Vidi’s first-mover advantage in the online video-on-demand (VOD) space in South Africa will not last long, with a number of firms expected to follow suit, according to global advisory services firm International Data Corporation (IDC).
Last week’s launch of VOD service, Vidi, by Times Media Group (TMG), has paved the way for a ramp up in competition in the country’s pay-TV market, long dominated by Multichoice’s DSTV service.
IDC said that Vidi has first-mover advantage, and could cause “significant disruption” to the pay-TV subscription market in the near future.
However, with other players – including telecom operators – also planning to launch VOD services, Vidi’s first-mover advantage will not last long, according to the IDC.
It noted that while Telkom withdrew its RFP for VOD services in February 2014, it promised to issue a new RFP that is properly aligned with the company’s new strategy.
Other operators are also believed to be in discussions with content providers to offer similar services, the advisory group said, including the likes of Vodacom and MTN, the latter expected to announce something in Q4.
“The biggest threat in the short term to Vidi is expected to come from Telkom if it launches its own VOD services by leveraging its ADSL infrastructure,” said George Kalebaila, senior research manager for telecommunications and digital media at IDC Africa.
“Telkom can offer VOD as a bundled service to its ADSL customers as a triple- or quad-play offering, and position itself as the preferred connected home communication provider to its subscribers.”
DSTV currently offers online VOD to DSTV premium subscribers on multiple devices, but the DSTV premium subscription of R665 per month is considered to be too expensive by many South Africans, the IDC said.
“It will be interesting to see if DSTV will move to protect the online VOD segment by opening the service to all its subscribers,” the firm questioned.
Vidi’s R149 per month subscription also compares favorably to Netflix’s $7.99 per month plus ZAR50 for a VPN connection to the US.
“In addition, Vidi’s quality of streaming is expected to be better than the international alternatives since Vidi has a local content distribution network (which act as content accelerators) in Johannesburg, Pretoria, and Cape Town, the advisory firm said.
“IDC believes the major impediment to mass adoption of online VOD services in South Africa is the cost of data connectivity, particularly for mobile broadband,” said Kalebaila.
“The advantage of accessing digital content from anywhere on multiple devices will be lost if the cost of data connectivity remains high. With low fixed broadband penetration in the country, the online VOD proposition on mobile broadband is where the numbers are going to come from owing to the large mobile subscriber base.”
The IDC said that mass roll-out of FTTx offerings are still a long way away, and therefore mobile broadband is the only attractive alternative for mass adoption of online VOD in South Africa.
“The anticipated freeing up of the digital dividend spectrum by ICASA post-2015 is expected to speed up LTE rollout and drive the cost of data downwards. Finally, IDC believes that online VOD will only significantly disrupt the pay TV market once the cost of data connectivity falls to affordable levels for the mass market,” Kalebaila said.