The apparent collapse of pay-TV operator Super 5 Media is unfortunate. It means less chance of the kind of rivalry that fosters innovation and drives down prices. At the top end of the market, however, competition to DStv may come from a less obvious source.
Super 5 Media, formerly known as Telkom Media, was cursed almost from the start. When Telkom, under former CEO Reuben September, decided to end its investment, the writing was already on the wall.
The company, acquired by a media group led by maverick Chinese businessman Philip Xiao, ran out of cash as shareholders quarrelled over its future.
This is despite the fact that Telkom had pumped nearly R500m into the broadcaster prior to disinvesting. It used the money to build television studios and buy broadcasting equipment and to hire staff. Since his business, Shenzhen Media SA, bought out Telkom’s stake in Super 5, Xiao has invested another R100m-plus.
But Xiao and fellow director Tian du Pisanie fell out, apparently over the strategic direction Super 5 Media should take, and the business came apart around them.
This month, the broadcaster, which hadn’t launched a product in about three years of operation, retrenched its remaining employees. It faces legal action from financial advisory firm Rothschild, one of its creditors, which is reportedly seeking to attach its assets.
Super 5’s failure to launch is a great pity, not only because of the job losses and wasted investment — on a net basis, Telkom poured more than R400m down the drain — but because the company was set to be the first to challenge MultiChoice and DStv. The two new remaining pay-TV licensees — On Digital Media (with the recently launched TopTV) and Walking On Water Television (still to launch) — have chosen not to target the top end of the market, which they say has already been sewn up by the incumbent.
TopTV is doing well, notching up more than 120 000 subscribers decoder sales in just three months since its launch. But the company does not offer the latest TV shows and live sports programming that many people crave.
And the jury is still out on Walking On Water, which promises to launch two bouquets of “family-friendly” channels this year. The bouquets, which will probably cost R49/month and R99/month, won’t challenge DStv at the premium end of the market.
Though it would also have struggled to secure sports broadcast rights — MultiChoice has exclusive long-term contracts for most important local soccer and rugby tournaments — Super 5 had plans to offer innovative new services like Internet Protocol TV, which would have appealed to the wealthier end of the market.
Instead of traditional rivals in pay-TV, MultiChoice’s competition in the premium market in the long run is likely to come from the Internet.
Already, thousands of South Africans — it’s impossible to quantify how many — download programming content from the Internet, mainly from unsanctioned sources.
The introduction of cheaper uncapped broadband products has no doubt expanded the practice, despite its dubious legal nature.
The long-term risk for MultiChoice is if a large number of its subscribers turn to the Internet for their TV entertainment.
It’s a long-term trend, though. For now, few people own the Apple TVs, Mede8ors and other multimedia storage and playback devices that serve downloaded content into people’s living rooms.
Over time, though, MultiChoice will have to launch transactional video-on-demand products and other interactive services to try to counter the threat.