Showdown at the VOD corral - TechCentral

Showdown at the VOD corral

james-francis-180Get ready for the great South African video-on-demand (VOD) cull. I have no figures to back this up, but my gut tells me that most of the local offerings are doomed. Services like Vidi, MaxVU and ONTAPtv.com made a go at it, but their reliance on rental models go against the grain. Perhaps they chose to mimic DStv BoxOffice, which uses a similar pay-per-view model, but it’s a step down from the VOD gold standard, Netflix.

Among themselves, these services may have carved out a new market. But the sudden arrival of Netflix in January put an end to that. They lack the deep pockets to really make a fight of it.

The exception, however, is ShowMax. It smartly copied the Netflix model, then went about securing some big titles. Having HBO, AMC and Showtime on board are big pluses, and it has plenty of local content, too. Beyond that, ShowMax is part of Naspers, a company with the cash resources needed.

But will this be enough to fend off Netflix?

I exchanged several e-mails with a ShowMax spokesman, who pointed out that there is a lot of market share to be had. That is true, but the Internet has made it very hard to compete against international companies. There is no local competition for Google search, Uber or Zomato — at least nothing commanding as much visibility. (The exception is the crowd of mobile payment services like SnapScan, but they may have had more opportunity due to the nature of sovereign financial laws.)

No such laws inhibit Netflix. As long as it has the content licences, it can ply its trade in South Africa.

This leaves me a little worried: much as I like having the next big thing in entertainment, it’s not in our interest to have only overseas companies serving us. It took less than an hour for ShowMax to get back to me, but nearly a week later and Netflix still hasn’t responded to my questions. They want our money, but do they care about us? Not really.

There is no clarity from Netflix on its plans to support local content, nor whether it has any intention of establishing a physical presence here. The only reason we know Netflix is in South Africa is because it works when you visit its website.

But I’m not here to beat on Netflix. I like the service and welcome its arrival to our shores. Yet I also hope the local competition can rise to meet what is a very real challenge.

So far, ShowMax appears to be the only one in a strong position to be able to do that.

My biggest gripe with ShowMax is its lack of standard definition (SD) streams. Sure, we all want sparkling high definition, but it is ruinous on your data. If you break down the Internet demographics of our country, mobile data is far ahead of the rest: it constitutes several million users, while ADSL accounts for about a million and fibre maybe a tiny fraction of that.

That means the majority of the market does not have access to cheap data or uncapped services. If you are on a 10GB package, which is still considered very generous by local mobile standards, you’ll manage a few episodes of Game of Thrones before calling it quits for the month.

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Netflix’s cheapest package is SD only, so I asked ShowMax why it isn’t doing the same. It replied that it didn’t want to confuse customers with too many options. That sounds like a canned answer, but it does raise a different point: you can download content to its app and that lets you select the quality.

Here’s where it gets interesting: ShowMax offers vouchers to use the service, so there’s no need for a credit card. It claims a large percentage of its users rely on the vouchers (it hasn’t revealed the numbers) and that many of these users tap free public Wi-Fi to download movies and shows for later viewing.

I have to concede that is an interesting model. The logic dovetails with the kind of bootstrap Internet use that South Africa is developing. For the majority of people, fixed lines are simply out of reach. In cities such as Cape Town and Pretoria, where free public Wi-Fi is gaining traction, the ShowMax voucher-and-download approach could engage a big audience.

You can nitpick at ShowMax’s design or its content, but that will change and grow. The company confirmed that it is planning to add support for Google’s Chromecast and Apple’s AirPlay. Technology evolves.

But evolution requires investment, and ShowMax is unlikely to show a profit any time soon. This means its future hinges on Naspers’s willingness to bankroll it for years.

There is also the slight hope that the other VOD services will rise to the challenge – and, who knows, perhaps digital rentals will prove hugely successful. But Netflix has raised the weight class: this is no longer a start-up environment.

One hopes Netflix won’t suck all the oxygen out of the room. The last thing we need is for South Africa to turn into a one-horse VOD town.

