DStv struggles to retain subscribers across the board

The only real bright spot in MultiChoice’s financial results between April and September was that it added DStv Premium subscribers for the first time “in many years”.

This was very likely entirely due to the Rugby World Cup in France, which kicked off in September – such is the power of the Springboks. Key will be whether MultiChoice manages to hold on to any of these probably ‘temporary’ subscribers.

The 5% increase on its smallest, yet most lucrative, subscriber base (after an 11% decline between 2021 and this year) was not enough to offset a 5% drop in its ‘premium’ segment, which counts the DStv Premium and Compact Plus packages. This means that the Compact Plus subscriber base likely saw a double-digit decline (Compact Plus exists as an upsell to the middle-market DStv Compact base).

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For the first time since its listing in 2019, it has lost subscribers in all three segments: premium, mid-market and mass market.

Most of the pain is being felt in that middle market (Compact customers), where subscribers are down 14% between September 2022 and September 2023. It is likely that Compact Plus subscribers are down by a similar amount. The mass market segment (Family, Access, EasyView) saw a 1% drop in subscribers.

Load shedding effect

In all, it lost half a million subscribers in South Africa in the last year, with a drop from 9.115 million to 8.629 million.

The bulk of this was a chunk of 311 000 subscribers who were basically gifted subscriptions by the operator because of load shedding in the hope that as the power cuts eased, they would start contributing to revenue (by paying for subscriptions).

This seemingly did not happen. It says, “while the group has supported its subscribers with similar campaigns during challenging periods like the Covid-19 lockdowns, we can only do so for limited periods of time”.

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Load shedding remains the “most immediate challenge in terms of subscriber activity”, according to the group, with the number of active days per subscriber declining by 5% due to a significant increase in both frequency (number of days) and intensity (Level 4 and above) of load shedding, “especially in the first quarter of the reporting period [April to June]”.

Its customers are, on average, now not active for 97 out of every 365 days – more than three months out of every 12.

Subscription revenue

Because the group of more than 300 000 were non-paying customers, they did not directly impact subscription revenues. Still, this declined by R500 million (or 4%) to R13.3 billion in South Africa, despite average price increases of 5.6% across its packages in its home market.

It notes that “mass-market subscribers are proving less resilient and more reluctant to pay when uncertainty around the ability to consume pay-TV exists”. The average revenue per user (Arpu) in the mass market is down 1% to R94.

Because of the increase in DStv Premium customers, Arpu in the ‘premium’ segment actually increased by 1% (not surprising because of the price differential between Compact Plus (R579) and Premium (R879).

Subscribers grew by 1% in the Rest of Africa business, resulting in an overall drop of 2%.

Uptick in streaming

Structurally, the group has seen an increase in streaming-only customers – those without decoders.

The relaunch of the DStv Stream app saw active users almost double (+87%) between July and September, with more than 90% of those “new to DStv”.

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It is investing heavily in Showmax ahead of that platform’s relaunch in February. It paid Peacock (Comcast) R1 billion for the build and customisation of its new platform in the six months. Right now, it is carrying the costs of two platforms at the same time.

The paying subscriber base of Showmax grew 13% year on year, with revenue of around R600 million and trading losses of R800 million. It is effectively losing more than R1.50 for every R1 in Showmax subscription revenue (only R476 million) at present.

Overall, group revenue grew by 4% to R28.3 billion, with a reported trading profit of R5 billion (down 18%).

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The Africa business is finally profitable, with a R330 million trading profit.

Factoring in nearly R3 billion in forex translation losses (mostly related to Nigeria), the group income statement shows a R911 million operating loss for the period. Core headline earnings are down 5% to R1.9 billion.

This article was republished from Moneyweb. Read the original here