S. African Broadcasting’s profit down

Annual report notes 50% decline for TV channel

JOHANNESBURG — The South African Broadcasting Corp. has reported annual profit for the year ended in March of $27 million, more than 50% down on the previous year’s record takings of $54.7 million.

News comes at a challenging time, with the entry of new players to the pay TV market announced last week.

Chief financial officer Robin Nicholson said the substantial drop in profit was the result of “significant investments in content and technology,” and that the figures still indicated stable growth since the pubcaster broke out of the red in 2005.

Chief executive Dali Mpofu said investments in new technology had accounted for a third of the total operating costs of $71 million. Revenue increased 12% to $610 million, boosted by a $28 million growth in advertising revenue to $404 million and slight growth in TV license fee collections.

Mpofu said it was “unclear” how long the SABC’s investment cycle would continue. New competition in pay TV as well as the move to digital by 2011 would make broadcasting a “completely different place” in the next year.

Nicholson said the corporation would have to budget accordingly and balance investments in content and technology to avoid getting back into debt in the “challenging” period ahead. Effort would include revising its pricing and funding models.

The SABC increased its advertising rates by 25% during the past year, and rates are likely to rise even further. Mpofu said the SABC was “unfortunately reliant” on commercial funding, and so it would have to increase its advertising revenue to boost its bottom line.

The chief exec said he had “a gripe” with the corporation’s current funding mix and the fact that the public broadcaster was still reliant on commercial funding to “pursue its mandate to the people of South Africa.”

The SABC receives about 75% of its funding from commercial ventures and advertising, 18% from TV licenses and a government grant of 1% of its total revenue.

Mpofu said the SABC “would be exploring alternative income streams,” including playing a part in the pay TV market in “one way or another.”

National signal distribution company Sentech, which had partnered with the SABC, unexpectedly withdrew its application for a pay TV license last week, two days before the Independent Communications Authority of South Africa named the four new license holders — Telkom Media, E.sat, On Digital Media and Walking on Water — which will break MultiChoice’s long-held pay TV monopoly.

Sentech has not yet given an explanation for the withdrawal, but the SABC has proposed that it “piggyback” off the pay TV operators in terms of a “must-carry, must-pay” ruling that would form part of the new operators’ license conditions, still to be determined by Icasa.

The regulator confirmed this week that it would draft regulations to govern the relationship between the pubcaster and the new pay TV networks.

The SABC said if pay TV operators were compelled to carry its channels, as expected, they should also “pay for the privilege.” The SABC would also try to position itself as a content provider for the new services, said Mpofu.

Four SABC channels are carried by MultiChoice on its DStv satellite service. SABC 1, 2 and 3 are carried free of charge, while the SABC pays DStv to carry SABC Africa.

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