStv Premium subscriber base again shrank by 4%.

By the end of the published financial year, MultiChoice had 1.4 million DStv Premium and DStv Compact Plus subscribers in South Africa, with the Randburg-based satellite pay-TV service continuing to see its subscriber growth now coming from its mass-market focused, lower-tiered DStv packages.

The decrease in DStv Premium subscribers, and increase in lower-tiered DStv customers, as part of the overall DStv subscriber base mix, means that MultiChoice's blended average revenue per user (ARPU) once again dropped further from R277 to R269.   

Premium DStv subscribers are leaving for video streaming options like Netflix SA and others, saying that DStv Premium no longer offers enough value for the high consumer price point.

"The past few years saw an erosion in our Premium base due to pressure on affordability in a tough economic environment, a rise in emigration, and a content slate that was perhaps not optimised for the changing demographics of our customer base," Calvo Mawela told investors. 

"Given its absolute contribution, Premium remains important and retention has been a key focus of our recent strategy. Our efforts are paying off and this year saw a welcome deceleration in the rate of decline from 8% last year to only 4%."

He said "another key part of our strategy for the South African business which is maturing at the high end is the launch of new products and services to grow ARPU (average revenue per user) over time".

Calvo Mawela told investors that MultiChoice's "content teams will continue to invest behind our local content strategy where we are targeting to spend half of our annual general entertainment budget on local content by the 2024 financial year."

"The year ahead will not be without challenges. High inflation is likely to affect consumers across our markets and some may have to reprioritise their spending in the short term. At the same time, people are likely to spend more time at home, which could be a positive for us," he said.

Lots of consumers under pressure
"We have always said that we think DStv Premium will get to a stage where it stabilises because everybody that will be on Premium, will be at the higher end of the market that will like to have all video entertainment at a given point in time," he said.

"We believe that we're getting close to that stabilisation point where we'll have the high end sitting on Premium, and marginal increases in pricing will not affect them that much."

"In the mid-segment, as we've reported, we are seeing a lot of consumers under pressure as a result of unemployment, and people having lost their jobs and that is an area that we think is still going to be a pain point in the financial year," he explained.

DStv content line-up unhelpful
Calvo Mawela told investors "what we are beginning to pick up as well in the middle segment is that our content line-up as well has not helped in this regard, especially towards the end of the financial year".

"We think it will be a pain point but we are actively working hard to make sure that we retain as much customers as we can."

"Mass market will continue to grow; we don't see any problems there. We think the product demonstrates value and people love our product very well and we have not seen a slowdown in decoder sales in South Africa in the mass market."