NOMPU SIZIBA: MultiChoice has admitted that internet streaming services like those provided by Netflix categorised as over-the-top will fundamentally disrupt services provided by pay-tv players like MultiChoice. It says that Netflix added more subscribers in the last quarter than MultiChoice had approved since starting over 20 years ago. In addition, Netflix’s recent capex – or capital expenditure – stood at $8 billion for just one year. A difficult opponent to contend with.
So on the line I have MultiChoice’s CEO Calvo Mawela. Thanks for joining us, Mr Mawela. That’s a very tall order to have to deal with. Just tell us how you feel at the moment about the likes of Netflix and Google’s YouTube disrupting players like yourself.
CALVO MAWELA: Good evening, and good evening to your listeners, Nompu. I think let me just put into context what our position is as far as the over-the-top players are concerned. We embrace them, they are bringing new technology to the fore, they are bringing choice to the consumer.
We have to compete with them in the market and we are doing our best as MultiChoice, as you have seen. We launched Showmax a few years ago. We are investing a lot into it so that we can compete with the likes of Netflix, Facebook, Google and so forth. That is our policy. We embrace competition and we are ready for the new technological change that is coming with online players coming the market, and we are ready to compete with them toe-to-toe.
So there is no question about whether we are ready to compete or we don’t want Netflix to exist in this country. We think they bring competition, they push us to innovate and do much better in the interests of the consumer, and competition always ensures that the consumer benefits at the end of the day. So we are ready to compete. There is no question about that.
NOMPU SIZIBA: That sounds very positive. You mentioned your partnership with Showmax. Just tell us a little bit about how successful that’s been and what kind of uptake you’ve had from your customers.
CALVO MAWELA: We are saying in terms of our research – and remember, these are estimates from our strategy division looking at how Netflix is performing vis-à-vis – we think we are competing at almost the same rate. However, let me take you through the issues that we have raised as far as competition is concerned. It has brought about the inquiry that Icasa has started doing.
Icasa has narrowly defined an inquiry into competition to look at competition to the old, traditional pay-tv. We think that is a debate that we should have had 16 years ago. That debate is no longer applicable in this era because we have got a lot of online players that are in the market that are able to launch audio-visual services.
So launching a similar TV type of service is like launching an app these days. You don’t need infrastructure. You can ride on top of somebody’s infrastructure. And we are saying to Icasa do not look at traditional TV as it used to be. Look at the whole audio-visual sector, include the likes of Netflix and how they impact on competition in the market because we are seeing a fundamental shift in viewing habits in terms of how people consume content.
People are moving to online and hence we have also launched Showmax, which is competing very well with Netflix. We are aware that Netflix has a much bigger reach and a much bigger budget, but we are not folding our arms and saying these are global giants that are coming in, and they are going to eat us for lunch. We are competing with them.
What we are arguing for, however, is we are saying to Icasa look at the bigger picture. If Netflix is able to come to the country, launch a service and not be required to register in this country, not required to pay any VAT, not required to pay any income tax, not required to observe local content quotas that you apply to the television, we think that the playing field is not level.
What you need to do is do is what the EU has already done, shown through gradual regulation of all online players. And we are not asking for regulation in the traditional way that was done in the past with pay-television. You can push them to register in the country, you can push them to register for VAT, so that they pay VAT. You can push them to register a business so that the income tax gets paid. You can push them to do local content because it helps in creating jobs, creating local production. The audio-visual sector is one sector that speaks to culture, speaks to language, and helps preserve our own culture and our language inasmuch as competition enters the market.
Those are among the few things that the EU has managed to put regulations on, in terms of the online players, making sure that the population of the EU doesn’t end up consuming only what comes from the US, but they also build an industry in the EU. The same thing can be done here. We don’t see why not.
NOMPU SIZIBA: I suppose we would have to speak to Icasa to ask them about some of the issues that you’ve raised. But, in your engagements with them, have they indicated they are going to be looking at issues like this?
CALVO MAWELA: The discussion document that they published in the first instance was only a paragraph that speaks to over-the-top players as though they were saying, yeah, we think they are there, but they are on the horizon and we don’t even see what kind of product this is, and therefore they do not matter.
What we are seeing, as people that are in this business on a day-to-day basis, we are seeing a big shift of people in terms of their viewing habits. People are moving on much quicker. We are seeing a decline in our subscribers from Premium, which shows that they are moving to online consumption of content.
So gone are those days of appointment viewing where I will tell you, Nompu, that at seven o’clock they are going to watch X, and turnaround eight o’clock they are going to watch Y. People want to decide what to watch at whatever time is convenient to them. I’m sure you do the same with Catch Up and all our content, as to when you feel like watching that particular content instead of appointment viewing.
So that is a shift and that’s why people have moved online. We are saying to Icasa, look at this. What the discussion document failed to appreciate is the extent of the proliferation of the likes of Netflix, and we shared with them an example of what they’ve been doing. I mean, we saw a cheeky Netflix advert coming through a helicopter that was circulating around Randburg, on top of our building, with a Netflix banner. That shows that Netflix is here. We’ve seen billboards going up in Sandton that say Netflix is here. We have seen Netflix making pronouncements that they are going to invest in content production in the country. So they are here, they are challenging us in our business on a day-to-day basis, and yet they do not have to comply with any of the regulations the country has made. Take a lead from the EU and put these regulations in place – in that way you’ll level the playing field, we can argue.
NOMPU SIZIBA: I was going to say your critique does sound fair. But while you are waiting for the regulator to come to the party and level the playing field, as you say, what can you do in the meantime? Of course, you have the Showmax gig going on, but what else can you do because this is massive disruption? You are seeing numbers falling with people switching out and so on. There is a complaint about DStv showing too many repeats. How can you change your content or your business model, and is you business model under threat?
CALVO MAWELA: Ja, that’s what keeps me awake at night as the CEO of this company – that if we are not careful we’ll follow the same route as many other industries that faced disruption by a new technology that is advanced. We can take a lead from the newspapers. We thought that the newspapers would be here for longer. Today everybody is consuming news online through Twitter, Facebook and all other means. The same thing is going to apply to us. People are voting with their purse and they are saying they are not going to follow the old traditional way. That’s why we are investing in Showmax, that’s why we have launched DStv Now. That’s why we have got Catch Up, we have got Box Office, so that we are able to adapt towards what the viewer behaviour is showing us.
So there is a lot of investment that we are going into, and we are trying to improve our service offering through focused groups, and through engagement with our customers to improve our service offering. That is along the way, as you know.
And this business has shown over the years that through innovation we are able to come up with the best technological advancements to make sure that we bring value to our customers. That we will continue to do, and that’s why we are saying we are not folding our arms. We know the future is online. We’ve got big giants that are going to challenge us, and we are doing everything in or power to make sure that we are ready for that challenge and able to deliver good customer service – if not better than the likes of Netflix and Facebook.
NOMPU SIZIBA: Alright. Well, we’ll try and get the regulator at Icasa on the line to try and speak to some of the points that you’ve raised and all the very best. Thank you very much for your time.