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In this episode, I speak with Stephen Watson, Executive Director of Discover Digital, to discuss VOD services in Africa, the importance of local content and sport on the continent, the role of linear and Telkom’s strategy.
Discover Digital is a digital entertainment and video on demand services company bringing internet television solutions to the African market via Internet Service Providers, Broadcasters and Telecommunications Networks.
Stephen explains that at Discover Digital their mission was to look at creating platforms that make quality content more accessible to the African consumer. Their primary role when they launched, was to enable telcos or broadcasters to get into the OTT video on demand (VOD) and streaming space with an accelerated route to market. Discover Digital is a full service business, typically providing an end to end solution. Their offering includes not just the technology stack, but also strategy proposition, KPI’s and they also license all of the content on the customers behalf. Stephen adds that they have become a kind of one stop shop accountable partner to their customers, “almost like they subcontract their media streaming division to us as a business”. Recently they have added marketing services to their offerings, Stephen discusses how this an additional string in their bow to try and support their clients to achieve success in the VOD or IPTV space on the African continent.
Traditionally, Africa has been a satellite TV market but more recently there has been more OTT launches on the continent. Stephen discusses how there haven’t been many success stories in the OTT space in regards to VOD services - excluding mainstream players like Facebook and WhatsApp. Free video on demand platforms is the current trend in Africa, as SVOD’s that have content set behind a paywall subscription either on a monthly or a daily basis are struggling to get traction. Stephen adds when Disney + launched in America they had over 10 million subscribers overnight. In Africa, you have players like Netflix, Showmax (MultiChoice) and DStv Now - those services have been around for many years and have struggled to surpass a million subscribers on their own platforms. Launching a successful VOD service on the continent is difficult and is very different to the deployments in mature markets. However, the marketplace in Africa is getting busier and there will be more entrants. There is already Netflix, Amazon Prime as well as local players and in the last two months Brit Box has launched and Disney will be launching in 2022.
“If you’ve got to play in Africa, you’ve really got to make a decision of where you stand and what is your strategy and how you’re going to play amongst those giants. I often say to people, you know, when we talk about content and the investment in content, but if you look at what the top 10 Studios in America spend on producing new content a year, there are only four countries in Africa that have a GDP greater than that. Yeah. puts it into perspective”
The cost of data across the African market is still relatively high in comparison to European or American markets. Stephen adds that he thinks those prices will come under pressure but also that most of the telcos have realised that they have to transform their digital services to value added services. Video is just one component of that, telcos have launched digital currencies, financial and banking services and various loyalty schemes - as well as video on demand. Stephen discusses how they have been party to one or two major telcos going to market with a subscription product in different countries in Africa. They have either subsidised the data completely, either promotions of months of free data to certain high spending customers and there have also been zero rated data strategies. He adds that these discounted data promotions haven't moved the needle and he believes that data is not the achilles heel to the success of a VOD service - having the right content is more important.
“If you talk to any telco, probably about 80% of the video traffic that they see over the network is the likes of YouTube, and of course, Facebook video coming into play. So it does show you that if you've got the right content, the consumers will consume it irrespective of the data cost. Yes. If data continues to go south, it will only accelerate that. But I don't believe that data in itself is the Achilles heel to why Africa doesn't see mass uptake of video on demand services, like we see in the west or in Europe”
Stephen explains that having the right content mix on your subscription platform (international versus local short and long form content) is important and you really need to understand your consumer. There is a vast population in Africa that is currently unbanked. Nearly 60% of the continent is living below the poverty line and are earning $1 or $2 maximum a day and in some cases less than that. Global players are coming in from the west not just bringing western content but are staring to invest in the production of original exclusive local series that are socially and culturally relevant. Their price points are very aggressive - Netflix charge around 49 Rand, $3 for a mobile only single user subscription in Africa. However these global streaming giants have got anchor markets that underpin them, as otherwise if Africa was their only market they would be losing substantial amounts of money. Stephen discusses that if you're launching a VOD service in Africa and your going to price a product from $3 and up for a monthly subscription, then you need a big content budget and you need to be able to go up against the giants.
In Africa, a lot of people buy their data by the day and don’t have monthly subscriptions, so you need to look at how you extract value. Stephen explains that if that $3 a month actually translates to $0.10 cents for a day pass to access the catalogue, the difficulty is extracting that $0.10 as a lot of the continent do not have bank accounts. From a billing perspective, a platform would need to tap into the telcos who have mobile wallets and allow people to charge their services to the telco bull if they are postpaid customer. However, the majority of Africa is not postpaid, it’s prepaid due to the difficulty in collecting cash.
“So then you start to go into the point that you can use your data balance as currency. So you can debit the data balance and use it as a transaction. And what that does is if you're not a telco, and you're looking to play in the media space, the dependency on your scale, and your success in this market is not just dependent on building a relationship with a telco to get better data rates, or subsidised or bundled data with your offering. It's as much as being able to access the telcos billing ecosystem”.
Other topics discussed include the importance of local content and sport on the continent, the role of linear and Telkom’s strategy.
Here is a breakdown of the topics discussed in this episode:
- The challenges of launching a VOD service in Africa and who the big players are
- Are high data costs the reason OTT services aren’t successful in Africa?
- Billing challenges when launching a VOD service in Africa
- Telkom’s strategy of bringing a product to market
- The importance of local content in Africa
- The evolution of sports content in operating a successful VOD service
- What is next for DStv?
- The role of linear in Africa and how it will evolve in the next 10 years
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