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Discop Africa: Streamers Search for Foothold in Crowded African Market

Despite data costs, bizzers optimistic about long-term uptake

JOHANNESBURG — Before Naspers’ VOD service Showmax rolled out its hyper-local Kenyan offering last year, Showmax Africa head Chris Savides noticed that audiences in Nairobi already had their own version of video-on-demand: Pirated content which was downloaded, distributed on flash drives, and often delivered to your door.

The existence of that parallel ecosystem underscored the fact that, despite the challenges facing streamers across the continent, African consumers already have the same built-in desire for on-demand content as the rest of us.

“We don’t have a VOD market that we have to develop—people are consuming VOD every single day,” Savides noted at a panel discussion at Discop last week.

Russell Southwood, of telecoms, Internet and broadcast consultancy firm Balancing Act, drove the point home by adding: “The money is out there, it’s whether it’s [moving] in your direction.”

Africa’s VOD marketplace has steadily expanded and evolved in the past few years, with Balancing Act estimating earlier this year that more than 180 platforms for VOD – via mobile apps, set-top boxes, or the Internet – had entered the fray. But the extent to which they’re capturing and monetizing a sustainable share of the market remains to be seen.

Sharks like Showmax and Nigeria’s Iroko are doing battle with Netflix, which launched on the continent as part of its 2016 global expansion, but the waters are mostly teeming with minnows, small regional players trying to exploit local content niches.

Margins are slim if your business model is tied to rabid support from fans of Kenya’s low-budget Riverwood industry. But even deep-pocketed players can get burned: Earlier this year, telecom giant MTN folded its latest VOD venture and went back to the drawing board.

While subscriber numbers aren’t available, top-tier services like Netflix and Showmax seem to have staying power on the continent. There’s enough consumer spending to be found in cities like Johannesburg, Lagos and Abidjan to ensure a profitable base of customers shelling out $10 a month to catch the new season of “Stranger Things” or “Orange is the New Black.”

“What we’re not doing is finding a lot of services…that talk to local communities,” said Manny Teixeira, MTN’s group head of digital media and services. “We have 230 million subscribers. That’s who I’ve got to serve.”

Subscription prices alone are likely less of an obstacle than data usage. Even as data costs come down across the continent, they’re still prohibitively high for streamers to gain wider traction. Teixeira cited a study that 50% of African smart phone users regularly switch off their data out of fear that auto updates and unexpected usage will exhaust their data supply.

“Data consumption on mobile is an expensive medium at the moment. It’s a challenge that we face on a daily basis,” he acknowledged.

Sitting in the hot seat, Teixeira stressed the difficulties facing the heavily regulated telecom industry: if MTN wants to launch a new product in Nigeria, he noted, it can’t settle on a price point until regulators have their say.

But data costs alone aren’t the main hurdle for VOD absorption. “I think we have a challenge…at a hyper-local level with how content is packaged, and the type of services that are available,” he said.

MTN is exploring ways to offer more cost-effective data bundles packaged with video consumption, similar to how its wildly popular music streaming service has made it one of the biggest music distributors on the continent.

Showmax is likewise looking to use innovative partnerships to bring more value to its subscribers, allowing them, for example, to download their content for free in shopping malls or aboard city buses. “We’re trying to make it as easy as possible for consumers,” said Savides.

With Internet penetration and smart phone usage on the rise across Africa, there’s a vast market still waiting to be served. MTN is likely to rebound with a new VOD offering soon. Earlier this year, Asian streamer Iflix, a leading SVOD service in emerging markets, announced a partnership with Econet Media’s Kwesé to launch a new platform across sub-Saharan Africa.

That competition can only benefit African consumers in the long run. “This is not a one-horse race,” said Savides. “We’re at the beginning of this…but it’s exciting.”

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