Understanding Multichoice’s New Price Regime, By Caroline Oghuma

Posted by African Examiner Articles/Opinion, Latest Headlines Monday, March 16th, 2015

Without doubt, I have a dog in this fight.

As the spokesperson for DStv, there should be no garlands for guessing the dog I am backing. Like everybody else, I have followed the public response to the new price regime announced by MultiChoice with keen interest. That is expected.

What I have been able to take away from the debate, a very robust one, is that our subscribers are unhappy with the fact that they will have to pay more for our services.

As a user of other services, including those unrelated to pay-TV, I cannot claim to have combusted with joy each time prices go up. Nobody I know of does that.

Here at MultiChoice Nigeria, the announcement of a new price regime was made with a great deal of reluctance. We are not happy to see subscribers angry because they are the ones whose goodwill has kept us going.

As such, anything that has the potential of depleting our deposit of goodwill among subscribers is something we have done and we will continue to do our best to avoid.

Sometimes, though, the best of our efforts are not good enough. I will explain. It is a fact that MultiChoice Nigeria has had the same price regime for two years. What I am saying is that our subscription rates have not increased in two years. That is not the case in other countries on the continent, where price increase have been an annual occurrence.

During this period, prices of countless goods and services have gone up by as much as 50 per cent. While I am in no position to explain the peculiarities of each of increases in the prices of other goods and services, I am fairly certain that market conditions and a few other factors have a hand in compelling such.

It is the same with us at MultiChoice, where we have been left with no choice than to do what we have done to keep serving you better. To keep doing that requires us to remain a going concern.

That, we are unlikely to remain, without a new price regime that reflects the present economic situation and operating environment. MultiChoice, I make bold to say, is a social institution. If it suffers ill-health, its partners are not likely to fare better.

Think of local content creators, suppliers of various items, installers, retailers, agents and those directly employed by the company. The government also loses in tax revenues. Can we, as a country, afford this?

I understand the public anger, but I seek an understanding of the situation in which we operate as an organisation.

Much of the anger is founded on the incorrect belief that we do as we please because we are a monopoly. We are certainly not one. We are in a field where competition exists and has always existed.

StarSat, one of our competitors, recently won the rights to broadcast matches of the German Bundesliga.

I am also certain that Nigerians know that Consat, ACTV, MyTV and Montage TV among others are not MultiChoice subsidiaries.

Before now, we had FSTV, CTL and HiTv, all defunct.

HiTv, in actuality, won widespread applause when it wrested the rights to some premium sporting content from MultiChoice. That success turned out to be a fleeting one because those rights had been obtained at stratospheric costs and was fatally undermined by an unsustainable, albeit lower price regime.

We know that MultiChoice got on the scene before everybody else. We are also happy that we got a rich bouquet of the content that has made you happy over the years.

This has nothing to do with the absence of competition, as evidenced by HiTv, but with a desire to have you better served on our platform.

To make our services more accessible, we also designed bouquets suitable for various income brackets. That is hardly the trait of a dyed-in-the-wool monopolist.

When prices go up, there is a need to reflect and understand what might have provoked such. Prices of commodities like toothpaste, bread, beer and phones as well as of professional services have risen in the last two years, most probably, because providers of such-especially those in low-margin businesses- have been left with no other option. There are limits to financial hoop-jumping.

And very crucially, the content we buy and bring to your homes, including those AfricaMagic movies and series, are paid for in dollars. It may surprise you to learn that local television content is paid for in dollars, but that is the truth. Our content purchase is done centrally-by our parent company in South Africa.

As we all know, the naira, our local, currency, is currently not enjoying the best of spells in its value to the dollar. The implication of this is that MultiChoice has to look for naira in far greater amount than it used to if it wants to continue buying and delivering to-tier television content to you. The same thing happening to the naira is happening to South Africa’s Rand and other currencies on the continent.

Closely related to this is a surge in the cost of acquiring television content. This, on a regular basis, is the product of the feisty competition among television companies involved in the bidding for rights. It was this type of competition that caused a 70 per cent hike in the cost of the broadcast rights to England’s Barclays Premier League.

The two outfits involved, Sky and BT, wanted the rights so badly and had to pay top dollar. The deal, which runs from next year to 2019, cost over 5billion pounds, with Sky paying 4.176billion pounds.

Already, it has hinted that its subscribers will have to pay more to view matches on its platform. It also means any overseas broadcaster seeking to include the Barclays Premier League in its offering will have to pay more to do so.

Premium content, as I hinted earlier, is not sold on the cheap anywhere in the world. It why it carries the tag “premium”.

What we have done has been done has been forced on us by pay-television economics, not an abuse of our pre-eminent position, as has been suggested. In the world of television economics, a fraction of the fee paid as subscription by the subscriber goes to the providers of content or channel owners as what is called “affiliate fees”. Affiliate fees represent a compensation to content providers and they are the oil that keeps the wheel of content development rolling. Thus, the subscription paid by a subscriber is for programming (the watched channels) and the distribution (infrastructure and profits for cable companies) and is shared with the content owner or distributor. Content is usually sold on a per subscriber basis, with channels broadcasting the most watched content attracting greater cost of acquisition of such.

As much as we would have loved to keep our subscription at the same level, the prevailing economic situation makes that impossible.

Oghuma is the Public Relations Manager of DStv.