DStv cord-cutting in South Africa
Amidst the global trend of cord-cutting and increased competition from streaming services, DStv is experiencing declining subscriber numbers and pricing pressure.
MultiChoice latest financial results revealed that active DStv subscribers in South Africa declined from 8.0 million to 7.6 million over the last year.
“Active subscribers declined from 8.0 million to 7.6 million, while the 90-day active base reduced from 9.3 million to 8.6 million,” MultiChoice said.
The 400,000 decline in active DStv subscribers is only part of MultiChoice’s concern. The most problematic part is that the decline affected all market segments.
Over the last year, DStv Premium declined by 8%, DStv mid-market declined by 9%, and DStv mass market by 1%.
This shows that DStv’s pay-TV growth is behind it. It cannot target any further market segments with its satellite offerings.
This should not come as a surprise. Globally, there has been a decline in pay-TV subscribers, known as cord-cutting.
Cable and satellite TV providers have lost over 20 million subscribers in the United States over the last decade, and this trend is accelerating.
The latest research reveals that there are expected to be 80 million cord-cutting US households in the United States by 2026.
Young people aged 18 to 29, who have grown up with the Internet and streaming services, are the most prolific cord-cutters.
Price is the number one reason people cut the cord on their pay-TV service. 87% of people who dumped their subscription cited price as the reason.
Only 34% of pay-TV subscribers said they are happy with the value they receive from their pay-TV subscription.
Even more concerning for pay-TV providers is that most people who have moved to streaming services say that they do not miss anything about their pay-TV subscription.
MultiChoice’s South African DStv service is particularly exposed to people leaving the service because of price.
For two decades, South Africans have been complaining about the price of DStv, especially its premium service, which offers sought-after sports content.
However, MultiChoice ignored these concerns and religiously increased the price of its DStv service on 1 April every year.
It had the luxury of increasing prices at will because it enjoyed a monopoly in the pay-TV market. It also had exclusivity on many desirable sporting events, including rugby.
However, things started to change for MultiChoice in 2016 when streaming services like Netflix gained popularity in South Africa.
At the same time, uncapped fibre broadband services gained momentum, with many fibre network operators rolling out access across South Africa.
The combination of affordable, fast, and unlimited broadband with cheap streaming products posed a significant threat to MultiChoice’s DStv service.
During its 2021 presentation to ICASA, MultiChoice said global streaming video services like Netflix were their biggest competitors and “an existential competitive threat.”
It highlighted that over-the-top (OTT) services had already fundamentally disrupted the music industry, eliminating the sale of physical cassettes and CDs.
They said traditional broadcasters, like MultiChoice, are now facing a similar existential threat to their businesses.
“These global OTT services and large, well-resourced domestic telecommunications companies are completely disrupting traditional TV, particularly Pay TV, in South Africa,” it said.
This scenario is now playing out in South Africa, and MultiChoice does not seem to have any way to stem the decline.
MultiChoice is now looking for alternative revenue streams to compensate for its DStv subscriber growth.
Its new strategy includes its own streaming service, Showmax, online sports betting, and becoming a one-stop-shop for bundled streaming services.
However, it does not have a significant competitive edge in most of these markets, so success is far from guaranteed.
Telkom, for example, is building a content-aggregating platform on which users can subscribe to a bundle of streaming services.
Telkom Consumer CEO Lunga Siyo said Telkom will provide the data needed for their subscribers to stream the content they subscribe to.
This is in direct competition with MultiChoice’s bundled services, and Telkom can offer data as part of its packages.
For these reasons, most investors view Canal+ buying MultiChoice as the best scenario for the once-powerful pay-TV operator.
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