Market Insight

Multichoice pre-empts competition in the emerging South African OTT market

November 21, 2014  | Subscribers Only

Constantinos Papavassilopoulos Constantinos Papavassilopoulos Associate Director, Service Providers & Platforms

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Multichoice, the largest pay TV operator in South Africa (its home market) and in Sub-Saharan Africa, is bringing to the market a bunch of new online services and enhanced functionalities for its DStv Explora set-top box. Subscribers to the top-tier DStv Premium package will have the option to buy a DStv WiFi connector for a price of 399 Rand ($36). Using the WiFi connector the subscribers can connect their DStv Explora set-top box to the internet and set decoder recordings remotely at any time though their smart-phones, tablets and PCs.

Furthermore, Multichoice will launch in December the DStv NOW app. The app will allow customers to download and watch TV content from DStv channels to internet-connected devices of their choice as well as live streaming DStv channels. Finally, Multichoice is further enriching its catch-up TV service, rebranding it as DStv Catch-Up Plus and doubling the number of available film and TV titles to 600 titles.

Multichoice said that access to these extra internet-connected services will be offered for free to existing DStv Premium subscribers.

Our analysis

Multichoice’s recent moves need to be seen in the context of the emerging OTT market in South Africa. Multichoice was the first operator to offer an OTT service in South Africa more than three years ago in July 2011), when it launched the DStv BoxOffice. This is a standalone subscription video-on-demand (SVoD) service offered to non-DStv subscribers as well as subscribers. The cost of renting a blockbuster movie is 27 Rand ($2.45) while library titles cost 15 Rand each.

While for almost three years Multichoice was unchallenged, as far as OTT offers are concerned (bar the launch in July 2013 of e On Demand, the free Catch-Up TV service of the main commercial broadcaster e.TV) , in the last three months numerous OTT services have emerged. 

In September, the Times Media Group (owner of newspapers and magazines in South Africa) launched an SVoD service called VIDI.VIDI offers online films and TV shows to PCs, Macs, iOS & Android phones and tablets, and connected TVs, for a cost similar to DStv BoxOffice. Customers also have the option of a monthly subscription for 149 Rand. The same month, Altech launched its own SVoD service called Altech Node. The customer has to buy a proprietary device, the Altech Node console, at a price of 3,499 Rand which has an 1TB internal hard drive and utilises a satellite connection (the same satellite as the one used by DStv so there is no need for existing DStv customers to purchase a satellite dish) to update its content offer. The Altech Node console can work with any TV set that has HDMI ports and comes with a built-in 3G-modem which enables the device to act as a WiFi hotspot where up to five devices can be connected. Apart from the purchase of the console, the prospective client has to pay a 299 Rand monthly subscription fee.

Further OTT services launches have been announced, before the end of this year or for the first half of 2015: Telco MTN is planning the launch, in December 2014, of an SVoD service partnering with South African digital media group Discover Digital. According to MTN, the service will also offer a transactional video-on-demand (TVoD) option. Recently-licensed pay TV operator Mobile TV is planning the launch of an SVoD service in February 2015. The service will be called TV4U and will be device-based as the prospective customer has to purchase a satellite decoder (at half the price of the Altech Node console) and will offer mainly US and African movies.

South African mobile network operator Vodacom (a subsidiary of Vodafone) announced the launch of its own SVoD service expecting that the main bulk of revenues will derive from a high data growth. US pay TV operator Starz has announced that it is planning the launch of an SVoD service (Starz Play) in Africa, MENA, Asia and Latin America in the first semester of 2015. 

The heating up of the OTT market in South Africa also follows the decision by the country’s regulator to grant five pay TV licences to new operators in April. Two of the licensees are ready to launch their offers and one (Mobile TV) plans to offer an OTT service. To offset this threat, Multichoice can count on its strong assets: the company controls the most premium content in South Africa (local and international football, US blockbusters and TV series, the most popular reality and talent shows). Furthermore, Multichoice has the largest customer-base in the country: according to IHS Television Media Intelligence data, DStv subscribers will reach 5.3 million by the end of 2014. Multichoice controls around 95% of the pay TV market in South Africa and such a huge customer base constitutes the most fertile ground for the growth of OTT services as pay TV operators tend to target first their own subscribers. Other valuable assets that Multichoice possess are its brand-name, its reputation for innovation and reliability (the first operator who introduced pay TV, HD content, PVR set-top boxes and OTT services in South Africa) and finally its consumer-friendly cost structure (free for existing subscribers and competitively priced for new ones).

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