New day, more troubles
One of the first indigenous movie streaming platforms in Africa, iROKOtv, has announced that, as from May 2020, 28 percent of its employees in Nigeria will be put on an indefinite unpaid leave of absence — a furlough, in other words.
In a blog post published by the company’s founder and CEO, Jason Njoku, it was revealed that iROKOtv would also be slashing salaries. The pay cut would affect 16 percent of the company’s staff. iROKOtv has offices in Lagos, London, and New York.
According to the numbers put forward by the CEO, the worst-hit of the lot is the iROKOtv Head Office in Lagos, Nigeria, where 36 out of 102 employees (35.29%) have been put on indefinite unpaid leave, 49 have been hit with pay cuts (~48%), and 6 employees (~5.8%) face redundancy. Njoku revealed that some 11 members of staff (~10.7%) will continue to get full pay.
The CEO said the tough call was made with survival in mind in light of new realities that have hit home since the pandemic bomb exploded, coupled with the economic crisis connected to the plunge in oil prices.
And then, there’s the devaluation of the local currency (naira) which means that the amount paid by subscribers on the video-on-demand (VOD) platform is now worth a lot less even as iROKOtv now has to pay more for some of its most important infrastructures.
“IROKO remains pretty unprofitable, even with these changes, we are still expected to lose USD 200-250 K per month for the rest of the year. Our ambition remains to reach cash flow positive, but in the meantime, we are planning on very conservative fundamentals,” a part of the blog post reads.
“The biggest challenge alongside the softening, okay collapse of, consumer confidence was the naira devaluation. This hurt us last time around.”
Njoku cited an example in iROKOtv’s Amazon Web Services (AWS) bills. With the naira devalued such that a dollar is now equivalent to NGN 450.00 presently as against NGN 360.00 previously, iROKOtv’s AWS bill has jumped to NGN 20.25 per month from NGN 16.2 Mn.
Scaled the rest of the year, that would beNGN 32 Mn per year newly budgeted expense (assuming NGN 450.00 to the dollar).
The devaluation has also eroded subscriptions. Njoku, who prides himself as a firm believer in numbers, further explains:
“Our NGN 3 K annual subscription just went from USD 8.33 to USD 6.67. You see the problem? We need to tighten up the entire organisation. Because a price increase isn’t feasible. We are important, not essential. This isn’t the first time this has happened to us.”
Indeed, Nigeria suffered a recession in 2016 during yet another oil price collapse. And Njoku’s iROKOtv felt the burn.
The CEO attributes the survival of the company that year to the efforts of ROK Studios, the iROKOtv-backed film production company founded by actress and filmmaker, Mary Njoku (wife of Jason Njoku), which was acquired by French television company, Canal+, in 2019.
But even ROK Studios is having a torrid time now as the pandemic has put production on hold.
“With the triple threat of COVID-19, oil, and economic collapse, there are very few moves to make. Last time, ROK saved us. But even ROK in the short term is hurting as production has ground to a complete halt,” he says.
What forced these new measures?
Interestingly, as per Njoku’s comments, iROKOtv was actually flying high during the early stages of the lockdown.
Subscriber numbers had surged in Nigeria especially, right after President Muhammadu Buhari announced the first two-week “cessation of movement” in three Nigerian cities.
But even before that announcement, the entire iROKOtv team had gone remote and terminated the contracts of around 100 contract workers in its offline and outbound marketing teams, in anticipation of the movement restrictions.
Njoku said iROKOtv hit its highest daily addition within the first few days of the lockdown, as users seemed to be allowing themselves to enjoy what seemed like a holiday at first. But things changed before long.
“I thought people would start panic buying and conserving, they didn’t, that would come later. It seemed that consumer sentiment was pretty high, folks seemed to view the lockdown as some kind of additional holiday,” he says.
But that was until reports of isolated incidents of insecurity and desperation among people became a major issue. And then, the lockdown was extended by a further two weeks. Just like that, consumer sentiment/confidence seemed to go downhill.
Nigeria, in particular, had posted the strongest numbers (it was the strongest the company had ever recorded for Nigeria). But the surge sort of died down as quickly as it had happened. Internationally, iROKO’s numbers seem stable, per his words.
Facing the possibility of pay-TV suffering a dip once the recession begins to bite, coupled with the earlier-mentioned naira devaluation scenario which, pretty much, has iROKOtv forking out much more and making a lot less than it used to, the CEO opted to “right-size iROKO for any reality,” because, according to him, “no one knows what’s going to happen next.”
A portion of an email to all iROKOtv staff which was sent out last Friday reads thus: “Iroko, in order to survive this new reality, needs to change. We need to survive. In order to do that we need to slim down and get to our fighting weight so we can re-emerge smarter, stronger, faster.”
So, where to from here?
Although a significant number of employees are being put on furlough, the company says the affected persons are still eligible to use IROKO’s health insurance.
The VOD startup also says it is hoping that things rebound quickly so it can welcome back all those who were furloughed, though early indications expect things to be pretty bad for the rest of 2020.
Earlier this week, we reported that South Africa’s largest independent card payment provider, Yoco, was laying off staff and cutting pay in an effort to steer through these uncertain times. Fresh reports also have it that one of Nigeria’s biggest banks, Access Bank, is significantly trimming its staff base and slashing pay. In a leaked video, the bank’s CEO, Herbert Wigwe, said he’s taking a 40% pay cut.
This is the reason why access bank want to lay off 75% of its staff.. From the mouth of the MD himself pic.twitter.com/dUDBeozLCu
— ??????? (@TzOlawale) April 30, 2020
iROKOtv, which describes itself as the world’s largest online distributor of local Nollywood content and Africa’s largest Internet TV operator, is now towing the same line.
However, in addition to the uncertainties of the times, the startup which was founded in 2010 and backed by USD 45 Mn in VC, will have to contend with the rising competition posed by the likes of Showmax and Netflix. The latter appears to be solidifying its African footprint.
Africa will have 47.26 million pay-TV subscribers by 2025, up from 30.7 million at end-2019, according to a report by Digital TV Research. Nigeria will contribute 10 million subscribers by 2025, overtaking South Africa in 2020 as the largest market, says the report.
With this in mind, VOD platforms are vying for the largest slice of the African pie. Although Njoku likes to maintain that iROKOtv is kind of playing a different game with its unrivaled collection of African content, Netflix’s recent ‘African affair’ is surely not something to be taken lightly.