Tim Jacobs was appointed CEO of MultiChoice Africa in April 2015. He was appointed Director of Finance for MultiChoice South Africa Holdings and the MultiChoice South Africa board in April 2014. He spoke to a select group of journalists in Nairobi, Kenya on the sidelines of the recent CNN Multichoice African Journalists Award on issues surrounding the company’s operations in Nigeria and the rest of the continent, as well as the changing Pay TV environment. Managing Director, Multichoice Nigeria, John Ugbe, sat in on the discussion. Excerpts:
What is your experience with Nigeria and the Nigerian market?
I have been coming to Nigeria not specifically for Multichoice but for other companies that I have worked probably for the last 15 years or so. I have to say that the change in Lagos is quite significant. The thing I like most about Nigerians is specifically the kind of the deep passion to be entrepreneurial, to get things done, to try to make a difference in peoples’ lives, which means that people are already focused on business opportunities, they are focused as consumers on what they need, they are very clear in their own mind about what it is that they are trying to do. I think some of the other countries that I travelled to are little bit more formalized, you know people with formal jobs, the kind of go-get attitudes is a little bit less pronounced because they do a 9-5. So, for me, Nigeria is a really interesting market opportunity; it is also very difficult. The Nigerian market and the Nigerian consumer is very activist; they don’t like surprises in the system; they tend to react quite strongly to anything that they perceive as negative, which obviously, as a consumer-based business, means that we need to be on top of our game; we need to make sure that what we do in the country really makes sense for the consumer.
We also understand that there are times when we do things that are not popular, but we do it in the interest of the business. So, because we are very conscious of the way that the consumers are likely to react, we tend to think quite deeply before we do stuff that is going to result in a negative impact. We try to minimize the impact. In Nigeria, we have been very fortunate that after the price increase we put through on the first of April, we haven’t had to put another price increase into the market yet.
Obviously it depends on the currency, if the currency does move materially, we may well have to do that but at the moment we have been able to avoid doing that in Nigeria. And I think that is largely because the government and the central bank have been very strong on the policy decision-making. They haven’t reacted to short-term movement in the black market rate and the weakening of the oil price; they have managed to hold firm. So, we’re very hopeful that the currency stays, so we don’t need to put a price increase. But obviously, time will tell.
What are you doing to improve on your content?
I don’t think that an improvement on content is the issue right now. If you think about the Nigerian market, we have all the Africa Magic channels. We have new shows that are coming into Africa Magic all the time… really strong telenovelas. Now, I don’t think that we can say we are going to improve on that; what we are going to do is to refresh. The MNet team that is based in Nigeria is constantly looking at scripts, constantly looking at new programming. So, as one really popular series kind off comes through, we then replace it with another one. A couple of months ago, we put Zee World into the African continent, Nigeria included. That has been resounding success; the market has really responded well to that. So, in combination with the existing line up, refreshing the existing line up, the programming within those channels and bringing stuff like Zee World on, I think the offering that we got at the moment in the Nigerian market is very strong.
Without coming up with another subscription price increase, how have you been striking balance between the cost of doing business in Nigeria and the target of making profit?
Just to put this into context, Nigeria is actually one of the cheapest subscription models that we run on the continent. You guys can easily go to the Internet and see what consumers in other countries pay. Nigeria pays $20 dollars cheaper than probably all of your neighbours. Now, some of that is because of other considerations … there’s the VAT rate and other things that the consumer has to pay for in other country. But Nigeria is a very affordable pay television market; it is one of the cheapest in the world. What we have done in the Nigerian market is we have kept the price low over many years in order to try and stimulate the market, because Nigeria is a potentially large economy. We have so many potential subscribers. Our growth in Nigeria, I would say, has been good. I think our GOtv platform, which kind of attracts the lower end of the market, has been doing incredibly well over the last year, particularly about December last year when we introduced a very cheap price, so we subsidize very deep to get to $20. That has obviously stimulated demand, but we need scale.
