Firms ride on Internet growth to colonise new TV frontiers

Showmax Chief Executive Officer John Kotsaftis. file photo | nmg 

By MUTHOKI MUMO

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Summary

• Safaricom, which rolled out 4,000km of cable in the last financial year, charge Sh2,500 for its cheapest Home Fibre bundle - 5Mbps, and Sh9,999 for the 40Mbps package.
• The popularity of these on-demand video entertainment companies should serve as a warning shot to traditional broadcasters, who have most of their business centred around selling advertising space in between shows or subscriptions can, say online marketing consultants.
• The growing competition in the broadcast sector, partly brought about by the rapid rise of Internet TV, has caused some companies, like DStv, to reduce their subscription prices.

The rapid penetration of Internet in Kenya is leading to a renaissance of sorts that could potentially drive non-adaptive traditional television broadcasters out of business.

Safaricom

, through their Home Internet business, are leading the new push to have as many homes as possible join the grid, effectively allowing Internet-based companies to colonise new frontiers in the country.

“We have passed more than 81,000 homes across the country and continue to invest to reach and connect more customers in line with growing demand for high-speed data connectivity,” Safaricom CEO Bob Collymore told Digital Business.

Safaricom, which rolled out 4,000km of cable in the last financial year, charge Sh2,500 for its cheapest Home Fibre bundle - 5Mbps, and Sh9,999 for the 40Mbps package.

“Our customer needs are changing – they are demanding more from their Internet connectivity and we are seeing the emergence of a more digitally enhanced lifestyle. Consumers are using more data rich products and streaming content that demands fast and reliable connections. We will grasp the opportunity for our home solutions to meet both the immediate need for connectivity in the home as well as also lay the basis for more advanced technologies such as smart home solutions,” added Mr Collymore.

Surf, which recently teamed up with Facebook to offer low-cost Internet solutions said it was encouraged by the interest its products are receiving.

“Our customers are very engaged and savvy about the value of the Internet and what it means to them in their daily lives and what options and price points are available. And, as they see prices drop, they see the opportunity to use it even more,” said Surf CEO, Mark Summer.

In response to the Internet spread, American enterprises Netflix and Showmax recently launched operations in the country and have, so far, remained in healthy business space, which is now attracting more rivals, among them iFlix.

iFlix, which first launched their service in May 2015, conquered the Asian region, after unveiling their products to 18 markets across Asia and the Middle East and North Africa (MENA) region, acquiring over five million subscribers in less than two years.

With a capital base boosted by an additional Sh9.3 billion ($90 million) funding by Liberty Global Group and Zain Group, iFlix Africa announced that it was attracted to the continent by the huge appetite for digital content and entertainment, mostly attributed to a large youth population.

“By 2020, Africa will have 720 million smartphone users. We aim to meet the entertainment needs of those increasingly connected viewers,” Mark Britt, iFlix co-founder and CEO said.

Yet, even as experts maintain that traditional cable and satellite TV may not be facing an immediate death knell, they remain adamant that players in the field should brace for a tough fight from emerging technologies.

The popularity of these on-demand video entertainment companies should serve as a warning shot to traditional broadcasters, who have most of their business centred around selling advertising space in between shows or subscriptions can, say online marketing consultants.

“It is becoming more attractive to sign up for products that allow you the flexibility of paying for only what you use and Internet-based broadcasters are niftily taking over.”

The growing competition in the broadcast sector, partly brought about by the rapid rise of Internet TV, has caused some companies, like DStv, to reduce their subscription prices.

Just this week, the South African company cut its fees by between 3.42 per cent and 9.86 per cent, across its different bouquets. DStv’s cheapest package, Access, now costs Sh950, down from Sh1,050.

But MultiChoice, DStv’s parent company, maintains that it is not under threat from Internet-based rivals.

“Every product has its own space, and each customer his own preference. Internet TV will not in any way affect our business, but we are using the current space to innovate, by beefing up the packages with more channels to give our customers value for their money. We remain competitive because DStv’s content targets a wider base,” said MultiChoice Kenya managing director, Eric Odipo.

DStv has for more than 15 years enjoyed a market-leader advantage by holding exclusive rights to some of the popular programmes like the English Premiership League (EPL).

The Premier League reports that 276 million viewers watched EPL soccer in sub-Saharan Africa during the 2014/ 2015 season, most of whom viewed the matches through SuperSport, DStv’s sports channel.

Strategy
SuperSport later paid £296 million for the 2016-19 Barclays Premier League broadcast rights in sub-Saharan Africa, a confirmation that the sports audience remains a key segment of the company’s strategy.

But Internet-based broadcasters are gradually eating into the market by offering similar content, with some, like Hulu, offering packages that only require users to only pay for viewed matches.

However, it might still take some time before the Internet options carry the day with the price of Internet connection in Kenya still high.

According to Netflix, which delivers more than 125 million hours of video every day in more than 60 countries, watching movies or TV shows on the platform “uses about 1 GB of data per hour for each stream of standard definition video, and up to 3 GB per hour for each stream of HD video.”

A 1GB data bundle from Telkom, one of the cheapest offerings in Kenya, costs Sh500, and for users connected using such limited data plans, the prohibitive Internet costs may dissuade them from joining the Internet TV bandwagon.

But that will not be a problem for the 81,000 homes already plugged into Safaricom’s unlimited Home Fibre, Surf Kenya’s home Internet users and many others already using older service providers like Zuku.

In addition, Internet content curators and distributors are working tirelessly to make their streams as light as possible, for the purposes of emerging markets.

Netflix, for instance, has been working on video compression technology that allows content streaming even over slow connections.

“Our talented engineers are constantly testing to compress more data through more advanced encoding,” said chief executive Reed Hastings in January last year, during the global roll out of the service.

“The goal is to deliver data so fast and well on any device in any broadband condition.”

Hastings further explained that the proprietary technology works by caching content on servers around the world allowing Internet service providers to access it with relative ease, from the nearest location.