It has been over three-and-a-half years since On Digital Media (ODM) tried its hand at posing competition to satellite TV giant MultiChoice. The launch of TopTV was at the time seen as a panacea for SA's monopolistic pay-TV market, but it seems the venture may be dead in the water, despite a spirited start.
The responsibility for what has been described as a gloomy outlook for SA's pay-TV landscape has been largely placed on the shoulders of the Independent Communications Authority of SA (ICASA), for not playing a tough enough role in creating a competitive environment.
ODM has, in recent months, taken various measures to win market share amid what industry observers say is a massively challenging, anticompetitive pay-TV landscape. These include the introduction of pornography, rebranding from TopTV to StarSat as part of a business rescue plan, offering customers a prepaid option, and the sporadic introduction of new channels.
Market share margin
The company is tight-lipped on whether business has picked up since the launch of its new platform StarSat, including PlayboyTV. However, industry observers paint a bleak picture for the relatively new (considering MultiChoice's DStv offering had a 15-year head start) pay-TV operator's future.
Marketing analyst Chris Moerdyk says given MultiChoice's dominance in terms of its wide array of channels, including its exclusive sports coverage - which it acquired at a price not even the SA Broadcasting Corporation has ever been able to match - "It is going to take very deep pockets to match the DStv offering".
MultiChoice had just under 4.5 million subscribers in the first quarter of last year - a number it says grew by 470 000 in the year to March alone. The company says its focus on high-quality local and international content was one of the drivers for this growth.
ODM says its subscriber numbers are confidential and declined to furnish ITWeb with any details. According to the last numbers available, as of August 2012, then-TopTV had 400 000 decoders installed in households, but only 150 000 of those represented active paying monthly subscribers.
According to World Wide Worx research, in 2012 MultiChoice's customer base was just shy of its current pool, at 4.2 million subscribers (96.2% market share), while TopTV had around 166 000 subscribers (3.8%).
Competition crash
Although TopTV initially sparked hope for competition in the pay-TV sector, having sold over 120 000 decoders within its first three months in operation (including 50 000 during its opening weekend) the success was not to last. Just two years later, the operator signed up for business rescue - a process that is still ongoing.
Industry pundits say ICASA dropped the ball years ago - and may not be able to set things straight and introduce competition to the pay-TV market at this stage.
Moerdyk says MultiChoice is way ahead of the two-man pack. "I don't believe ICASA can do anything to create competition with MultiChoice. It has handed out licences left, right and centre in the past and none have actually come to fruition."
Moerdyk refers to a move by ICASA about six years ago, when it tried to open up the market by awarding ECNS licences for more pay-TV providers to enter the market alongside MultiChoice. Initially, 18 companies applied, but the number was whittled down to just five companies - Walking on Water, ODM, e-SAT, Telkom Media and MultiChoice Africa - after others withdrew.
ODM was the last man standing as the other four failed to take the process further and put their business plans into action.
ICASA tried opening up the pay-TV market again last year, but the call for applications for licences was met with an unenthusiastic response. Five companies gave presentations during the regulator's hearings - Close-T Broadcasting Network, Kagiso TV, Siyaya Free To Air, Mindset Media Enterprises, and Mobile TV. Whether any of these will follow through this time remains to be seen.
Take charge
Independent broadcasting researcher Kate Skinner says, however, it is vital the monopolistic situation is addressed. "ICASA must start playing a much more active role. [The regulator] needs to do some careful analysis and research, and then move swiftly from there to introduce new pro-competitive regulations. As time passes, it becomes more difficult to address these issues so we need a swift response."
Democratic Alliance shadow minister of communications Marain Shinn says, without "exceptional material", any newcomer will battle to get off the ground as things stand. "MultiChoice has the choice of the best programmes, so unless there is something unique and sought-after, they are unlikely to get off the ground - which is unfortunate."
ODM had hoped its pornography package would appeal to a large base of potential subscribers. The company fought for ICASA's green light on this and was finally given the go-ahead last year April and launched six months later. ODM declined to comment on how the new offering - exclusive to StarSat in SA - has fared.
Skinner believes SA needs a an environment with as much content as possible at the best possible price, including as much local content and African language content as possible. "We need a vibrant three-tier broadcasting system that includes a strong public broadcaster, strong and active local community broadcasters, and a vibrant commercial broadcasting tier that includes a number of free-to-air broadcasters and pay-TV operators."
Fat chance
Having said that, Skinner says the situation currently looks bleak.
Moerdyk says it is next to impossible for any other pay-TV player to make it in the current market, with the current perceived pay-TV broadcast model.
"The mistake being made is that the current pay-TV model is being treated as the model for the future. It isn't. Netflix is the model for the future - or at least one of the models for the future, and if you look at what MultiChoice has done with its Explora decoder, you can see quite clearly that the future of pay-TV is going to be all about delivering content on demand.
"Right now, Japan is offering Internet download speeds capable of downloading a full-length HD movie in just a few minutes. And an experiment in the UK between Alcatel-Lucent and UK Telecoms just a week or so ago saw them achieve a download speed of 1.75 terabits per second. That is capable of downloading 44 full-length movies per second.
"Admittedly, SA is still pretty far behind, but the broadband speed here is increasing exponentially and it won't be long before we are watching everything via the Internet."
At the end of the day, he says, any new entrant blindly following the current model will struggle. "I have difficulty in seeing any newcomer making a success of it."
That said, Moerdyk notes there is "a lot of room" for Internet-based models. "I would not be surprised if some print media houses are the first to get in on the act - mainly because their own future lies not in print but as Internet-based, on-demand information resources."
ODM would not comment on its plans to bolster business, saying only: "The plan is to add more channels. Details will be announced at the appropriate time."
ICASA did not comment by the time of publication.