Africa’s video-on-demand sector, until a couple of years ago, comprised a handful of micro-local startups doing their best to build a scene.
That has all changed. Nollywood-focused iROKO has become a major player, securing investment and major deals to provide Nigerian films on-demand. South African internet and media group Naspers launched video-on-demand service ShowMax in 2015, which has since expanded across Africa.
In January 2016 came the long-awaited news that Netflix was launching in Africa, while just this month Malaysian video-on-demand company iflix has closed a US$90 million funding round to expand into Africa.
ShowMax, in particular, has demonstrated major potential. The company has, with the backing of Naspers, already started expanding outside Africa, recently launching in Poland.
Though much of the content on ShowMax platforms is the same in each country, the company has made it a priority to ensure it has as much local content as possible. This allows it to compete with more local alternatives while also differentiating itself from more general, global services such as Netflix.
Chris Savides, head of ShowMax Africa, says the European launch is proof that the hyper-local concept, pioneered in Africa, has wider application.
Rather than sticking with a standard model globally and going with light-touch localisation, going hyper-local model is what Savides says is behind ShowMax’s rapid growth.
“This involves having management teams in place locally who are much better placed to identify needs not yet being addressed in terms of product features, functionality and content,” he told AFKInsider via email.
ShowMax’s hyper-local model applies not just to content, but to payments.
“As an example, with relatively low credit card penetration in South Africa we developed a prepaid voucher model and partnered with major retailers and banks,” Savides said. “We also integrated with telcos to give add to bill functionality. In Kenya, meanwhile, the payments challenge was different, the solution to which was integrating with Safaricom’s M-Pesa mobile money service.”
Savides says he is not concerned with the competition as the market is big enough for everyone.
“We see in multiple markets that people are happy to sign up to more than one SVOD (subscription video-on-demand) service as long as each is providing something of value to the consumer,” he said.
“Fundamentally it’s about giving people choice and a new way to watch TV shows and movies. We’ve got the rise of low-cost tablets and smartphones in Africa and we’ve got faster mobile connectivity rolling out, so the basics are lining up. In our view it’s inevitable that internet TV will take off in the same we we’ve already seen on multiple continents.”
In fact, in Savides’ view, the biggest competition is piracy.
“You’ve got to offer something more convenient and valuable to tempt people away from illegal viewing routes. Having said all of this, perhaps the single biggest factor affecting the uptake of SVOD services in Africa is the cost of mobile data,” he said.
It has certainly proven challenging to make subscription video on demand a success in Africa. A number of such services have started and already shut up shop. Savides says it is not an easy business. This is because it is not just about the technology, but also about having a deep understanding of customer needs and content.
“You definitely need to understand customer needs and deliver according to those. It may be that your niche isn’t the type of content but how you deliver that content in a way nobody else is doing,” he said.
“Having said that, we’re not finding there’s one silver bullet to crack customer demand – you need to get a whole bunch of things right simultaneously and keep tweaking in a hundred different places to get things right.”
iROKO founder Jason Njoku certainly has experience of that, having worked for years to establish his company as a major player. That is something he now believes he has done.
“It’s a brutal market, as essentially, you are building a highly complex and financially draining product that the vast majority of your audience cannot actually access, because of poor or wildly expensive broadband costs,” Njoku told AFKInsider.
“iROKOtv tried, for many years, to make VOD work. We couldn’t make it work, and therefore pivoted, pretty abruptly, to a new model of mobile-only, download-only and relaunched the product. The results were staggering. We were finally, finally able to bring our content to our largest market.”
ShowMax’s success, he feels, is down to its deep pockets, having the financial weight of Naspers behind it.
“To make a splash, to launch a genuinely premium and scalable product, to secure the quality and quantity of content you need to feed an insatiable, content hungry audience, I’d hazard a guess that you’d need around US$50 million. That’s a big number for entertainment in the current climate,” he said.
“There are very few niches left where broadcasters and platforms aren’t bidding up content prices. We were first to market, with Nollywood. We went narrow and deep – we listened to our audience. We’ve also spearheaded and found a new niche within that.”
That is why Njoku has no concerns about the growth of the likes of ShowMax.
“We create and own 65 per cent of our content forever. With our channels across DStv, StarTimes and Zuku, we have no customer acquisition costs. So we’re building our brand and sharing our content across the continent pretty quickly,” he said.
“We’ve focused on our own offering and our platforms, and have built out our niche and our brand, which differs significantly from the likes of Netflix of ShowMax.”