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MultiChoice revenue down as subscriber base dwindles

Admire Moyo
By Admire Moyo, ITWeb's news editor.
Johannesburg, 15 Nov 2023
MultiChoice Group CEO Calvo Mawela.
MultiChoice Group CEO Calvo Mawela.

Video entertainment group MultiChoice has reported a drop in active subscribers. This was revealed in its financial results for the six months ended 30 September (1H FY24).

The company posted group revenue of R28.3 billion, down 1% (up 4% organic) due to weaker local currencies and consumer pressure, offset by conversion benefits of a weaker rand on the group’s dollar reporting segments and inflationary-led price increases in the majority of the group’s markets, says the firm.

MultiChoice has steadily been losing Premium subscribers over the years, as it contends with growing competition from global streaming services, such as Netflix, Disney+ and Amazon Prime Video.

Amid the pressure, MultiChoice says in a statement that to accommodate shifts in consumer video consumption trends to support future growth, it continued to transition strategically with an increased investment in Showmax, ahead of the re-launch in the second half of this financial year.

“We remain focused on developing our leading entertainment platform that caters for consumer needs across Sub-Saharan Africa, on leveraging our footprint to build a differentiated ecosystem and on developing additional revenue streams,” says CEO Calvo Mawela.

The company says the overall excitement around three World Cups, culminating in the Springboks emerging victorious as back-to-back Rugby World Cup champions, supported subscriber activity.

Silver lining

A highlight of the interim period was the South African Premium customer base, which grew 5%, a positive trend for the first time in many years, it notes.

The firm explains that profitability came under pressure due to ongoing power interruptions, cost of living increases and sharp depreciation in local currencies against the US dollar. However, it notes the impact was mitigated by a change in focus towards subscriber retention, an improved customer mix, as well as ongoing pricing and cost-saving disciplines to protect the resilience of the business.

As a result, it adds, the group maintained a positive trading profit margin of 3% in the rest of Africa (a R2.2 billion organic improvement year-on-year) and delivered a 31% trading margin in South Africa.

For the South African market, MultiChoice says the challenging consumer environment persisted into 1H FY24.

It points out that load-shedding remained the most immediate challenge in terms of subscriber activity, with the number of active days per subscriber declining by 5% due to a significant increase in the frequency and intensity of load-shedding, especially in Q1 of the reporting period.

Premium and Compact bases showed improved stability compared to the latter part of FY23.

The group reported a 5% decline in 90-day active customers to 8.6 million (3% of which can be attributed to the decision to end the short-term campaigns implemented in the prior year to support customers during load-shedding), with active customers amounting to 7.8 million.

More stable trends in the mid- and upper segments of the customer base, along with inflation-linked average price increases of around 4%, helped limit the decline in monthly average revenue per user to 2%, it adds.

Offsetting challenges

It points out that various initiatives were implemented to protect the economics of the segment and help offset macro and consumer challenges weighing on the performance of the business into the second half, This period is typically affected by the seasonally higher cost of the football content rights and festive season promotional activity.

“Key among these was the reduction in decoder subsidies through increased device pricing in our linear business and the relaunch of DStv Stream, which has more than tripled its subscribers since March 2023, albeit off a low base.

“Encouragingly, over 90% of DStv Stream subscribers added in the period are new subscribers to DStv, who find the connected product without hardware installation more appealing. The pricing and value proposition of the DStv Business Play packages were also recalibrated, which led to a 37% increase in month-on-month revenue for this segment in September 2023.”

In South Africa, revenue declined by 3% to R16.5 billion, impacted by a 4% decline in subscription revenue and a reduction in decoder revenue due to the shift in strategy, offset by 31% growth in insurance premiums and a doubling of DStv Internet revenue.

The segment delivered a trading margin of 31%, with Showmax now reported as a separate trading segment.

“In absolute terms, the lower revenues and negative operating leverage resulted in trading profit trending 17% lower to R5.2 billion, impacted by the ongoing investment in local content and sport, partially offset by cost saving initiatives and reduced decoder subsidies.”