After five years, in Africa, Netflix has 1.4 million users. MultiChoice has about 20 million customers and certainly has deeper roots in the continent. To grow that business, Netflix has moved into licensing local movies and commissioning new ones. Yet, the double whammy where people who do not have a lot of disposable income must first pay for Netflix subscriptions, and then find money to pay for the internet broadband services to binge, makes everything complicated. For MultiChoice, through its satellite TV services, all you need is to pay for the subscription and that does it. So, right at the beginning, Netflix has a new layer on its pricing which has to be managed in Africa. Unfortunately, that layer – the mobile internet – is not within its control.
Netflix is testing if viewers will buy the mobile-only service at N1 200 (about R45) a month, well below the N2 900 it’s been charging for its most basic account. With over 100 million Nigerians living on less than R32/day, it could still be a stretch. …
The offer is still costlier than the equivalent of N250/month charged by Iroko, a streaming platform that has the largest online catalogue of Nigerian “Nollywood” content, including long-running hit comedy Jenifa’s Diary.
For the same broadband cost, the iROKOtv pricing did not work well in Africa. The company had noted that Africa would not be part of its immediate future.
It should not come as a surprise to anyone: selling video streaming products in Africa is a hard business. It is a double whammy for most potential customers: pay subscription fees and then cover the broadband costs. So, it was not entirely unexpected when iROTOtv announced that it was refocusing out of Africa: “Over the next week, IROKO will be defocusing our Africa growth efforts and we will revert to focusing on higher ARPU customers in North America and Western Europe. Even after pushing incredibly hard in Africa for the last 5 years, our international business represents 80% of our revenue today…” This is really a smart move as now the company can focus where it can earn U.S. dollars; I made that case a few days ago when I explained how Nollywood producers are focusing on international markets.
But interestingly, DSTv, owned by MultiChoice, is a distributor for Netflix in Africa which means if you check carefully, this battle is muted. I have called it the unification as MultiChoice closes the flanks, taxing its competitors because it has the pipe to the pockets of Africans. But Netflix is happy with it because it is selling a digital product which has a fairly low marginal cost. Provided there is something coming in as revenue from that DStv deal, it would be fine. And over time, the users will get used to its products and could then go straight to the web and subscribe, disintermediating DStv.
In June 2020, I wrote, “The weakest link in MultiChoice’s DStv business is defending itself from Netflix. Netflix was picking some of its best customers in South Africa. Also, because Netflix was not under the high voltage searchlight DStv was subjected as a local operating company, by regulators, the cost was not optimized to compete against the global juggernaut which does not need to open many African locations to do business in the continent. No matter how you look at it, DStv was going to struggle for years to manage the problems from Netflix.” Then, magically, there was a truce and Netflix chose DStv as a distributor. That was wisdom as Disney+ and Amazon Prime were coming after it; the distraction in Africa was not evidently necessary.
Everyone could actually win right now but what happens as mobile internet becomes cheaper would be different. I see DStv waking up one day, in 2022, to decide to part ways with Netflix. Yes, that will come after a clear realization that it has simply used its channels to promote the services of its major future competitor. The future of Netflix in Africa is the web. Whatever it is doing with DStv now is to take care of the marketing budget towards driving higher penetration of the brand in the continent! This is a typical fish bait acquisition construct.
Source: https://www.tekedia.com/that-netflix-multichoice-dstv-gotv-partnership-in-africa/