Netflix could face an uphill battle in South Africa

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The video-on-demand (VOD) market in South Africa has seen a huge explosion of services over the last couple of months.

In the last couple of months, both Naspers’ ShowMax and OnTapTV were launched, positioned as competitors for the more established VIDI. Since then, they’ve all been fighting for a slice of the media-streaming pie, and this is all happening ahead of Netflix’s planned arrival in the country.

According to BMI-T’s SA Consumer Digital Lifestyle Research Programme (DLP) survey, the market is only set to grow even further as it predicts that VOD will reach almost a million people within the next five years. Currently the company says that VOD penetration in South Africa right now is around the 700 000 mark.

This doesn’t bode very well for popular US services like Hulu and Netflix. One would think that Netflix has a wide user-awareness in South Africa, but it turns out that it is not the case.

The study noted that almost 80% of people who are considering a VOD service are considering it in addition to subscription TV like Dstv and StarSat, while only 18% of people are aware of pure play VOD services like Netflix.

VOD services
[Chart – BMI-T]
Another fact that doesn’t bode very well for Netflix, is that two-thirds of the survey’s respondents say subscription TV providers would be their most likely choice for a VOD provider. According to BMI-T, this is also a reflection of current VOD usage patterns, which are dominated by DStv’s own offerings, including BoxOffice.

“It is interesting that VOD, at this stage, is seen by most as an addition to subscription TV rather than a replacement. That then also speaks to what consumers would be willing to pay – much less than if it would be seen as a replacement service. The additional cost of data usage must also always be kept in mind,” explained Clinton Jacobs, senior research analyst at BMI-T.

Naspers’ ShowMax, was only launched after the survey was completed.

“It will be interesting to see how awareness has grown due to the strong promotion, including advertising in traditional media,” notes Jacobs.

When ShowMax launched in August, it has been reported that it accumulated around 40% of South Africa’s VOD market. Its popularity can be down to the fact that it bridges the gap between Netflix and Hulu, offering both movies and television series for a flat monthly fee.

Services like VIDI, MTN’s FrontRow and the now-defunct Altech Node, charges subscribers a monthly connection fee in addition to individual fees for blockbuster movies.

ShowMax is the closest that South Africa can get right now to a service that mimics Netflix’s business model, and with a large selection of local shows and films coupled with an extensive advertising campaign, it can only reap up a bigger slice of the pie as more people become aware.



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