33 Comments

  1. A couple of big issues that the author missed.

    I’m quite happy that ShowMax is HD only, but it doesn’t allow an option to configure that stream in order to conserve data. Netflix allows users to choose Low, Medium, High and Auto.

    ShowMax has some bizarre device rules and stringent policies about how often these devices can be changed. Netflix doesn’t care how many devices are attached, it’s the number of concurrent streams that are limited by the chosen plan.

    ShowMax doesn’t offer user profiles. One of the great things about Netflix is that Dad’s shows and Johnny’s shows are separated and age appropriate. The profiles can even be configured for data usage so that Dad is in HD, which Johnny is in SD.

    ShowMax has limited device support. Not the end of the world if you could use Airplay (or similar) to stream to your TV, but you can’t. You can’t even take your ShowMax on your overseas holiday.

    ShowMax does offer offline viewing. That’s probably the only tick in the plus column.

    Multichoice missed a massive trick with their crippled Explorer. If they had gone the whole home DVR route with thin clients (ethernet or wifi) and allowed users to access ShowMax as part of a premium DSTV package, this would be a world beating offer. But, they didn’t.

    Oh well, it’s time to Netflix and chill.

  2. Good points, James. However, I have some remarks in regards of foreign investments. Last year within my work for a big media holding I could meet with the largest groups of African pay TV and DTT, offering them a “white label” solutions for creation of the strong brands, investment in content adaptations and an attached investment plan for the local production. Until now, I’m still in discussions but none of them proposed a vital plan to continue the cooperation. Here is an example when someone is thinking about you but you prefer to spend your money on foreign content acquisitions, rather then to develop your own industry (when I say “you” I’m referring to your phrase about “they want our money”)

  3. Mike van den Bergh on

    I’d like to correct a few points made in this otherwise excellent
    article:

    ONTAPtv.com does not rely on a “rental model”, as the writer suggests. We have always offered both a Subscription Video on Demand (SVoD) service and a Transactional Video on Demand (TVoD) offering – the latter is akin to what the writer refers to a rental or pay-per-view model, and is actually a differentiator against services like Netflix, which currently only offer an SVoD option. TVoD enables us to offer the latest blockbuster movies earlier, rather than having to wait for the studios to make them available via SVoD services.

    Our SVoD product is itself also differentiated from other offerings in the SA market, as it provides subscribers with the option to only pay for the content they want to watch, rather than requiring them to buy a “one size fits all” subscription which may include content which is either unwanted or unsuited to their needs (for example, we offer a Family Package which excludes content more suited to viewers older than 16, and an African ONTAPtv package which is heavily weighted towards local content and which is available at only R39 a month). We also offer a free sample pack, which is regularly refreshed with different content, to allow as many people as possible the opportunity to enjoy the ONTAPtv.com experience, and to realise how VOD is going to change SA viewing habits over the next few years.

    ONTAPtv.com was the first VOD service in South Africa to offer an option to download content and view it later in offline mode – others have since followed, but we were the first. We did this because we identified the high cost of mobile data and data caps as
    barriers which would hold back the rapid adoption of VOD services, and so we set out to enable subscribers to download content using wi-fi and off-peak mobile data, and to then watch it offline, either on their mobile devices, or by playing it out from their mobile devices to their television sets at home.

    Taking the above point further – and the writer picks up on this point when he refers to the need to offer both HD and SD content because of the high cost of mobile data –we have always offered both a high resolution option, for those subscribers who would like to view the content on a large screen television, and a low resolution option for those wanting to minimize data download costs, and who only intend to view the content on a mobile device (smartphone or tablet). The low res option delivers a very good viewing experience on mobile devices, with viewers having the ability to scrub backwards and forwards through movies and TV series with virtually no delay, using our own local content delivery network (CDN). The network also employs adaptive bit rate encoding to adapt to the network speed available to the subscriber, so that it optimizes their viewing experience based on their access network characteristics.

