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MultiChoice reports uptick in revenue; sees slim subscriber growth

Customer needs have changed, which explains the decline in premium subscribers, believes CEO Calvo Mawela.

FIFI PETERS: MultiChoice came out with its results today. The group said it added 900 000 subscribers to its network over the year, bringing its total number of subscribers to over 21 million – 21.8 million to be exact. This contributed somewhat towards higher revenues, up 3% for the year. But trading profit was pretty much flat, pretty much unchanged from 2021.

We’ve got Calvo Mawela, the CEO of MultiChoice, joining the Market Update. Calvo, thanks so much for your time. Let’s start with the subscribers. Are you happy with the numbers that were added to the group over the year, or would you have wanted more?

CALVO MAWELA: I think we are pleased. We are very pleased with the subscriber movement – adding 900 000 subscribers after a very inflated number that we got as a result of Covid as people spent more time at home. We grew by almost 1.5 million subscribers in the past [two] year[s]. So for us, we see growth coming through with people returning back to their normal lives, where [the fact that] they do not spend as much time at home is a testament that our product is gaining resonance in our market, and we are pleased to benefit in the outcome.

FIFI PETERS: Where do you see the direction of subscriber growth going from here, just as things have normalised? Are you expecting to add on from the current levels, or are you expecting it to slide down even further?

CALVO MAWELA: We still believe that we have got market growth of around the same numbers that we have seen in the past, around a million is the mark each year for the rest of Africa, especially with a market of I think seven million that is still out there. We believe that we should still continue to grow about a million-plus subscribers each year.

In the South African market, of course, the middle segment is under pressure, but we have seen very good growth in the mass market.

It has not slowed down, and with a TV household of around 15 million households, and we are sitting at nine million households, we believe we still have an opportunity to grow.

We have also seen stabilisation in our decline in the premium segment, where we’ve improved from declines of around 8/9% in the previous years – and this year a decline of just 4%.

So overall we still think we have an opportunity to grow in the media side, and an opportunity to grow on the online side with our Showmax Video on Demand platform, where we saw a 68% increase in paying subscribers in the past financial year.

FIFI PETERS: [Why] do you think for the premium subscribers you’ve seen an improvement in terms of the decline? What do you think that means? I’m wondering if it means that the state of the consumer is not as dire or as bad, as bleak as we may think, or do you think it’s got to do with maybe some of your new product offerings on the platform that has led to the narrowing in the decline in the premium segment?

CALVO MAWELA: Yeah, there are a number of initiatives that we have taken to ensure that we stabilise this segment. This segment is the higher-end segment of consumers. Usually the segment is not as susceptible to temporary shocks in the economy. They tend to survive a little better.

Those that feel the pain immediately are the middle class, as a result of job losses – as we have seen the job numbers that have come through in the previous slump.

However, on our side we are focused on retention.

We have rebranded our whole marketing campaign on Premium with Thola Konke – ‘Have it all’.

We are exposing the brand very well with our consumers.

We have also understood very well that our customer needs at the premium level are continuing to shift, and therefore we need to respond to that shift and give them content that they would want to see more and more.

We’ve taken initiatives to introduce some local content in that regard, understanding that the customer needs have changed in terms of demographics. That we believe is the reason why we are seeing the decline in premium subscribers being better than what we’ve seen in the past.

FIFI PETERS: So you are paying quite a bit more for content. You paid about 9% more in terms of content costs. Are you seeing the return on investment for this? You did highlight the stabilisation of the premium segment – but are you seeing the return in the other segments coming from you paying more for content?

CALVO MAWELA: Yes, we have definitely seen very good traction. We have added two channels, for instance, in Angola; we’ve added a new channel in Mozambique – all of them local-content channels. And we have seen an uptick in subscribers in all these markets as a result of this introduction of new local-content channels. We have done the same in Tanzania, and we are going to continue to expand the local-content mix in all our markets. Our plan is to continue to shift the spend from international content to local, and we aim to get your 50% split between international content and local content spend in FY 2024.

That’s why we are seeing good traction in terms of subscriber numbers, where we’re growing just below a million subscribers. The appointment viewing – we are seeing that coming through where our shows also gain traction on Twitter as they play out on a day-in, day-out basis.

FIFI PETERS: Talk to us about that deal with Disney and how it changes the game for the group.

Read:

CALVO MAWELA: We are very excited about the partnership that we have done with Disney, and it’s different from all the others that we have done. It’s a composite deal that includes us being able to on-sell their Disney+ app to our customers.

The good thing about this initiative is that it was done in a very collaborative way. The launch happened on the same day, which gave us all an opportunity to be able to launch and market this product much better. We have been pleased with the result that we have seen as a result of us launching it at the same time, and we believe that has got good learnings [for] many other online players that are going to come with apps into our markets – that this is the way to do it.

FIFI PETERS: You are pleased with the results. What are those results? Can you share?

CALVO MAWELA: Unfortunately, we can’t share at this stage, but we are very pleased with the results.

FIFI PETERS: It’s early days. Okay. Calvo, what was also really interesting to see [is] just how strongly advertising has come back, and I’d like to understand what’s going on there and whether you are worried that the pace of advertising growth that you recorded this time around – some 37% higher – can be sustained in this environment of rising costs and high inflation, where one of the quickest areas companies go to, to cut costs, is advertising and marketing?

CALVO MAWELA: I think you are raising a good point there. What we are seeing in the advertising space is that as things normalise and people get back to work, there will be, of course, some shift in terms of the advertising spend. We have benefitted a lot out of people being at home and everybody trying to get people at home, and our product is a home product, and that’s why you see this big growth that has come through.

We think there will be stabilisation, but I think those players that are going to position themselves well, and be able to make sure that advertisers get a buck for their investment – they will be able to continue to see good results.

We might not see the kind of growth that we’ve seen in the past financial years, but I think we still stand a good chance [of being] able to demonstrate that there is varying advertising through our platform, and there are a number of initiatives that we’re putting in place to make sure that we try to uphold as much as possible, despite the change in platforms that advertisers are going to choose as things get back to normal.

FIFI PETERS: But just on inflation still, what does that mean for the packages that we pay for? How much of those rising costs are you able to pass on to your customers in this environment?

CALVO MAWELA: So the way we look at our cost structures is to try to limit the impact that impose[s] the cost on to the consumer – and it’s precisely because you can’t just price your way into making more profits; you need to still sustain the base that we have in terms of subscriber numbers. We do a whole lot of research [to] be able to make a determination as to what type of pricing we need to pass on.

But what we have seen is that, despite us increasing prices by inflation each year, we have seen the mass market continuing to buy into our product.

We’ve also seen in premium the decline happening, but begin to stabilise. The middle income [segment] definitely is feeling the pain, as I said, as a result of job losses and so forth.

You have seen our discipline in terms of cost-cutting. We have cut costs at a R1 billion-plus per year, and we are trying to look at ways to try to get as close as possible to the billion rand in cutting costs. So we’ll be looking at making sure that the price increases that we’ll pass on are price increases that can sustain the business for the long term, and not just take short-term gain out of passing through higher-than-inflation prices, which are going to impact the business in the long term.

FIFI PETERS: And impact your consumers. Please do – it’s tough for us out there.

We’ll leave it there for now, sir. Thanks so much for your time. Calvo Mawela is the CEO of MultiChoice.

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