Three months after going through a round of pay cuts, furloughs, and layoffs sparked by the economic impact of the pandemic, iROKOtv has taken further steps to steady the ship in the face of the storm.
A sour cocktail of the COVID-19 fallout, currency devaluation, and hostile regulatory environment has forced Africa’s foremost video-on-demand (VoD) company to pause its pursuit of growth in Africa and focus on its international business which accounts for 80 percent of its revenue.
This move will cause the mainstream Nigerian online movie streaming startup to reduce the size of its African teams dramatically. As iROKOtv Founder/CEO, Jason Njoku, revealed in a blog post, around 150 jobs will be cut as the company hunkers down, tackles burn, and prioritizes top-earning markets.
As of 2017, iROKOtv reportedly had over 950,000 hours being watched in 178 countries around the world. Its effort is known to have given Nigerian movies a global reach and made them more accessible.
As Njoku asserted, the fallout of the pandemic has had a markedly different impact in its different markets. Whereas the pandemic has been sort of a massive boon for iROKOtv’s international business, it’s been the opposite on the African continent.
iROKOtv had seen its international subscription daily additions grow by 200 percent as the pandemic forced stay-at-home measures. However, in Africa where it claims to have been pursuing aggressive growth in the last 5 years, there was an initial spike but it wasn’t for long.
After recording its best month in April, there has been a steady decline in subscriptions in Africa, possibly due to economic uncertainties and financial strain. According to Njoku, local subscriptions tanked 70 percent from April to July. Efforts to get things back up have so far proved abortive.
Per the words of the CEO, the problem is compounded by the recent round of the Nigerian currency devaluation that has put a strain on cash flow since most of its expenses (Amazon Web Services and other tech tools) are in U.S. dollars.
Several weeks ago, the oft-pressured naira was officially devalued to NGN 380.00 to the dollar for various reasons that can be tied to the long-standing economic and fiscal maladies in Nigeria.
For businesses that rely on inputs from outside Nigeria (like iROKOtv), that implies higher costs and reduced earnings in the local currency. Njoku summed it up in these words while illustrating the impact of the erosion of the value of the naira:
“We went through the brutal 2016-17 devaluations and ended up N3,000 = $8.33 (360/$). A nightmare by all means, as we just lost real value. Like, tangible pay some bills costs. Today N3,000 = $6.3 (477/$),” he wrote.
“All indications are that the naira devaluation hasn’t really finished. Some are saying it’s just starting and will end up at 550-600/$ before year’s end.
“What we are seeing now is distorted as the access to FX has been cut off for almost 6 months. A lot of our costs are in dollars – AWS, tech tools, etc,” added Njoku, who was essentially pointing out how the value of iROKOtv’s popular NGN 3 K annual package has gone from USD 18.00 in 2015 to USD 6.3 in 2020.
There are also issues in the regulatory environment. Early this month, a raft of stifling measures targeted at Pay-TV operators and VoD platforms was greenlit by Nigeria’s National Broadcasting Corporation (NBC) as part of the country’s new broadcasting code.
Njoku, who has been very vocal against the regulation, even got some flak from the Acting Director-General (DG) of the NBC, Professor Armstrong Idachaba, who questioned iROKOtv’s identity and practice with these words:
“Where is the base of iroko TV? Do you know, where did they start? London. And all the money they do through Netflix and other things that they sell, where does the revenue go? How much of it is invested into the country? The involvement they do is like a creative investment that allows them to take artistic, cultural materials, original to the Nigerian people and export, maximize the profit, suck it out of Nigeria, and still take abroad. Is that not injustice to the Nigerian society?”
In response, Njoku mentioned that iROKOtv has accumulated net operating losses of more than USD 30 Mn over its lifetime while investing in African content starting with Nollywood (Nigeria’s coveted movie industry), and has been bleeding millions of dollars annually trying to build Internet TV in Africa.
In any case, iROKOtv will now abandon growth plans on the homefront and look after its international business. Njoku estimated that this will cut monthly burn from USD 300 K to USD 50 K.
It is understood that focusing on markets abroad makes economic sense for the business since its international annual average revenue per unit (ARPU) is around USD 25.00 to USD 30.00. In Africa, the annual ARPU value is between USD 7.00 to USD 8.00.
The adjustment is geared towards seeing iROKOtv through the next 18 months after which there may be a readjustment depending on market dynamics. The CEO did mention that employees affected by the layoffs would be supported.