    Contrary to the writer’s assumption, PCCW Global is very definitely in this market for the long haul. We never expected a “quick win”; we recognize that we are part of a “content revolution”, viewing habits and patterns are changing, binge watching is
    becoming the norm for many, but these changes won’t take place overnight. We’ve shown our commitment to South Africa by choosing to locate the ONTAPtv.com service fully in this country – we are not playing out from some remote location, everything is in South Africa, and we believe that the quality of our viewing experience bears testament to the wisdom of that decision. Our team is also almost completely local – we’ve already created a significant number of jobs, and we expect to create a lot more as our service offering expands.

    We are also very committed to local content – we sponsor the Maxum Media Accelerator (MMA), which is an incubator for local up-and-coming content producers, and we’re looking forward to offering the first output from that initiative very soon. And when the major TV stations were unwilling to show the local drama “Miners Shot Down” late last year, even though it had just won an Emmy award, we took it upon
    ourselves to make the movie available to download and to view, for free, on ONTAPtv.com.

    We believe that there is room in in the South African market for a number of VOD service providers, but only if there is also a simultaneous focus on growing the overall market. We need to expand the subscriber base, to address currently unserved segments of the SA market; the size of the overall pie needs to get much bigger, and we can only do that by lowering the barriers to entry for all South Africans, and by offering a product which is attuned to the needs of local viewers.

    PCCW Global and ONTAPtv.com look forward to being a part of the SA VOD market for a very long time to come.

  4. Vusumuzi Sibiya on

    There are more words in this comment from you Mike than there are in this;

    >>otherwise excellent article:

    Good info on your platform and I certainly wish you well in your ambitions of;

    >>look forward to being a part of the SA VOD market for a very long time to come.

  5. Vusumuzi Sibiya on

    >>Until now, I’m still in discussions but none of them proposed a vital plan to continue the cooperation.

    Vlad, all that these local SA players are – is copycats that rely on local agencies that are completely clueless about the mass market because of the kind of prejudice person(s) “Penny Sparrow” types that make the final calls…

    …I’ve said this before, a Big Player from outside of SA will come into the SA VoD market space and do exactly what’s required; and crush every single local player including a ShowMax –

    ShowMax will never, ever come anywhere close to being as dominant as DStv in this space. They are destined to be another VIDI and there’s really nothing that they can do about it, for as long as they are influenced by the same “Penny Sparrow” type mentality that is going to be the ultimate downfall of all those entities and people who still believe that, in Africa they can hold onto the so-called “economic power”.

    The game has changed, and the gains that such companies as Multichoice made, where during a time when the masses were not awake to;

    >>(when I say “you” I’m referring to your phrase about “they want our money”)

  6. I mention that Showmax does not have any SD support. In fact, quite a bit of the column deals with that.

    At this stage I think user profiles are fairly moot. It’s a nice feature, but not a dealbreaker.

    I mention their intention to expand on devices and protocols.

    I talk about the offline or download viewing.

    This column isn’t about Mutlichoice.

  7. Andrew Fraser on

    Wow, saved me some typing time. I agree with all these points.

    The device support is a key one for me. ShowMax won’t even let you Airplay from an Ipad to an Apple TV in the correct aspect ratio. No support for any media streamers (Apple TV, Roku, Chromecast) or consoles XBox, Playstation4.

  8. If I follow you correctly, you noted a lack of willingness in the local markets to really compete. That is interesting and hopefully Netflix will light a fire under them.

  9. Andrew Fraser on

    The first point isn’t the whole story. Netflix SD or HD allows the user to set the data/quality rate. ShowMax doesn’t offer this feature. So apart from autosensing the client bandwidth and adjusting on the the fly, Netflix offers some granular control over quality and data used.

  10. True, but for the sake of the column it is sufficient to note Showmax has no SD streaming support. The how and what of Netflix’s methods isn’t relevant in this case. What you raise does not negate or change the point I raise about Showmax’s problem, so why raise it?

