Johannesburg — As the world moves toward the 2015 deadline for digital migration, industry stakeholders across Africa are hoping for a production boom to meet the content needs of a growing number of channels. But how to finance a possible production spree — and how to get cash-strapped consumers to pay for set-top boxes — continue to dampen expectations.

Fearing a lack of local product, broadcasters in South Africa have already petitioned the government to lower its quota for local content ahead of the digital switchover. In Kenya, a 40% quota for local content is on the books, but has never been enforced.

The threat to established broadcasters is significant. “DTT is great for new players,” says Craig Johnson, managing director of media for Nielsen, South Africa. “(But) for established broadcasters, there can be an erosion of their share.”

One way they can capitalize on the switchover, Johnson says, would be to develop branded channels targeting niche markets — for example, through sports or educational content. In South Africa, pubcaster SABC is planning to unveil a 24-hour news channel as part of its free-to-air offerings.

Digital migration will also pose a threat to pay-TV penetration, according to Johnson, citing similar trends in other developing markets. Consumers in struggling African economies might not see the value in pay-TV packages when their free-to-air options have increased — for example, from four channels to 14 in South Africa. Still, the total number of pay-TV subscribers in sub-Saharan Africa is expected to nearly double to 14.1 million by 2017.

As Africa’s TV industries mature, broadcasters are finding increased demand for local content. Locally produced formats have taken off across the continent, from African franchises of global brands like “Big Brother” and “Deal or No Deal,” to the ubiquitous “American Idol”-style knock-offs, like East Africa’s “Tusker Project Fame.” Scripted dramas are also in demand, leading to such hits as “Shuga,” a collaboration with MTV about a group of young friends living in Nairobi, and “Mali,” a soap about the problems of a wealthy family, in Kenya.

But finding the coin to produce enough content to meet the ’round-the-clock demands of new channels will be a serious challenge. Local content currently takes up just 20%-30% of programming time across the continent, according to research conducted by consultancy company Balancing Act, with most of that either news or studio-based talkshows. Foreign programming rights cost $300-$500 per hour, on average, and up to $1,200 on the high end, while a locally produced drama will cost around $9,000 if produced independently, and $10,000-$15,000 if produced inhouse. As new players enter the market, it’s likely that they will resort to traditional staples to meet their programming needs, such as international sports and Latin American telenovelas.

Despite the popularity of American series and films, piracy could undercut the potential gains for Hollywood. In Kenya, for example, the widespread availability of American shows on pirated DVDs has seen acquisitions by local broadcasters plummet in the past five years.

If they can find the resources, African content producers could be looking at a golden age. Nigerian filmmakers, for example, already benefit from the wild popularity of their local film industry, which is distributed across the continent on South African satcaster M-Net’s Africa Magic.

Despite high hopes that it can deliver the future of African broadcasting, though, the digital switchover so far has not been going smoothly. Nine countries are running pilot programs; a host of others have applied for a waiver to postpone the process to 2020.

With the continent’s most mature TV industry, South Africa was widely expected to lead the way on migration. But despite plans to switch off its analog signal in 2011, the transition has been marred by government shakeups, delays in equipment upgrades, budget shortfalls, and bundles of red tape. The country finally seems on track for its commercial DTT launch in December, with an estimated 11.5 million set-top boxes expected to be delivered by the time the analog signal is switched off a year later.

But according to Kate Skinner, a broadcasting researcher and policy analyst for the advocacy group SOS: Support Public Broadcasting, “there hasn’t been enough communication around what DTT is all about.”

The government, she says, has failed to educate the public on the costs of new set-top boxes, the availability of subsidies to purchase them, and the added value digital will bring to consumers.

How to mitigate the costs of those new TV sets remains a major concern; even a $50 set-top box is prohibitively expensive for most African households. On a continent where meeting basic needs dominates most government agendas, subsidies are unlikely to take hold; to date, South Africa is the only African country to have adopted a subsidy program, offering a 70% subsidy to the poorest 5 million households.

Given the rapid growth of middle-classes across Africa, however, analysts hope that the market will take care of itself. There are an estimated 42 million households with TVs in sub-Saharan Africa — a number that’s expected to reach 50 million by 2017.

Sass Jahani, managing director of ABS Broadcast, which specializes in content delivery, notes it will take a long time for DTT to take off in Africa, and during that time, “TVs have to be replaced.” Governments can allay the risks to consumers by legislating that all new TV sets imported into their countries for sale be DTT-ready — a model that has worked for Australia.

Meanwhile, despite increased broadband access and the ubiquity of mobile phones across Africa, analysts say Internet TV is not likely to pose a threat to TV anytime soon. Broadband costs remain high across the continent, and sluggish speeds make it virtually impossible to stream video. What: Digital TV changeover faces challenges in Africa.
The takeaway: Migration from analog offers the seeds of a production boom, but stumbles on the cost of set-top boxes and coin for local production.