Africa’s Pay-TV Giant Braces For Life Beyond Pay-TV As Subs Shrink

Africa’s leading pay-TV provider, MultiChoice Group, is battling a formidable challenge: A shifting landscape where subscribers are dropping, economic headwinds are battering earnings, and competition is rising from digital and streaming options.

Facing these pressures, MultiChoice is doubling down on newer revenue streams to redefine its future beyond traditional pay-TV. However, this shift is proving to be a costly venture, both financially and operationally, and the stakes have never been higher as Canal+ eyes a full takeover of the company.

MultiChoice’s traditional pay-TV model, established with its popular DStv and GOtv services, has shown signs of strain over the past year, with subscriptions steadily declining. The group reported an 11% year-over-year drop in its subscriber base in its latest financials released Tuesday, with 1.8 million customers leaving by the end of September 2024.

While the South African market was relatively resilient, losing only 5% of its base, the Rest of Africa business fared far worse, particularly in Nigeria and Zambia. Nigeria’s ongoing economic crisis—with inflation above 30% for the better part of the year—has hit consumer spending hard, exacerbating MultiChoice’s struggle to retain subscribers.

Overall, MultiChoice’s subscriber base declined by 11% or 1.8 million subscribers to 14.9 million active subscribers in the last 12 months; a 5% decline (0.8 million) in 1H FY25 and a 6% decline reported (1 million) in 2H FY24.

In Zambia, where drought-driven power outages have disrupted service, MultiChoice lost 298,000 subscribers in just six months. Nigeria also shed 243,000 subscribers in the same period, and the revenue impacts from these declines were further compounded by foreign exchange volatility.

“MultiChoice has felt the direct weight of this volatility,” the company noted, estimating that currency depreciation alone has drained roughly ZAR 7 B (~USD 318.2 M) in trading profit over the past 18 months.

Betting on New Revenue Streams

To mitigate its dependence on traditional pay-TV, MultiChoice is moving fast to diversify. Showmax, its subscription video-on-demand (SVOD) platform, has seen strong growth, reporting a 30% increase in paying subscribers. Following a rebranding and migration to the Peacock technology stack, Showmax now benefits from partnerships with distribution giants like M-PESA in Kenya and Capitec in South Africa, which has helped drive uptake.

Beyond streaming, MultiChoice is expanding its footprint in the insurance and financial services space. Through a partnership with Sanlam, MultiChoice is finalising a deal expected to yield a ZAR 2.6 B (~USD 144.4 M) to ZAR 3.3 B (~USD 182.9 M) accounting gain.

Additionally, the company’s sports betting business continued to gain strong momentum in Nigeria, where BetKing Nigeria has secured the second position in the online betting market.

This is in spite of a tough macroeconomic and foreign exchange environment, with net gaming revenue falling 48% to USD 48.3 M due to a weaker naira but increasing 10% organically. Also, SuperSportBet, the South African business launched late last year, is showing early signs of life and reported a tenfold increase in net gaming revenue over the past nine months.

Meanwhile, Moment, its fintech venture, is now live in 40 African countries, the company says, showing significant growth since its launch last year, with total payment volumes growing to USD 242 M while currently processing almost 30% of the Group’s payments.

“We have successfully been implementing our strategy over the past few years, achieving key milestones such as our investment in KingMakers [its gaming division],” says Calvo Mawela, MultiChoice Group CEO.

All these are part of MultiChoice’s strategy to capture a broader slice of consumer spending outside of television. Irdeto, MultiChoice’s global technology arm, also continues to contribute meaningfully, especially as it expands into digital security services that address the growing needs of online and streaming platforms.

Canal+ Takeover Looms as MultiChoice’s Future Hangs in the Balance

The pay-TV industry is under pressure from streaming services, the rise of short-form social media content, and shifting consumer preferences. These challenges are accelerating in MultiChoice’s core South African market, while severe economic, power, and consumer hurdles limit growth across its broader African footprint.

Compounding the strain, the group faces its most challenging foreign exchange environment yet, impacting financial results. In response, MultiChoice is significantly adjusting its cost base while navigating short-term pressures, with an eye on medium- to long-term opportunities in video entertainment, streaming, and emerging verticals.

Adding to the evolving strategy at MultiChoice is the looming Canal+ takeover, which promises to shift the landscape of African broadcasting if completed. With the merger control filing now submitted to the South African Competition Commission, the acquisition would give Canal+ greater leverage in shaping the region’s pay-TV future. Regulatory engagements are already underway, reflecting the weight of a deal that could reshape media ownership across Africa.

At the same time, MultiChoice’s efforts to sustain revenue by implementing a series of price hikes in its Nigerian market amid the naira’s woes have not gone unnoticed by regulators. Some increases, implemented to offset inflationary pressures, have sparked debate over affordability and raised concerns about customer retention in an already strained economic environment.

The Cost of Diversification

While MultiChoice’s efforts to broaden its revenue base are promising, they come at a steep cost. The group’s trading profit dropped 46% in the latest period due to exchange rate pressures in its Rest of Africa segment, coupled with a ZAR 1.6 B (~USD 88.6 M) investment into Showmax.

“Showmax investment cycles are weighing on overall profitability,” the company admitted, even as it noted that its cost-optimisation efforts—driven by a reduction in decoder subsidies and streamlining content—delivered ZAR 1.3 billion (~USD 72 M) in savings. This focus on efficiencies aims to bring full-year savings to ZAR 2.5 B (~USD 138.6 M), up from an initial ZAR 2 B (~USD 110.8 M) target.

The impact of currency fluctuations, particularly in countries like Nigeria, Zambia, and Malawi, remains a core challenge for MultiChoice, which earns revenues in local currencies across its 50 African markets but incurs significant costs in US dollars. Reported revenue in the Rest of Africa segment fell by 28%, and with trading losses growing to ZAR 259 M (~USD 14.3 M) in the first half of FY25, MultiChoice is keenly focused on cost savings though the Group CEO emphasises the need to go beyond that.

“Our focus extends beyond cost efficiency—we are equally committed to grow the business,” says Mawela. “We remain committed to driving new revenue streams and see significant medium to long-term opportunities in video entertainment, particularly in streaming, and in our adjacent new businesses.”

As pressures mount, MultiChoice’s pivot to digital and diversified income sources reflects a necessary evolution but one fraught with challenges.

UPDATE: MultiChoice Group also mentioned it wrote off USD 21 M of cash held in Nigeria with Heritage Bank as its license was revoked in June 2024 and the bank was liquidated.