Amazon is coming to South Africa. Apart from taking on Takealot and Makro, its Amazon Prime offering poses a serious threat to MultiChoice’s DStv and ShowMax.
Amazon announced it will launch Amazon.co.za in 2024, giving local sellers access to the world’s most popular eCommerce platform.
The exact launch date has not been specified as it is determined by the engagements with sellers and local partners in the coming months.
Most people focus on Amazon’s impact on online shopping, but the eCommerce giant’s value proposition extends far beyond online shopping.
The South African launch, dubbed “Project Fela”, will start with its marketplace and “fulfilment by Amazon” service for third-party sellers.
Amazon’s Prime membership programme is set to become available to South Africans shortly after its marketplace launch.
The company is playing its cards close to its chest and has chosen not to provide an official comment regarding the reports on Amazon Prime in South Africa.
However, Amazon Prime formed a core part of its offering in many other countries where it launched.
Amazon Prime gives subscribers a myriad of shipping, shopping, streaming, reading, and other benefits.
Prime members enjoy better delivery, get exclusive product deals, qualify for rewards and cash-back on purchases, and can borrow books and magazines from the Prime Reading catalogue.
Free games, exclusive in-game content, and a free Twitch channel subscription are also part of the subscription.
The biggest benefit of Amazon Prime, outside of expedited shipping, is the Amazon Prime Video streaming service.
Prime Video offers unlimited streaming of movies and TV episodes, with the option to add video subscriptions to services like Showtime, A&E, and AMC.
The great benefits of Amazon Prime will encourage many South Africans to sign up for the service.
They may reconsider paying hundreds of rands for DStv when they get access to Prime Video as part of their subscription.
For context, South Africans can subscribe to Amazon Prime for significantly less than a low-end DStv package.
MultiChoice has previously said streaming services, like Netflix and Amazon Prime, pose “an existential competitive threat” to its DStv business.
The broadcaster has most likely overstated the competitive threat from streaming services – it was part of a competition hearing, after all – but Amazon Prime must be of concern to the company.
South African families are under pressure to cut costs, and an Amazon Prime subscription’s online shopping and entertainment value is unmatched.
What makes Amazon Prime a particularly big threat to MultiChoice in South Africa is the pay-TV provider’s strategy.
MultiChoice is betting big on its streaming service, Showmax, driving revenue and profit growth in future.
MultiChoice partnered with Comcast-owned NBCUniversal and Sky to create the leading streaming service in Africa and beat competitors like Netflix and Disney+.
Besides new technology, the partnership with NBCUniversal and Sky will bring international content to the Showmax platform.
By partnering with Comcast and through its planned products and price offerings, MultiChoice expects a step-change in customer numbers in the future.
“Speaking to affordability and content preferences of African customers, we expect to have three times more customers than initially envisaged,” she said.
To facilitate this growth, MultiChoice is ramping up its investment in its ShowMax platform and local content. It wants to create ten times more local content within ten years.
MultiChoice expects ShowMax to have the same 3 to 5-year J-curve as its global peers in the streaming industry.
“We are aiming to generate revenue of more than $1 billion after five years, with a trading profit breakeven target in full-year 2027,” the company said.
However, with increased competition from Amazon Prime – in addition to Netflix, Disney+, and others – it will not be easy to make Showmax the top streaming service in Africa.
Amazon’s launch in South Africa can, therefore, impact MultiChoice and DStv and put significant pressure on Showmax’s growth.