In Nigeria, what we are always hoping for is that we can keep the prices reasonably low if we get the scale… We just launched Mnet Igbo as we continue trying to satisfy many segments of the market. We are happy to continue to invest, but we need to obviously see the scale coming into the business. When we get that, then we keep the balance, then we keep the price reasonably low and provide good additional content.
What is your take on pay per view?
Pay per view is a very simple financial equation. If you want to do pay per view, you have to take whatever content the person wants to watch; Let’s take the obvious one, the EPL. You take the cost of the EPL, you say how many subscribers do I have, then I divide the cost by the number of subscribers that want to watch EPL and that’s how many people pay for it.
Now we have worked the numbers. Anywhere in the world, pay per view is materially more expensive for the person who wants to watch only that piece of content, then binding all the content together and spreading over the time market. It is just a mathematical calculation; it is not that complicated.
Ugbe: Maybe to distinguish, because some people say pay per view when they are talking about pay as you go, which is not a TV model; it is a communication model because you can start and stop the conversation. Think about it. If you are watching an EPL game and you stop at the 30th minute, what do you do? Do you pay for the game or do you not? So, you see, it is not a TV content model. There is a lot of confusion about it in the market. It is a communication thing because it’s two-ways. But for TV, you can’t watch 10 minutes of a movie and just pay for 10 minutes.
Tim Jacobs: I have got two examples that can show you what has happened elsewhere in the world. In the US, the Manny Pacquiao and Mayweather fight, if you wanted to watch it for one evening, one day cost $99! It’s not a full day; it’s a couple of hours. Rugby World Cup in the US at the moment, as I understand it, is also close to $90, $89 or something, for the duration of the World Cup. So let’s call that a month and half.
If you want watch Rugby World Cup in the US, you pay a single fee of almost $90. In Nigeria, you guys are paying for Premium subscription just over $60 a month equivalent and for that $60 a month gives you all of the content. Okay, maybe Nigerians don’t want to watch Rugby, but the same principles apply if we want to charge you the same way – pay as you go for the EPL. Remember, the EPL is a right cost and much more expensive than the Rugby World Cup or the Manny Pacquiao fight. The pay as you go is a nice concept. Everybody likes it. And the reason people think that is an option is that they think about Netflix. You know that I can go and get a VPN and I can just watch whatever I want with $10 a month. But, remember, their content is old content. Its stuff that is not fresh, it is not stuff that is happening now and with sport TV in particular, it only means anything to people when they watch it live. Nobody wants to go three weeks after Chelsea plays Man U and say watch it over again. It has 10 percent the value of the live match.
MTN just secured Pay-TV licence to operate in Nigeria. How is the impending competition likely to affect Multichoice?
Ugbe: Multichoice has always welcomed competition. One thing we want to say is that we are very focused on what we do. We are very internally focused and on what we can deliver to our subscribers and this means we welcome competition but we will keep doing what we do and our aim is to deliver the best possible product. Fortunately, you can get a licence; anyone can get licence. And contrary to a lot of belief, we do have competition out there. We are in pay entertainment, so, really, your DVD is competition. But what we are focused on doing is putting the right package together. As a team, we’ve spoken a lot about keeping the prices very reasonable, which involves a lot of deep subsidies sometimes, just to be able to get products into the hands of the subscribers.
Jacobs: We are often asked this question about Multichoice’s ‘dominance’. We don’t see our position in the market place as dominance. One, we have lots of competitors at the bottom end of the market. Let’s take something that is really kind of top of market in Nigeria, the whole digital migration. So we started in Nigeria two years behind the other operator in the market and the only way that we could compete was on a reasonable price point and with top grade content. Now, given that they were there two years before us, there is no reason whatsoever why their offering shouldn’t resonate with Nigerians.
