International video-on-demand (VOD) entrants in the local market could become a serious headache for local broadcasters, but market watchers say they are unlikely to have a significant local impact in the short-term.
Local media giant Naspers, which owns pay-TV platform MultiChoice, warned this week that "competition from international online players with global reach, such as Netflix, Amazon and Google, is increasing. MultiChoice is investing in its online offering, expanding its delivery platforms and improving products and services."
The local market has reacted with interest, especially in the expected arrival of Netflix towards the end of next year. The popular VOD service provides on-demand Internet streaming media, available to viewers in North America, Australia, New Zealand, South America and parts of Europe.
Established in 1997, the service has more than 30 million subscribers in over 40 countries.
"Netflix has quite a following in other parts of the world, and many South Africans are already accessing the service [illegally]," says local ICT commentator Adrian Schofield.
Schofield says Netflix does boast reasonably desirable content, which could compete with current offerings on the market. "But bandwidth remains a challenge in SA," he says.
Slow start
Pay-TV service DSTV, owned by MultiChoice, is delivered via a good-quality signal, says Schofield, adding that a VOD service, delivered via ADSL or through a mobile provider, would likely see a limited uptake.
"All this means we can expect a services such as Netflix to start slow, but the signs are there that our connectivity is improving. There is an increased access to fibre, especially in upmarket areas where most of Netflix's customers are expected to be found."
Schofield says digital migration, which would ultimately free up the so-called digital dividend and give South Africans access to high-speed Internet, would potentially pave the way for Netflix and similar streaming services to gain a serious foothold in the market.
"Yes, digital migration would certainly free up spectrum, but we are at least two to three years away from that happening. When it does happen, I expect it to be the point when Netflix ramps up its presence in SA."
Another factor which stands in favour of current broadcasters is content, says Schofield, pointing to the disappointing sales of the Altech Node as an illustration of this. The satellite-based VOD service - received via a locally-produced set-top box - has failed to make significant inroads in the local broadcasting landscape.
"It hasn't really taken off as well as they hoped. This underlines the hold of existing broadcasters on the local market. Unless you have really good content, it will be really difficult to break into this space."
World Wide Worx MD Arthur Goldstuck says he does not expect Netflix to have much of an impact in the short-term, but says its long-term impact is likely to be "dramatic".
"We are certainly seeing a shift in connectivity in SA. We are seeing much fibre broadband rollout, in one suburb after another. This means thousands of people are signing up at a time."
Accelerated delivery
Goldstuck sees the current fibre-to-the-home rollout as an accelerated version of the Internet rollout in the 1990s.
"Next year this time, several tens of thousands of people will be connected and will be looking at content to consume. Fibre-to-the-home will be a very viable path for services like Netflix to follow," he says, adding digital migration will play its part when it finally happens.
"Local players need to start getting in there if they want to compete."
However, Goldstuck says DSTV is likely to remain the dominant player for some time, as subscription TV still holds the advantage over streaming services in SA by being able to cover live sports and news coverage.
Ovum analyst Richard Hurst says Netflix seems to already boast a marketing advantage, as it has yet to spend a single cent in this market, but already has a very strong name locally.
"Bandwidth does remain a problem for streaming services in SA. Netflix will certainly be a niche market offering, with fibre-to-the-home being an advantage for the uptake of such services.
"It is true that current broadcasters have the advantage in SA, especially with sports content, which is the strength of MultiChoice."
However, Hurst says incumbent players need to take a tactical approach for the short-term impact of Netflix, as well as a more strategic approach to deal with the long-term effects it will have on the local market.
Share