Business

MultiChoice’s DStv Premium plan backfires

DStv

MultiChoice’s plan to hide the decline in DStv Premium subscriptions backfired, and it is now trying to bypass its new reporting standard.

To understand MultiChoice’s DStv Premium reporting flip-flop, you have to go back to the days when the company was still part of Naspers.

Every six months, Naspers would give an update on MultiChoice with a breakdown of Premium, Compact, and lower-end packages.

This breakdown made sense as it gave investors a good idea of the performance of MultiChoice’s big profit driver – DStv Premium.

However, there was a problem. From 2015, DStv Premium started to lose subscribers, which did not look good for the company.

When MultiChoice launched a campaign to entice investors ahead of its listing in 2019, it changed its reporting to hide its DStv Premium subscriber numbers.

Instead of sticking with reporting Premium, Compact, and lower-end subscribers, it unveiled three new segments.

  • Premium – DStv Premium and Compact Plus
  • Mid-market – DStv Compact
  • Mass market – DStv Family, Access, and EasyView

Through this new reporting standard, MultiChoice obfuscated the decline of DStv Premium by bundling Compact Plus bouquets with it.

Even when asked, MultiChoice refused to reveal its DStv Premium subscriber numbers which faced an onslaught from Netflix.

However, this strategy backfired in its latest reporting period.

High-profile sporting events, including the United Rugby Championship and 2022 FIFA World Cup, bolstered DStv Premium subscriptions.

DStv Compact Plus, in comparison, suffered a significant decline which harmed the premium segment’s subscriber growth.

In its results presentation, MultiChoice highlighted that DStv Premium was growing again – something which never happened before.

MultiChoice is once against talking up its DStv Premium subscriber numbers because of the growth over the last six months.

DStv premium segment ARPU

Another interesting part of the premium segment is its average revenue per use (ARPU).

Despite a decline in cheaper DStv Compact Plus, an increase in DStv Premium, and a general price increase in April, the ARPU of the premium segment declined.

With a higher ratio of DStv Premium customers, one would have expected the ARPU to increase.

However, the ARPU of the premium segment declined from R587 to R566 per month – getting closer to the DStv Compact Plus price of R519 per month.

A possible explanation is that MultiChoice bundle streaming services – which are significantly cheaper – with the traditional decoder bouquets.

DStv Premium on a decoder costs R799 per month, while the same streaming service costs R699 per month.

So, while DStv Premium subscribers increased, many may be on cheaper streaming packages. DStv Premium decoder users may have also migrated to streaming packages.

Although it decreases revenue, it is not necessarily bad news for MultiChoice’s bottom line.

MultiChoice CFO Tim Jacobs told analysts that while streaming services are cheaper, they are targeted at a different market segment.

“Offering streaming services is not necessarily a cannibalisation of your existing customer base,” he said.

“Many of these customers are a new market segment who don’t want to buy a decoder and are more comfortable in an online environment.”

Another benefit is that the investment in streaming is lower than with the decoder business.

So, while the streaming pricing is lower, the profitability is still making a big contribution to MultiChoice’s bottom line.

Newsletter

You must sign in to view or make comments.

or