As subscribers decline, MultiChoice begins disrupting itself

Management has made some strange decisions to prop up the business …

MultiChoice is under tremendous strain. Subscriber numbers are, for the first time, in structural decline.

In the year to March 2024, it saw drops in not only its Premium segment (DStv Premium and DStv Compact Plus, down 8%) but also in its mid-market (DStv Compact, down 9%) and mass market segments (down 2%). The latter, which offers entry-level packages costing as little as R29 per month, has been growing relatively strongly for years and has helped the pay-TV operator offset declines at the top end. 

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Read: DStv has lost one in six Premium subscribers since 2021

This reversed in the last year as higher interest rates, a stagnant economy and an explosion in other viewing options (many of which are free) hit the business.

Overall, subscribers are down 5% in South Africa – nearly half a million accounts.

It has also been distracted by anything but pay TV, given that it has known for years that the market would turn ex-growth. 

It’s taken a sizeable gamble on a betting business (years and years too late) in Nigeria.

It expanded this to South Africa and has moved into what it describes as ‘adjacencies’ such as streaming (Showmax), reselling internet packages, safety (Namola) and payments … anything and everything but its core business. 

Read: MultiChoice bets on a future beyond pay TV

Canal+ will no doubt simplify the business (read: get rid of the distractions) once the takeover by the French is completed.

The business churns cash, and with efficiencies to be extracted on content, sports rights, and satellite transponder leases, it should return to healthy profit margins sooner than many think. 

Read: Why Canal+’s MultiChoice takeover is going to get messy

Strange decisions

However, to prop up the business, its management has made strange decisions in recent years. 

Showmax as a proposition was always strange. The French have already publicly questioned why MultiChoice decided to launch an entirely separate streaming product to compete against its existing DStv Stream. 

First, it launched a stripped-down sports bundle on its streaming service Showmax, which has since become a Premier League package. At R69 per month, this provides a very affordable entry point for consumers who cannot or will not stump up the R469 per month for a DStv Compact subscription.

Read: MultiChoice to offer Premier League content on Showmax

To make this bundle even more appealing, it has since added live PSL games to it, including cup competitions Carling Knockout Cup, MTN 8 and Nedbank Cup.

Now, any younger consumer who might’ve considered a Compact package (or even a slightly cheaper streaming-only one at R399 per month) will surely choose Showmax (which is no longer even wholly owned by MultiChoice).  

It also cracked down on households that share their streaming credentials, but then caved and offered additional mobile streams for R99 per month for Premium and just R49 for Compact packages. It surely knew that stopping account sharing wouldn’t suddenly get thousands of customers to subscribe (re-subscribe) to DStv. Or did it? These additional subscriptions have helped prop up revenue, especially in the Premium base, as total subscriber numbers decline. 

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Read:
DStv picks nuclear option to crack down on password-sharing [Feb 2022]
DStv caves on single stream limit, but there’s a catch … [Aug 2023]
DStv further relaxes streaming limits – at a price [Feb 2024]

These moves have been the first steps to disrupt its core business as it charts a future beyond linear pay TV. Showmax continues to grow (16% increase in paying subscribers since its relaunch in February) but remains unprofitable. 

Capitec partnership

Its biggest move yet will launch this month in partnership with Capitec Bank, which has 20 million clients. The bank’s CEO, Gerrie Nel, announced this month that it will launch DStv vouchers that will enable customers to access specific content. “A consumer will be in control and pay for only what they want to watch,” said Nel, reportedly.

Read: Capitec Connect’ SA’s fastest-growing mobile business’

“You need to be a Capitec client to qualify for the DStv streaming option. What will happen is that clients will go onto a Capitec app and buy a voucher and watch for whatever they would have paid for. A client will be able to say: ‘Tonight I want to watch this particular programme and pay for it’ or, for example, buy a package of European soccer.”

In effect, this will unbundle the bundle, something pay-TV operators the world over have fought hard against.

The economics of the bundle make the whole thing work. This is why sports-only subscriptions simply aren’t feasible. One wonders how much the French know about (or approve of) this plan. 

Capitec’s market power is astonishing. It launched Showmax vouchers on its banking app in mid-August and sold 50 000 of them in six weeks.

Capitec customers are effectively able to subscribe to Showmax at half price using these vouchers. In the six months, Capitec has grown net income from bill payments, lotto purchases, vehicle licence renewals and Showmax vouchers by 50% to over R200 million.

This will almost certainly have a dramatic impact on MultiChoice, in the mid-market in particular. Why would one need to pay a monthly subscription for a Compact package, if you can pick and choose the content you want to watch and only pay for that? Enabling this via such a large distribution partner will put further pressure on its subscriber base. 

Listen: Tech troubles: Can Cell C and MultiChoice survive?

Perhaps it’s seen the writing on the wall, and the decline is irreversible?

This will at least enable it to generate some revenue from subscribers who are unlikely to ever return, somewhat echoing its decision to launch the extra mobile stream bolt-ons – R99 from a customer who is not likely to ever subscribe (or resubscribe) to DStv and uses that login to, say, watch the Springboks and maybe some F1 races, is better than zero rand from that same person. 

This latest move would’ve been agonised over, debated, and planned for years internally. That’s just how MultiChoice works. It may well be the correct decision, but at the wrong time.

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