They had two years to figure out what you guys like, what you don’t l like. Now if we run a very good and very successful business and we are competitive, I don’t see that as and cannot describe that as dominance. What we do is understand and pay attention to what the Nigerian consumer wants. The issue is not dominance, we are just good at what we do and we try to really resonate with the consumer.
We don’t like to put out a price increase into the market, we only do so when it is absolutely necessary ; it is the balance that John is talking about. We don’t see ourselves as dominant; we see ourselves as a very good supplier that understands what its consumers want. The consumers have a choice, they can go to any other platform or competitors but If they choose to come to us, that is just because we happen to be good at what we do. We don’t see ourselves as this dominant player that just dominates everything. We actually have to fight every single day, to make sure that what we offer is a better offer for the consumers, because the consumers can walk to me and say they don’t want this product, they want my competitor’s product, and they have the right and the ability to do that.
Can you share your vision for Multichoice?
The vision for Multichoice is a very clear one. We need to do a couple of things: We need to be responsive to our consumers’ need. We understand that on the African continent – because that is where we have chosen to play in the future, on the African continent –we need to become more localised, which is why we continue to produce, for example, more Africa magic channels.
So we are doing more localisation. We are bringing Bollywood into our programming; we are bringing Nollywood into our programming. This is a representation of the strategy at Multichoice; we are becoming more localised. At the same time, we also have premium subscribers who are used to and want and demand the top-end Hollywood content.
So what we are doing is that we are expanding the cost base in order to cater to more of those needs of different population groups. In the same micro-economic kind of content proposition that we are doing in Nigeria, we are starting to do it in some of our other markets, so we are busy launching a channel in Tanzania to cater to that specifically. We have Zambezi Magic, which is launched for the southern territories; we have programming for Django Magic, our Portuguese market. Our long-term vision is to become more and more localised; and in doing that, we want to win and maintain the hearts of the consumer. We want to be their first choice.
We also want to bring onto our platforms the local channels. So John gets hammered by me on weekly basis about anybody that he doesn’t have, any free-to-air that he doesn’t have on our platform. That is our commitment: one, develop our local programming for our local market; two, make sure that if a third party has got really good content that is resonating with our audiences, we get that content and make it available to our customers; and three, make sure that we bring local programming onto our platform to ensure that the consumer has access to the best that we can offer at every single territory that we are in, and to do that at the cheapest price point that we can.
But unfortunately when the currency devalues – because a lot of our input cost is in dollars – that is when we have to put the price increase into market. Unfortunately, some of our territories have increased drastically this year. It’s been actually horrendous for us to do that, but if we want to maintain that vision of giving more local content to the audiences, they have to be able to pay for it.
Will a time ever come when the rains don’t disrupt programmes being watched by customers?
Ugbe: Sometimes when there is very big cloud cover at the beginning of the rainfall, you can have that interruption. There are certain things that are natural, I mean with satellite technology this will happen everywhere in the world. I have had to take few pictures sitting in New York and from the UK when there is a break in transmission occasioned by rain. So it’s worldwide. However, we have a lot more rain in two very big places I think are Liberia and Nigeria in terms of rainfall in the whole world. Obviously, we will get a big more interruption. Few things we have done to reduce this. One is strengthen the power of our satellite and the other is moving from satellite to satellite to ensure more power. We have always gone with high-power satellites.
Two, we’ve done training for installation because a number of times what we found out is that when it rains and we ask some subscribers to check the quality of their installation we find it at may be 40% or so. This is when it is more susceptible to the challenges of weather.
I ask people, you’ve had DStv for about how long now? Maybe for about 10 years. Have you ever got your dish realigned? No. But your car, how often do you service it? Well, I service it every other time. So that’s another thing we are beginning to promote among people to say, after a while, for instance in Lagos with a lot of the winds, your dish is moving a little bit out of alignment. We need to check that, we need to get your signal level to above 90% because that will eventually help because this is just the power of the signal and the rain cutting into the signal.
It takes quite some time for decoders to reboot. I was wondering if it’s something Multichoice is looking at.