  11. Andrew Fraser on

    The one thing that I note is missing from the article is that it ignores the other international players that may (will inevitabily, perhaps) enter the market. It is only a matter of time until Apple enters the SVOD market, we’ve seen this in music and it’ll happen for video. Amazon is already a player in SVoD in the USA, and they already have the network to support a launch in other international territories. Google already has a SVOD (YouTube Red) system in place and is the biggest VOD supplier in South Africa already. Any one of these three has the clout to launch a Netflix competitor in South Africa.

    And don’t forget about Facebook…

  12. Thanks for the comment.

    Apple’s attempts to become a true VOD player is notorious for its false starts and problems. If you read between the lines, companies appear to be reluctant to do business with Apple, as it likes to dictate terms. Companies such as Netflix has stolen a lot of its thunder and leverage.

    Amazon is an interesting one, but it pins a lot of its momentum on Prime membership, which only makes sense in certain countries. It has also not been as successful as Netflix in procuring and generating content, plus its refusal to give numbers for its VOD service make sit hard to see what Amazon is planning at all.

    Youtube Red only recently even started talking about its content strategy. It is very far from being anything to a Netflix competitor. Just last week the boss of Red spoke to the BBC and his best sales pitch remains that Red is ad free and you get Google Music with it. That’s nice, but it’s no Netflix. At the moment Red is an attempt to ween Youtube off just ads as a business model: it doesn’t appear to have any clear vision to tackle the VOD market. (I know Youtube is VOD too, but by VOD I refer specifically to the Netflix model).

    Facebook… As far as I know there is no Facebook VOD strategy, unless you count a third party like Screenburn.

  13. I can’t say that, not without proper bandwidth comparisons. And, yes, it may be in even a worse position than I make it seem. But I can’t quantify any of that, so it would be pure speculation. I think pointing out its lack of SD as enough and Showmax gave their rebuttal. It’s up to the reader to decide if Showmax has a problem or not.

  14. Apple hasn’t tried to become an SVOD supplier, Just like they didn’t try become a streaming music service until they bought Beats. Apple is a major content purchaser, even if only for TvoD, I can’t see companies being reluctant to deal with them. Remember also that Netflix, big as it is, is a minnow compared to the four companies that I mentioned. I wouldn’t be surprised to see either Google or Facebook acquire Netflix.

    Youtube Red is a test, as is the way of Google. Right now it is pretty limited, but I would never dismiss it. Amazon is a insatiable machine, it needs to eat the market of other businesses to survive… eventually there simply won’t be enough retail market to acquire and Amazon knows this. The solution: diversify the content business. Amazon Prime is limited geographically, but it is a compelling value offer. It also ties physical retail, online content and services together (something that no other operation has succeeded in).

    Facebook is an outlier. Who knows what they’ll do? But Zuckerberg seems to want to fence off the internet, so that subscribers live in a FB garden of services. In order to do this, they’ll need content services.

    Do I expect these four to enter the ZA SVOD market in the next year? No. But inevitably at least one (and I think three) will offer SVOD in South Africa.

  15. In my experience with ShowMax and Netflix – Showmax HD is worse quality than Netflix SD. Showmax lags and stutters all the time – Often freezing completely for a long time. And their content is mostly very old and quite frankly irrelevant. Even Netflix’ limited offering sofar has been excellent whether we are talking about new or old content.

    My only conclusion – Netflix understands entertainment better than Naspers does and they are better versed in VoD technology as well.

    It will not be easy for ShowMax to catch up to that and retain customers long enough to become profitable – So there is the challenge.

  16. Actually, the point made in the article was data consumption. Netflix allows control of that, despite the package chosen. The top, four stream, package offers UHD. However, that can be reduced all the way down to SD to save data. Showmax allows two concurrent streams (equivalent to Netflix’s middle package), with no option to customise data usage.

  17. Vusumuzi Sibiya on

    >>Youtube Red only recently even started talking about its content strategy. It is very far from being anything to a Netflix competitor.

    When you are playing in this global content space, you shouldn’t be positioning yourself to be like a Netflix; you need to focus on your own niche USP and that will gain you traction into this market space… if you are a copycat then you are destined to fail.

