Battle of the billionaires—Africa’s video-on-demand market whets some big appetites

Everyone wants a slice of the continent's one billion-strong market--but who are the real winners?

TELECOMMUNICATIONS giant PCCW, owned by Hong Kong billionaire Richard Li, is expected to next week unveil its video-on-demand service in South Africa, raising the stakes as streaming services do battle for an African market that counts a population of more than one billion people.

The entry by the conglomerate into the African market comes on the back of its March purchase of Vuclip, the mobile video-on-demand service that would also allow it target the continent’s blooming smartphone market, and which has sparked a flurry of talks with telecom firms by competitors.

PCCW’s service would pit it against American provider Netflix, which early this year disclosed plans to be in 200 countries, or just about every country, by the end of 2016 in what it says is an accelerated expansion strategy.

Naspers plans

It also comes on the back of plans by Naspers, Africa’s biggest company, to sink at least $65 million into its newly-launched Showmax video-on-demand service as it looks to grow out into the rest of the continent.

“It’s a priority for the group,” Bob van Dijk, who oversees the project, told Bloomberg news wire in an August 31 interview following the going live of the service. “We’ve never limited our ambition to South Africa.”

Naspers, known more on the continent for its Multichoice pay TV unit, is worth $55 billion—the bulk from its stake in the Chinese web firm Tencent which makes its money from small payments by its customers for games and social media.

The South African firm was last month reported to be in talks with Vodacom to push content to mobile devices across Africa. The telecoms firm has mobile networks in five African countries, nearly all in southern Africa, but its parent firm Vodafone also has a foothold in Ghana and Egypt, and in Kenya through minority stake in Safaricom.

The tangible moves by these three big firms are further shaking up a market that has been thought to be in the crosshairs of other heavy-hitters such as Amazon, Apple and France’s Canalplay.

Smaller African players

It also muddies the water for much-smaller but ambitious players that have been looking to ride on their ties to the continent.

One such is Afrostream, which is set to launch its video on demand service later this month. Founded by African descendants living in France two years ago, it had a catalogue of about 50 films as at last month and has signed up some 2,000 subscribers, as it hopes to be a bridge between Africa’s growing middle class and its diaspora.

One of Afrostream’s co-founders, Tonje Bakang, born in France to Cameroonian parents, in an interview said that success against the heavy hitters would come from taking a different approach, but did not specify which, with the reality being that it is a bout that could be a mismatch.

Other better-known pioneers include Nigeria’s iRokoTV, which started off in 2011 and has more than 5,000 films to its title, and Kenya’s BuniTV. 

South Africa already has at least two other video-on-demand firms. In a sign of how the terrain is changing, Lagos-based iRokoTV, dubbed the Netflix of Africa, in April signed a deal to support an Africa section on the real Netflix, which has 66 million subscribers globally.

But despite the obvious growth, Africa has not been an easy market—convincing the continent to pay for a service that requires a reliable and high-speed internet connection takes some doing. South Africa has about 1 million fixed-lines, the most of any country, while iRokoTV had to switch off its streaming service and focus on downloads, due to the high data costs that put off would-be subscribers. 

The bottlenecks

For a continent with anywhere up to 100  million TV households there are only 16 million paying people, though this number is forecast to grow to at least 25 million accounts in the next five years, with revenue from pay reaching $6.2 billion.

Of the 375 million households watching online TV and video, only 5.8 million were in the Middle East and Africa—with standalone figures from the content unavailable but expectedly only a fraction of this figure, according to Balancing Act Africa, a consultancy and research house. 

In addition to the slow growth in credit card uptake—and some countries have vaulted past this stage altogether, there is also the slow pace of electrification in the region, though this has not put off Nollywood and its spinoffs around the continent from being prolific.

But the Africa market is whetting investor demand due to fast-improving internet infrastructure. Wireless speeds have improved and their cost is becoming more affordable—at least for the 300 million Africans classified as middle class. 

Econet unit Liquid Telecommunications, which is in three other African countries, this week said it was seeking to raise more than $150 million to fund internet expansion in West Africa and bring in broadband in to more homes.

All about smartphones

Another internet firm, Smile Telecoms, was Tuesday reported to have raised $365 million in debt and equity to raise the speed of existing connections, and also move into the populous Democratic Republic of Congo.

The pace however remains slow, and this has led to the heavy focus on smartphone access on the continent. There are currently some 130 million smartphones in the region, a number that is forecast to reach 350 million by 2017, and 500 million by 2020.

This is informing the rush to cut deals with mobile service providers and video on demand service firms such as Vuclip. Afrostream has gained the support of French multinational telecoms provider Orange, which has presence in 19 African countries.

While the decisive blow in the competition is anyone’s win, the fast-paced developments are good news for content providers. Nigeria’s Nollywood for example last year made over $4 billion in revenue, on the back of a mind-boggling 2,000 films that account for its near-ubiquity. 

But going forward analysts say there will be need to diversify to meet the needs of a continent with over 50 countries if it is to match the explosion of similar services in China, creating more opportunities for both current and new players.

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