Online video-on-demand (VOD) services in South Africa will remain a relatively niche service until the cost of data connectivity falls to levels that are affordable for the mass market.
That’s the view of advisory and services firm International Data Corp (IDC), which believes that despite the affordability gap, VOD services like Times Media Group’s recently launched Vidi will provide competition to MultiChoice’s DStv.
“IDC believes the major impediment to mass adoption of online VOD services in South Africa is the cost of data connectivity, particularly for mobile broadband,” says senior research manager for telecommunications and digital media George Kalebaila.
“The advantage of accessing digital content from anywhere on multiple devices will be lost if the cost of data connectivity remains high. With low fixed broadband penetration in the country, the online VOD proposition on mobile broadband is where the numbers are going to come from owing to the large mobile subscriber base.
“Mass roll-out of fibre offerings is still a long way away, and therefore mobile broadband is the only attractive alternative for mass adoption of online VOD in South Africa,” Kalebaila says.
Vidi, he says, has the first-mover advantage in VOD and could cause “significant disruption” to the country’s pay-television subscription market. But, he says, with new VOD players set to launch services soon, this first-to-market advantage will not last long.
“The biggest threat in the short term to Vidi is expected to come from Telkom if it launches its own VOD services by leveraging its ADSL infrastructure. Telkom can offer VOD as a bundled service to its ADSL customers as a triple- or quad-play offering, and position itself as the preferred connected home communication provider to its subscribers.”
IDC says Vidi’s monthly subscription fee of R149 compares favourably to international services such as Netflix and Hulu, especially when one considers that to watch those services, South Africans typically spend about R50/month extra on services that allow them to bypass region restrictions.
It says, too, that the launch of new entrants could force MultiChoice to make its VOD services available more broadly.
“DStv currently offers online VOD to DStv Premium subscribers on multiple devices, but the subscription of R665/month is considered to be too expensive by many South Africans. It will be interesting to see if DStv will move to protect the online VOD segment by opening the service to all its subscribers.” — © 2014 NewsCentral Media
