The big risks that could see DStv lose subscribers



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While MultiChoice's DStv subscribers numbers have grown in recent years, the company is under no illusions as to the challenges it faces.

In Naspers' financial results for the six months ended September 2018, the company said, 'Subscribers' numbers went up overall for its operations in Africa – but the' premium base in SA 'was under pressure.

Its "mostly in the mass-market" growth was seen, and 285,000 in the first half of its 2019 financial year.

The drop in Premium subscribers were attributed to strong competition from streaming players, particularly Netflix.

With its subscription to DStv Premium only prices, Netflix offers a huge catalog of on-demand content. This catalog is set to continue growing as Netflix spends billions of dollars on shows and movies.

However, with satellite TV providers that are losing globally – while Netflix's user numbers climb, recently passing 139 million.

Risks to MultiChoice

There are other risks which MultiChoice and its DStv and Showmax Netflix businesses face besides, though, which were pre-listing statements by the company.

MultiChoice Group Limited – which includes MultiChoice South Africa, MultiChoice Africa, and Showmax – is expected to begin trading on the JSE on 27 February, and was required to share the pre-listing document as a result.

In the document, the listed company risk areas. These were:

Attractive programming

"The group may lose subscribers and revenue, not acquire, produce, or retain attractive programming," said MultiChoice.

"The continued success of the group depends on its ability to continue to acquire attractive general entertainment, sports, and other programming on reasonable commercial terms."

It stated that movies and sports contracts with the group are up for renewal from "time to time", and when these rights are not secured "MultiChoice must seek" alternative programming ".

This content may not be available on the "commercially reasonable terms", or it has been sold exclusively to another provider.

"In the past, competitors have rights to sports content in various territories, such as the English Premier League and UEFA Champions League," said MultiChoice.

It added that it might become "more difficult to maintain exclusive rights to programming" in the light of content rights coming under increased scrutiny by regulators.

Subsies decoder

Another MultiChoice potential issue faces is decoder subsidies.

Satellite dishes and decoders are required to access DSTV packages and are once-off cost to a consumer.

"The group currently subsidizes a portion of the cost of decoders and the installation there of subscribers. "Should the decision be made to cancel the subsidy of decoders and installation, the group offerings may become less attractive to new subscribers," said MultiChoice.

This would slow growth subscriber and decrease revenue.

Piracy

Piracy was not forgotten by MultiChoice, which stated that "access to programming signals may adversely affect the group's revenue and programming arrangements".

"The delivery of subscription programming requires the use of conditional access technology to prevent unauthorized access to programming, or" piracy "."

MultiChoice said it used Irdeto's conditional access technology supplied, and it needs to be updated continually to remain effective.

"The group will continue to incur substantial expenditures to replace or upgrade its conditional access technology in the future. Conditional access technology cannot completely prevent piracy, and virtually all video entertainment markets are characterized by varying degrees of piracy that manifest themselves in different ways. "

It was stated that the group failed to adequately prevent unauthorized access to transmissions, programming services "materially adversely affected" could be and subscribers could switch to pirated signals.

Streaming services

As stated, MultiChoice has acknowledged the impact of streaming services on its business. This includes big pressure from global powerhouse Netflix.

"The group faces competition from global companies that deliver content to consumers (including Netflix), fees for access (e.g. YouTube) – or charging a lower fee for subscription charged by the group."

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