    The leverage which Showmax should utilize to sustainably compete is to be offering compelling African niche content. Regional licensing of content is something that will be history, sooner rather than later and such platforms as HBO GO as well as others from major studios have been in existence for quite some time…

    …why would one decide to get, from Showmax; that which they’ll be able to get directly from the original content creator from a global catalogue offering (something that Netflix has also indicated they are pursuing; and so will every other original content creator)…???

    The most definitely quickest and profitable way towards a sustainable business model in this global content space, is to focus your resources on developing original content in the specific niche that you are definitely sure you can dominate.

    Once you have established your sizable niche base, you can then bring in the global content – but also offer a USP on it, like having the content dubbed into Afrikaans or indigenous languages of the niche that you are able to dominate and control.

    The Showmax copycats are already behind and they are going to end up just like Vidi because instead of innovating – all that they do is imitate; and they will never be an HBO, Netflix, or any other Hollywood offering from which they buy content… and the days of being protected by regional licensing are all but over.

  18. Who ever pays any attention to 2 of the countries 3 biggest idiots, you would get more logic paying attention to grass growing and pain drying.

  19. Vusumuzi Sibiya on

    Keep on ignoring the writing on the wall; and there’s going to be a time, just around the corner, for a rude-awakening that will be impossible to ignore…

    …that’s the difference and advantage that such people as Juju and those who work the ground engaging with the masses have over the blind and ignorant that make such utterances;

    >>Who ever pays any attention to 2 of the countries 3 biggest idiots,

  20. See, that’s what I thought: who wouldn’t want to deal with Apple? Turns out many companies and Apple’s attitude may even have driven companies towards Netflix, which exploited the tension by offering much better terms.

    Apple is not new to this: it has been offering VOD rentals for a long time (longer than Amazon, for example) and made several attempts at accessing IPTV markets (which VOD can be seen as a part of) through Apple TV.

    I agree on your other point: the size of these companies could be a factor. But we often see how the specialists tend to corner their market. No matter what Google did, it could not crack the social media market. Size isn’t enough – you need focus too. And often tech companies lose that when they diversify from their core offerings.

  21. You are very correct: local content, especially developing local content, is key. This is why a Netflix takeover could be bad for SA, as we desperately need more local content channels.

  22. Yes, Showmax has a lot to fix – perhaps more than they are prepared to admit publicly. One reason why I wrote this column was to give air to some of the issues. Let’s just hope they are reading these comments…

  23. Vusumuzi Sibiya on

    >>Showmax lags and stutters all the time – Often freezing completely for a long time. And their content is mostly very old and quite frankly irrelevant.

    The investment to fix the first issue is really not worth it, given the current size of the local market; and the smarter option is to explore a collaboration with such companies that have made the server infrastructure investment and leverage their backbone to provide an offering that adds value.

    >>their content is mostly very old and quite frankly irrelevant.

    …don’t know which “bright spark” came up with the idea of having Box Office, Catch-up & Showmax being separate entities;

    …when they consolidate all three into one offering then maybe they’ll begin to have an offering that is relevant to the SA consumers that are still customers –

    …but for as long as they are manipulating their offerings in order to extract as much money as they possibly can from customers; the same fate as Vidi and Altech’s Node awaits them.

  24. Andrew Fraser on

    I think it may be a bit harsh to judge ShowMax’s offering as old or irrelevant. There is some very good content on Showmax and in some cases more recent and higher quality than on Netflix ZA (especially series e.g. HBO, Showtime).

    But I agree on the streaming quality – Showmax is dire in comparison to Netflix.

  25. Andrew Fraser on

    “…don’t know which “bright spark” came up with the idea of having Box Office, Catch-up & Showmax being separate entities”

    I agree, it would make sense to put them under the same banner.

  26. Thanks, I didn’t see that. But it appears to be all rentals and buy, similar to what iTunes offer. It’s not the same VOD model Netflix and Showmax are using.

  27. Hence the “T” for “Transactional” in TVOD, as opposed to the “S” in “Subscription” SVOD…

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