DStv Premium subscriber base stable after years of decline

MultiChoice has arrested the decline of its top end DStv Premium subscriber base, with marginal year-on-year growth in the number of customers on this package in the six months to 30 September.

This is a marked improvement on the 3% drop in Premium subscribers at the interim stage last year.

This base has been under significant pressure for years, as it faced a pool of upper income customers who were ditching pay-TV subscriptions altogether in favour of on-demand services such as Netflix, downgrading their packages, or emigrating.

While it did not disclose the number of subscribers, MultiChoice says the Premium package is “stable after historic declines”.

However, the overall Premium segment – which includes Compact Plus – still saw a 3% drop in the number of subscribers to 1.3 million. Importantly, the rate of decline is slowing.

Of concern to MultiChoice will be the sharp decrease in the number of Compact Plus subscribers. This is down 10% from last year.

It says this is due to the fact that this package was introduced as a way of upselling to mid-market Compact customers who are now under financial pressure due primarily to fuel and food price shocks. These price hikes tend to have a disproportionate effect on lower- and middle-income customers.

The Compact base as a whole (including commercial customers such as hotels, bars and taverns) was down 4% to 2.7 million. This base is down more than 5% from the 2.9 million peak achieved between March and September 2020.

MultiChoice could see the issues looming in the mid-market base last year already, and made a number of focused changes to its key entertainment series and sport (essentially, scheduling of matches in the DStv Premiership) on Compact channels.

Although it struggled with pronounced subscriber losses across the upper and mid-market bases between April and June (Q1), it managed to reverse these and both of those segments showed growth between July and September, of course helped by sport.

The only subscriber growth in South Africa so far this year has come from mass market packages such as Family, Access and EasyView – a trend that has been entrenched for a number of years. Monthly prices for these packages range from R29 to R309.

Streaming

Streaming has helped the local business, with the number of customers accessing DStv via a stream more than doubling in the last year.

In September, it reduced the prices of its streaming-only packages. Premium, for example, costs only R699 a month on this basis, versus R839 per month with a dish and decoder.

It says it was able to reduce these prices as it costs the group less to serve these customers. No set-top box subsidies are needed, marketing costs and customer service requirements are generally lower, and content distribution costs are lower versus satellite.

The number of subscribers paying for Showmax is up 50%, with the Showmax Pro base (which offers live sport, including football) up 111%.

Overall, subscribers in its home market are up 3% from last year to 9.1 million.

In the rest of Africa, it grew subscribers by 6% year-on-year to 13 million. Nigeria, which is nearly half of this base, drove the growth with subscribers up 9%.

The Rest of Africa unit, which accounts for 37% of group revenue, remains loss-making.

But MultiChoice says it would have been profitable in these six months, had it not written off R700 million in decoder subsidies for the Fifa World Cup.

This is because it is holding increased stock levels of decoders ahead of the football showpiece and it expenses these subsidies upon delivery. It expects this investment to translate into subscriber growth and says it will help mitigate “the growing risk of supply chain disruptions from global silicon chip shortages”.

The numbers

Revenue increased 7% to R28.6 billion, with the help of a weaker rand. Core headline earnings were up 2% to R2 billion.

The betting operation BetKings, in which it acquired 49% last year, grew revenue by 62% to $93 million. It reported a $16 million loss after tax.

MultiChoice managed to repatriate $122 million in cash from Nigeria during these six months, equivalent to around R2 billion, but it says that because currency had to be exchanged at parallel rates, it had to book a R1 billion foreign exchange loss on this ‘extraction’.

This article first appeared on Moneyweb, and was republished with permission. Read the original article here.