As Altron gears up to report its results on Wednesday, the company's figures will show its video-on-demand (VOD) offering is not the success it had hoped for, and it is looking for an alternative to its Node product.
Altron unit Altron TMT launched the Node about six months ago to much fanfare, a move that followed a week after Times Media Group unveiled Vidi. Both offerings were set to go head-to-head with the current incumbent, MultiChoice-owned DStv.
While the satellite-based Node has captured the attention of global giants - including Google, Microsoft, Netflix and Amazon - with its smart home and VOD offering, the solution is not performing to expectations. In a recent trading update, Altron said: "The recently-launched Altech Node has performed below expectations with regard to retail customer take-up. Altron TMT is well-advanced in terms of exploring alternative opportunities for this business."
Yet, say analysts, Node's lacklustre performance does not mean there is no market for this offering. Arthur Goldstuck, MD of World Wide Worx, notes there is a local appetite for VOD, with a quarter of a million people saying they are watching pay TV on the Internet - although not specifying what they watch. This figure is probably made up of BoxOffice Online, Vidi and Netflix, along with several smaller local players.
Node and Vidi are not the only local players in the game, as MTN unveiled its offering in December, and other players are set to get on board the bandwagon, such as Netflix - currently illegal in SA - which will be available globally by the end of next year.
Limited market
While no figures are available as to how well the combined VOD offerings are doing, MultiChoice, which provides a service to almost 50% of all homes with TVs, is not feeling any impact from the increased competition. Naspers, which owns the satellite monopoly, says the impact on its rate of growth due to other Internet VOD services has been limited, due to the poor penetration of unmetered broadband and the high costs of data packages in SA.
Naspers spokesperson Meloy Horn says markets are typically only well serviced by Internet VOD offerings where unmetered broadband reaches a significant proportion of a population and is reasonably priced. Yet, she adds, this space will become more crowded in the future as customers will increasingly be able to access the Internet without worrying about data costs. "Most markets around the world are evolving in this way and South Africa is likely to follow this trend over time."
ICT commentator Adrian Schofield adds VOD players are challenged in SA because MultiChoice has the addressable market sewn up, and decent alternatives to the satellite operator require high-speed broadband across the country, at affordable pricing. "The size of the market is dictated by the ability to connect to use the service."
Still demand
Despite these challenges, Schofield does not believe VOD is dead in the water, but rather that the current demand for online TV is the "tip of the iceberg" until many more South Africans can get access.
Goldstuck adds - even if Node has not won out - there is still space for services that take into account both the needs and the limitations of users. He says Node probably needs a rebuild as it is "a clunky system, with very temperamental components and processes", although it has "great potential in terms of range and quality".
Altron was definitely too early with Node as an Internet of things play, adds Goldstuck. He anticipates Vidi has a better chance of surviving as it requires far lower investment, and notes MTN's move is a "non-starter for now, given the high cost of mobile data and the heavy data demand made by movie-length, high-quality video".
He concludes: "The fear of Netflix coming into the market and dominating has spurred much of the activity we've been seeing. Ironically, this activity has in turned spurred Netflix into announcing an entry into this market."
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