While video streaming services like Netflix and Amazon Prime have landed in South Africa and will continue to grow over the next five years, their impact on satellite media giant Multichoice will be negligible as it continues to dominate.
Auditing and advisory firm, PwC has released its latest Entertainment and media outlook: 2017 – 2021 report, showing that significant shifts are underway in how Africa’s entertainment and media (E&M) companies compete and generate value, as quality over quantity becomes the primary basis for profit making.
The group found that by 2021, total E&M revenue in South Africa is expected to reach R177.9 billion, up from R132.7 billion in 2016. Internet access remains the key growth driver and will account for R27 billion of this increase.
The fastest growing sectors will be virtual reality (VR) and e-sports compounded annually at 72.6% and 39.6%, respectively, although these segments are still new revenue lines and remain the smallest in terms of absolute revenue numbers, the group said.
The report also noted that although overall growth in revenue will hold up, it is expected to slow down by the end of 2021.
“Companies that wish to capture value amid shifting consumer preferences and business model disruptions must focus on an increasingly prominent source of competitive advantage: the user experience,” said Vicki Myburgh, head of E&M at PwC Southern Africa.
“These imperatives assume a larger importance because, as we document in the (report), the entertainment and media industry is confronting several challenges to continued top-line growth.”
TV and streaming in the next five years
South Africa remains by far the largest TV market on the African continent, with total revenues of R40.9 billion in 2016 – a total comprised of pay-TV subscriptions, physical home video, internet video, public licence fees, and advertising.
This is expected to increase to R51.2 billion by 2021, said PwC.
“Satellite has had a monopoly on pay-TV subscriptions, but IPTV and pay-DTT established a minor presence in 2016. By 2021 satellite’s dominance will have been squeezed but the sector will still account for 93.6% of subscriptions,” the group said.
This equates to a drop of just a few percentage points as Naspers’ MultiChoice will continue to dominate the satellite market and much of the country’s premium entertainment content and sporting rights.
MultiChoice added a further 626,000 satellite households to its South African base in the 2016-17 financial year, bringing subscriber numbers to 6.4 million, although profits have been hit by local currency pressures, said PwC.
“Despite being a mature market, the growing number of middle class households provide long term opportunities for broadcasters, pay-TV operators and OTT platforms,” it said.
“Improving broadband infrastructure will also be vital in boosting premium revenues, allowing subscribers to access content on demand across a range of devices. The entrance of Netflix and Amazon Prime Video in 2016 brought new competition to MultiChoice, although the latter retains the majority of key sporting rights.”
The report indicated that because streaming platforms are often taken as a complementary service to access a wider range of premium content, there does not appear to be any imminent changes to the pay-TV market on the horizon.
“With a long term shift towards viewing content when and where audiences desire and often on ad-free platforms, there are concerns for advertisers. However, digitisation will provide more opportunity for targeting niche consumer groups, while live content and sport will continue to draw in the largest linear audiences and subsequently, the largest advertising budgets.”