In the past six months, video entertainment group MultiChoice invested R1.6 billion in its streaming platform Showmax, which it believes is the company’s future.
This, as MultiChoice continues to bleed subscribers on its DStv platform, while revenue and profit have also been on a downward spiral.
Yesterday, MultiChoice announced its interim financial results for the six months ended 30 September, saying it is facing “the most challenging operating conditions in almost 40 years” to generate desired returns.
According to MultiChoice, the pressure on the linear pay-TV subscriber base was lower than the previous six months, reflecting a 5% decline (800 000) compared to 6% reported (1 million) in 2H FY24.
On a year-on-year (YOY) basis, the linear subscriber base declined by 11%, or 1.8 million subscribers, to 14.9 million active subscribers.
MultiChoice says in FY25, Showmax is focused on enhancing its content line-up, bedding down distribution partnerships, expanding payment channel integrations and refining its go-to-market strategy.
In an interview with ITWeb yesterday, Tim Jacobs, MultiChoice group CFO, said: “We invested R1.6 billion incremental in Showmax. In total for Showmax, we had a total loss of R2.4 billion for the half, but only R1.6 billion of that was incremental from last year.
“If you subtract the R1.6 billion from the R6.6 billion, it means that on an organic basis, including the investment in Showmax, which is our future, we delivered a flat trading profit year-on-year.”
Jacobs pointed out that the Showmax business is subject to the same macro conditions the linear business is facing.
“For example, when there is load-shedding in Zambia, we see that nobody can sign up to Showmax. Consumer affordability is also an issue.
“At the same time, this is a start-up business for all intents and purposes. If you look at Netflix and Disney+, these businesses took generally five to six years before they broke even.”
He said Showmax’s break-even target is going to depend on the ability of the business to scale. “So, what we are busy doing in the background is opening up more payment channels, as an example.
“When we relaunched Showmax this year, we only launched with about six to seven payment options across the continent. We are now building more of those with [MultiChoice subsidiary] Moment, and these are coming on stream each month as we go on.
“More of these payment options are becoming available and at the same time, we are working through our partnerships with mobile operators and banks, such as Capitec, in trying to make sure the customer journey, when they are using these channels, is seamless.”
According to Jacobs, there are still some operational issues the company is working on to scale Showmax.
“But what I can say though is this year is supposed to be the peak funding year for Showmax, and we are going to be very disciplined about making sure that, from a business point of view, the funding requirement of this business starts to decrease as we move into the future.
“We cannot afford to be funding this business at this kind of level indefinitely. Our balance sheet is a little bit too mean to support that level of funding. We are expecting the funding requirements to decline and we are busy looking at all the different scenarios that could impact the business.
“By the time we get to the end of the year, I think we would have run enough scenarios that will give us a much better feel for the market in terms of when we think the business will break-even. A lot of this, however, depends on the adoption rate and how fast we can scale this business.”