DStv’s big price problem

MultiChoice has a problem. The average revenue per user for nearly all its DStv segments in South Africa and the Rest of Africa (RoA) is decreasing despite increasing prices each year.

MultiChoice’s results for the six months ended 30 September 2022 showed an increase in revenue and operating profit but a large decrease in profit after tax.

The Rest of Africa was the star performer in the group, with a 28% increase in revenue from R8.3 billion to R10.6 billion.

RoA subscription fees increased 26% – from R7.6 billion to R9.6 billion – while advertising revenue increased 70%.

In South Africa, the picture looked very different. Revenue declined from R17.8 billion to R17.4 billion on the back of lower subscription fees and declining advertising revenue.

The decline in subscription fees in South Africa came despite an increase in the subscriber base and higher DStv prices.

There is a simple explanation – the average revenue per user (ARPU) experienced a significant decline.

What it means, in simple terms, is that DStv subscribers in South Africa are dumping expensive DStv packages altogether or downgrading to cheaper bouquets.

Over the last year, the blended ARPU of DStv subscribers in South Africa declined from R273 per month to R261 per month.

• Premium segment ARPU declined by 4% from R587 to R566 per month.
• Mid-market segment ARPU declined from R302 to R295 per month.
• Mass-market segment ARPU declined from R97 to R95 per month.

A big concern for MultiChoice is that the ARPU of DStv subscribers in South Africa has been declining for years.

MultiChoice increases prices yearly to increase ARPU, but it is not working. As prices rise, DStv subscribers dump the service or downgrade to a more affordable package.

DStv is also facing increased competition from affordable streaming services like Netflix and Disney+, making increasing prices even more difficult.

The lower ARPU puts pressure on MultiChoice’s margins, and it is no surprise that its profit after tax is declining.

Although the blended ARPU in the RoA increased by 3% over the last year, the decline in the premium and mid-market segments has already begun.

In the RoA, the premium segment’s ARPU declined by 3%, mid-market ARPU declined by 4%, and mass-market ARPU increased by 4%. It is, therefore, following a similar trend as South Africa.

MultiChoice has no easy way to address this problem, and the management team does not seem to have a strategy to reverse the trend.

The charts below show MultiChoice’s ARPU challenge in South Africa and the Rest of Africa.

ARPU in South Africa

ARPU change in South Africa

ARPU in Rest of Africa

ARPU change in Rest of Africa