The Video-on-demand Space Is Slowly Maturing In SA

By Gugu Lourie

Even though South African subscription-based video-on-demand (SVoD) services have failed to attract the expected millions of subscribers, the technology is developing at an unbelievable speed with new players trying to attract subscribers.

Unlike the local mobile cellphone sector, which managed to attract millions of subscribers when it launched 20 years ago, SVoD, which is in its infancy, seems not to be doing that well.

The delivery of video content is shifting towards subscription-based SVoD and consumption habits are fast changing – a development that provides hope for revenue streams diversification for all players involved.

Already Vidi, an online streaming service owned by Times Media Group, is providing subscription-based SVoD services at R149 a month without extra costs for data. Times Media Group owns the Sunday Times newspaper.

The country’s biggest pay-TV operator MultiChoice also provides the same services to its premium clients through DStv BoxOffice. While Altech Node, owned by JSE-listed Altron, provides subscription at R299 a month for access to older movies and TV shows, and newer movies are available for rental at between R15 and R25.

Earlier this year Naspers, the owner of MultiChoice, revealed that its DStv BoxOffice rentals have reached a massive
600 000 movies a month, which could be delivering millions in revenues similar to those earned by US-based Netflix – a global provider of on-demand internet streaming media.

That said, both Vidi and Node are not making noise about the number of subscribers on their books, which may be a sign that things are not that rosy.

But this week Larry Annetts, chief marketing officer: MTN South Africa, pressed ahead with the official launch of MTN FrontRow subscription-based VOD service, designed to target a niche market rather than the masses. “We picked up on the need and wanted to offer the service to our subscribers. It’s something we feel playing in that space will give our customers a lot of benefits,” says Annetts.

When asked whether the current subscription and rental pricing offered by MTN will be able to attract ordinary viewers to watch VOD, Annetts says: “[MTN FrontRow] is not for everybody. The key target will be your middle to upper class.”

MTN FrontRow is available at the launch price of R179 or R399 a month inclusive of a 10GB data bundle for streaming and viewing. This is regardless of which network potential clients subscribe to. MTN FrontRow allows subscribers access to thousands of movies and television series on up to five different devices – one device at a time.

The question is, will this diversify MTN South Africa’s revenue streams, especially its voice turnover, which is
coming under serious pressure from competitors and over-the-top (OTT) players?

“I don’t think you will get millions of subscribers on VoD because this is not free to air: you are paying subscription and data. But for the market size we have set for it, we think it will be successful,” explains Annetts.

There is obviously a need for this service from high-end earners and MTN is eyeing subscription-based VoD as a targeted niche market – a development that offers it an opportunity to diversify its revenue. MultiChoice is also gaining more business from its premium customers.

Mobile phone operators may have an advantage in delivering subscription-based VoD because they control the cellular handset, which provides customers with the opportunity to stream and consume content whenever and wherever they are,
unrestricted by broadcast schedules.

Customers who have subscribed to MTN FrontRow Club can view content via their browser on the MTN website, or through their iOS or Android mobile devices.

To stay ahead of its rivals, MTN’s new-generation network has been going through transformation phases in the
last few months. MTN has made sure that the SVoD service is in sync with the network expansion, says Annetts.

Not surprisingly, Annetts wasn’t prepared to disclose how many new subscribers there were for MTN FrontRow, which has a soft launched in December. He was reluctant to disclose the numbers because MTN was in a closed period until
it publishes its financial results.

“We’ve done partnership with Discovery Digital and it is on a revenue shared basis. It’s very cost-effective for us
because we are not the ones who are going personally to do the relationship with the studios,” says Annetts.

The convergence of technologies is blurring the distinction between mobile units and television sets. Even, Samsung Electronics SA is developing a strategy around content to enable South Africans to enjoy the benefits of modern
television.

Samsung is already partnering with South African content producers, such as Vidi, to deliver VoD for ordinary viewers. Samsung also partnered with Vox Telecom to provide one terabyte of data, which is valid for a year. It is
“unthrottled, unshaped, premium-grade ADSL” to every Samsung Smart TV purchased via participating retailers to enable TV viewers to watch VoD.

But the big question is whether players who are interested in attracting subscription-based VoD will be able to
continue to subsidise data.

That said, the industry and customers wait to see VOD plans for Vodacom that it promised for this year.