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Investment: Coming to a TV screen near you

Posted on Tuesday, 28 October 2014 12:00

Africa is in the grip of a television gold rush as production and distribution firms race to control key markets and satisfy soaring demand for programming.

A continent that has for decades been overlooked by international distribution companies is now at the forefront as global television networks vie to secure contracts to provide content to growing middle-class populations with more disposable income.

We expect to see an increase of around 20m additional TV households in sub-Saharan Africa between 2013 and 2020

The sub-Saharan market has traditionally been dominated by South Africa’s MultiChoice in Anglophone Africa and French firm Canal+ Overseas in the Francophone regions.

They are now competing with rivals such as China’s StarTimes, which has launched an aggressive expansion strategy, pledging to increase its pay-TV subscriber base from its current level of around 4 million people to 20 million in five years.

Backed by a number of Chinese banks, including the Export-Import Bank of China and the China Development Bank, StarTimes has already signed deals to provide content in around 15 African countries, explains Simon Murray, the principal analyst at the media consultancy Digital TV Research.

It plans to double this to 30 by the end of the decade.

The firm has deep pockets, having reportedly secured more than $400m in loans since 2012, and is increasingly threatening MultiChoice’s position as the largest pan-African provider.

In Nigeria, a joint venture between the government and StarTimes pushed MultiChoice from the top spot in 2013 as the largest pay-TV provider, as measured by the size of its subscriber base.

“There is no doubt that the entry of StarTimes has radically changed the African TV market,” says Adam Thomas, lead analyst for Global TV Markets at research firm Ovum.

“While there have been occasional challengers to MultiChoice’s dominance over the years, it has always managed to flex its financial muscles and swat them away. But StarTimes is different, it has its own deep pockets and is posing a really serious challenge to MultiChoice right across the region.”

Smaller rivals are also appearing on the scene and helping to drive down prices for consumers.

“In Kenya, Wananchi [Group] and [its platform] Zuku are successfully challenging MultiChoice by offering a wider range of channels and at lower prices,” adds Murray.

The firm has already expanded into Uganda and Tanzania and has announced plans to launch operations in Malawi soon.

Despite losing ground, MultiChoice still has a key advantage in its control of rights to UEFA Champions League football matches, plus English Premier League football and rugby, which remain a powerful draw for viewers.

“MultiChoice’s position of strength is built on its control of key programming rights,” adds Thomas. “The rights to the English Premier League and other European football are a very important component of this, but it is its across-the-board dominance of rights deals that is important.”

Have money, get TV

The sector has recorded promising growth over the past decade as the continent’s economic expansion fuelled an increase in the number of viewers, with a consequent rise in income from television services.

Revenue generated from pay-TV products in sub-Saharan Africa, which was around $1.8bn in 2010, is set to nearly triple to $5.3bn by 2020, according to data from Digital TV Research.

This is being driven by a surge in the rollout of services, as analysts predict the number of homes in sub-Saharan Africa with access to television will jump from 48m in 2010 to 68m by 2020.

The expansion began in South Africa, which saw a rapid rise in television sector revenue at the end of the past decade, with satellite subscriptions up 20% in 2009 and 15% in 2010, according to PWC’s South African Entertainment and Media Outlook report 2013-2017.

This in turn drove up advertising revenue and fuelled an expansion of channels to satisfy choice-hungry viewers.

Geographic shift

The growth in South Africa was in part a response to the 2008 economic crisis in the US and Europe, which drove investors to seek out new investment opportunities outside of the developed economies, says Audrey Iwanczyszyn, an international media consultant specialising in Europe, the Middle East and Africa.

“South Africa was a tremendous investment opportunity at that time. You had a young demographic with a rising standard of income who were keen to have access to television,” she says.

“MultiChoice was, and still is, the primary player in that market and has a very professional operation, with good PR [public relations] teams, marketing and customer services, so it was an obvious choice for firms looking to invest in the sector in Africa.”

But as South Africa’s double-digit growth peaked and gave way to more modest yet steady expansion, investors have now turned to the markets of Nigeria and Kenya, where they say there is much untapped potential.

With a population of 166 million people, Nigeria had only 1.8m pay-TV households by the end of 2012. At the same time, Kenya had 232,000 subscribers for a population of 42 million people.

“We expect to see an increase of around 20m additional TV households in sub-Saharan Africa between 2013 and 2020,” explains Digital TV Research’s Murray.

“This will equate to only 38.4% TV penetration by 2020 and shows the long-term potential for the region, with plenty of growth expected beyond 2020.”

Technology is key to the development of the industry. Nigeria, Kenya and a number of other key markets all intend to switch from analogue terrestrial television services to digital by June 2015, in line with a deadline set by the International Telecommunication Union.

This is part of a plan that will free more of the radio spectrum for use by mobile telephone and broad-band internet companies.

The industry relies largely on satellite dishes to provide content, with 8.5m of the total 11m pay-TV subscriptions using dishes to receive services, according to Digital TV Research.

South Africa currently contributes around five million of these subscribers with Nigeria adding around two million.

Satellite into orbit

The total number of satellite TV subscriptions in sub-Saharan Africa is expected to leap to more than 25m by the end of the decade.

Much of this expansion will come from the rapid growth of uptake in Nigeria, where satellite subscribers are set to triple to more than six million, combined with other markets such as Kenya, Tanzania and Uganda.

As the reach of television increases, so too does the appetite for new channels and extra content.

In response, a host of companies are springing up to feed this demand. One such company is Lagos-based start-up Africa Media Distribution (AMD), which aims to match international television channels looking to sell their content with new African platforms seeking to buy programming.

Managing director Lindsey Oliver says: “The market has responded very well. We are trying to be a service to the platform providers, delivering them content or channels – both third-party channels that we get the rights to from Europe or the States and our own AMD branded channels.”

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