Load shedding has a devastating impact on households and businesses throughout South Africa. For businesses, keeping the lights on during outages is costly, but the revenue collected in that time often justifies the additional spend. Households, on the other hand, are not always equipped to invest in backup power.
Meloy Horn, head of investor relations at MultiChoice Group, said this has a negative impact on the pay-television operator’s subscription numbers.
“It looks like people can work around stages 1 to 3 of load shedding, maybe even stage 4. But once it goes higher, like we’ve had a lot of this year, we see subscription numbers, especially reconnections, being materially impacted,” Horn said an interview with TechCentral on Wednesday.
The challenge of reducing the impact of power outages is not unique to MultiChoice. However, a subtle difference in the MultiChoice business model makes it impractical for it to do so as effectively: whereas most businesses need to keep only their own infrastructure running to generate revenue, MultiChoice needs its customers’ infrastructure – the TVs, internet routers and set-top boxes in households – to remain operational during outages so they can access DStv.
“The churn we see due to load shedding is lower in the premium market,” said Horn. “People in that segment have more disposable income to invest in backup power, which is not the case in the lower segments of the market.”
Given the poor state of the South African economy, budget-conscious consumers face difficult choices about how to spend their money. Many have had to cut or redirect their spending.
“When things get really tough, some households don’t have a choice but to cancel and come back when things are better, as you ‘cannot eat entertainment’,” said Horn. “That affects our ability to recover the money we spend acquiring the content. What makes the MultiChoice scenario unique is that load shedding affects us more on the revenue side of the equation because most of our costs are paid long in advance.”
Content acquisition is the highest spending item for MultiChoice, costing the group R21-billion in the year ended 31 March 2023. The planning window for content, Horn explained, is 12-18 months, on average. “Major sporting events like the Rugby World Cup are planned up to three years in advance,” she said. It’s impossible to know what the energy supply situation will look like in three years’ time, making planning difficult.
Following the easing of high levels of load shedding earlier this year, MultiChoice saw some recovery in subscription numbers. Returning subscribers, however, have proved to be risk-averse in their decision to sign up again. “They don’t immediately resubscribe when the level of load shedding drops again. Rather, they wait to see if the electricity supply will stabilise so they know that they’ll get value for money from their subscription.”
Looking at the year ahead, Horn said MultiChoice remains “gravely concerned about the debilitating impact of load shedding on South Africa”.
“We believe the problem can be fixed and are confident that with technological solutions and political will, the damage done can be reversed, putting us on a growth trajectory again. However, it is critical for action to be taken urgently,” MultiChoice Group said in its 2023 annual report. — © 2023 NewsCentral Media