Probing Multichoice’s Pricing: Are Nigerians Really Overpaying For DStv/GOtv?
Here’s a quick question: Do subscribers pay too much for Multichoice’s DStv and GOtv pay-TV service in Nigeria? Politically-correct answer: It depends on who you ask. But for lawmakers in Nigeria, and indeed a large group of locals, the answer is a resounding yes, apparently.
That’s because an ad-hoc committee formed by members of Nigeria’s House of Representatives is convinced that the pay-TV operator is ripping Nigerians off with its current pricing model and has resolved to force change by compelling cable service providers to switch to a pay-per-view (PPV) or pay-as-you-go (PAYG) pricing model.
As The Cable reported on June 26, a House of Representatives committee is insisting that cable and satellite television service providers in the country must introduce a PAYG subscription plan for customers.
The house ad hoc committee, which is investigating service providers over their high tariffs, said the pay-per-view plan is to address the yearnings of Nigerians.
The house had in March resolved to investigate complaints about high tariffs and monopolised bouquets on cable subscription services. To summarise, Nigeria’s so-called “Green Chamber” is specifically probing South Africa’s Multichoice Group for alleged high tariffs and the restriction of Nigerian customers to prepaid plans.
At the committee hearing on Thursday, Unyime Idem, the committee chairman, said excuses on why DStv and other service providers have not introduced the PAYG plan are not tenable.
“We have already taken a decision that pay-as-you-go is not going back,” he said.
“We only called you to rub minds with you so that you can tell us what it takes; Nigerians have spoken to us and the challenge they threw at us is, no matter what it takes, that they need pay-as-you-go.”
He added, “So I want you to have it at the back of your mind that it is pay-as-you-go. That is the duty we owe the people that we are representing, and we are not going back.”
Where’s this coming from?
Africa’s largest pay-TV company, Multichoice Group, has been operating in Nigeria since 1996. Its DStv and GOtv cable platforms have grown in leaps and bounds over the years and are now widely popular in the country; enjoying borderline-monopolistic dominance.
Across the 50 Sub-Saharan African countries where Multichoice broadcasts, it operates a prepaid pricing model in which subscribers pay specific amounts for specific cable TV packages lasting for a specific period.
Both DStv and GOtv offer different bouquets which are essentially an allotment of channels. The price of a bouquet is generally determined by the number and nature of channels available in it. It follows that the cheapest bouquets often have the least number of “nice” channels.
The argument by Nigeria’s Green Chambers is that the company bouquets are overpriced and that its customers in Nigeria should be availed the option of paying for highly-customized offerings.
In other words, convinced that pay-TV is costing too much, members of the House of Representatives want to compel Multichoice to allow users to pay for only the amount of cable they want to watch, instead of paying for a whole bouquet. This model will see users pay for only as much as they watch or as much as they would like to watch, instead of paying the flat rate.
The underlying rationale for this argument may have something to do with the idea that many of the bouquets come with bloated pricing due to the stupendous allotment of channels, many of which are not needed.
There is also the concern tied to Nigeria’s epileptic power supply, many have argued that paying the flat rate is a rip-off since power outages and factors tied to everyday living often mean that no one gets to watch as much cable as they paid for.
The House is, therefore, pushing for the PPV or PAYG option which they believe will be much cheaper, though this is not necessarily true.
The PPV/PAYG option might prove a bigger problem
Pay-TV companies like Multichoice Group easily expend hundreds of millions of dollars acquiring broadcasting/licensing rights all over the world. Some companies acquire broadcasting rights for years at a time with upfront payment.
For instance, Multichoice’s popular DStv sports channel, SuperSport, paid EUR 296 Mn (USD 332.05 Mn, at today’s rates) for the 2016-19 Barclays Premier League broadcast rights in Sub-Saharan Africa.
After paying so much to acquire these rights, companies like Multichoice recoup this money from subscriptions while targeting profits. But sometimes the margins are quite narrow.
If Multichoice gets strong-armed into going the PAYG or PPV route in Nigeria, there is hardly a doubt that the company will adjust its pricing to offset the difference and make their money back; such that the PPV/PAYG option might prove even more costly for subscribers after all checks and balances are done.
But even this point is moot as Multichoice has previously made it clear that it is incapable of implementing the PPV model.
Nico Meyer, CEO of MultiChoice Africa, told an entertainment content conference that was held in Mauritius in 2014 that his company has no capacity to put in place such a facility.
“We procure content on a monthly basis, we don’t procure it based on the time the consumer will be using it, but on an entire month,” said Meyer.
The MultiChoice Africa boss added that, unlike mobile operators and electricity companies, they were unable to detect when their subscribers are actually using their service.
“If you buy airtime and you consume it, they will deduct it because they can tell. But we cannot tell when someone is traveling or not using it.
“All I know is that someone pays on a monthly basis and we make that service available but I cannot tell if you are consuming the service,” he said.
Do Nigerians really pay too much for cable?
During the last Thursday’s hearing, Armstrong Idachaba, Acting Director-General of the National Broadcasting Commission (NBC), told the ad hoc committee that the agency has on many occasions compared the tariffs in Nigeria with those of other African countries and found out that Nigeria’s rates are much lower in some cases.
Well, that pretty much sums things up. But beyond the comments of the Acting DG, the fact is that, contrary to what many Nigerians believe, Multichoice’s pay-TV service is indeed cheaper in Nigeria than in many African markets, including the company’s home country, South Africa, where it actually has a far greater number of subscribers.
As of November 2019, the group’s overall subscriber base stood at 18.9 million households with South Africa single-handedly accounting for 8.2 million of those. The remaining 49 countries where Multichoice broadcasts, including Nigeria, collectively make up 10.7 million.
Of DSTV’s 13.5 million subscribers in Sub-Saharan, Nigeria accounts for barely 1.5 million. This should put to bed any talk of Nigeria’s being Multichoice’s largest market, as South Africa actually has nearly 5-times Nigeria’s total DStv subscriptions.
Another misconception that is common among Nigerians is the unfounded idea that the group offers the PPV option in South Africa. This is a bogus and untrue claim as Multichoice is not known to offer such anywhere.
When it comes to pricing, there’s plenty of information available on how cable fee in Nigeria compares to other African markets. As a matter of fact, the cost of subscription is lower in Nigeria than in South Africa. As an example, DStv Premium costs NGN 16.2 K in Nigeria and the equivalent of NGN 23 K in South Africa.
In addition, Meyer had also revealed in 2014 that national tax policies are the main reasons why subscription rates vary from country to country.
“People might think that Nigeria has slightly lower rates because they have high numbers in subscriptions, but contrary to popular belief Nigeria does not have the highest number of subscribers.
“The reason for the different subscription rates is due to the countries’ taxation regimes. Each country has different taxes hence the different subscription rates,” he had said.
Indeed, DStv and GOtv bouquet prices increased significantly recently but this may not be unconnected to the revised taxing regime that came into effect this year. Earlier this year, Nigeria had implemented a new Value-Added Tax (VAT) regime which was a 50 percent climb from the previous figure.
Featured Image Courtesy: Zambia Daily Mail