/ 17 October 2024

Can Canal+ turn the tide on MultiChoice subscriber exodus?

The only hint of an explanation for dropping ANN7 came in a carefully worded statement prepared for Mawela.
The MultiChoice Group's active customers for all its regions, including South Africa, dropped from 17.3 million to 15.7 million over the year.

PayTV giant MultiChoice finds itself at a critical crossroads as it grapples with a steady loss of subscribers in South Africa. 

According to its recently released annual report for the year ending March 31, 2024, DStv saw its subscriber base shrink 5%, from 8 million to 7.6 million, in just one year. 

The same can be said for MultiChoice Group, whose total active customers for all its regions, including South Africa, dropped from 17.3 million to 15.7 million over the year. 

The group saw drops in not only its premium segment (DStv Premium and DStv Compact Plus) which was down 8%, but also in its mid-market (DStv Compact), down 8%, and mass market segments, which decreased by 2%. 

The group chalked it up to a challenging macro-economic environment and negative impact of specific regional issues, such as the removal of the fuel subsidy in Nigeria, load-shedding in South Africa and rising interest and inflation rates on consumers. 

MultiChoice Group posted a loss of R4.1 billion, deepening the financial woes that began with a R2.9 billion loss the previous year. 

Even Showmax, once touted as the contender to take on Netflix, is facing significant hurdles, posting trading losses of R2.6 billion during the same period. 

“MultiChoice is in structural decline and just like the US cable operators, they have been losing subscribers forever and a day,” independent analyst Simon Brown said. 

Last month, Business Insider reported that pay-TV distributors such as Comcast and satellite-TV outfits like DirecTV lost 1.6 million subscribers in the second quarter of 2024.

The losses have been steady as the industry lost 1.7 million subscribers in 2023 and 1.8 million in 2022. Total subscribers that remain in the US market are 68.76 million. 

Thus South Africa’s pay-TV industry is suffering the same fate as its first world peers. 

Brown said that the subscribers that remain with DStv are there because of sports. 

“If you want football, cricket and rugby you can go to DStv because they have absolutely sewn up that market,” Brown said. 

DStv boasts eight dedicated sports channels, showcasing a diverse array of events from golf and kickboxing to cycling and cricket. The selection caters to a wide range of sports enthusiasts, offering them access to both local and international sporting codes.

Brown said that in the US, season passes are sold for various sporting codes. Basketball fans, for example, can purchase a pass and only watch basketball without having to buy the entire sports suite. 

“For South Africa the idea of a sports package is compelling, but the problem is that it won’t be that much cheaper than the premium package, of which 80% is already going towards sports,” Brown said. 

DStv Premium, offering access to over 200 channels along with all sporting content, comes at a monthly price of R929. 

In contrast, the most budget-friendly package provides access to 55 channels—though fans of the latest movies will need to pay extra for that add-on – priced at just R99. 

This stark contrast in offerings and pricing reflects MultiChoice’s challenge in catering to a diverse audience while competing in an increasingly crowded market.

Brown added: “They should start slicing and dicing their offering to create packages like an Olympic package for R700 or a Rugby World Cup package, but they are resisting because they want us to keep paying R1000 every month.”

As subscribers increasingly choose to opt out of its service, MultiChoice is facing mounting pressure to maintain profitability. 

For the year its trading profit was R8.8 billion, down from R9.7 billion in 2023.

Peter Takaendesa, head of equities at Mergence Investment Managers, said that MultiChoice’s efforts to cut costs—such as streamlining content and reducing decoder subsidies— was like “running fast to remain in one spot”.  

But is the Canal+ takeover of MultiChoice what is needed to save the payTV operator?

The French media giant and MultiChoice have formally submitted a joint merger filing to the Competition Commission, seeking approval for Canal+’s proposed R55.3 billion acquisition of the pay-TV company.  Canal+ already holds over 45% of MultiChoice shares.

The transaction is classified as a large merger and so requires the approval of the Competition Tribunal as it has the potential to redefine competitive dynamics in the country. 

“The jury is still out on whether Canal+ will get good value out of MultiChoice. They probably just realised that an easy way to get into the South African market is through an existing footprint,” Takaendesa said. 

For Brown, the purchase of MultiChoice by Canal+ is just a “land grab”.  

He said that MultiChoice is dominant in the Anglophone countries in Africa, and Canal+ in Francophone ones, with latter wanting “the whole pie”.

“It’s a land grab and it will help them with economies of scale, but there should be efficiencies, and it should help relieve some pressure from MultiChoice, which is fighting for its survival,” Brown said.