London — Netflix’s announcement that it will roll out across all of Africa came as a big and rather welcome surprise. It had already announced its intentions to go into South Africa but no-one really knew the scale of its ambition. Alongside this announcement, the pace of 4G-LTE roll-out announcements continues to increase. Balancing Act’s Senior Analyst Sylvain Beletre looks at how these two things will impact Africa’s broadcast industry.
4G progress in Africa
On 1st. January 2016, Balancing Act published data that showed 4G -LTE had been launched in 24 African countries! The pricing is still too high for all but the upper end of the middle classes and it’s only available in urban areas, but that’s how 3G started out. The big question is how quickly the mobile operators will start the pricing glide to more reasonable levels.
In addition. Mobile operators have confirmed plans to launch 4G-LTE in 12 other countries. Some African countries have already launched tenders, others are at the stage of technical tests. While other countries have made official the amount the 4G license fees will cost operators.
4G will eventually be deployed in over 50 countries throughout Africa within 5 years. As in other populated areas of the world, Africans are beginning to access the Internet via broadband 4G technology, fiber, WiFi or VSAT, taking advantage of solutions such as cloud services, smart TV / OTT solutions and, VOD (video on demandde), IPTV and WebTV.
Impact of Netflix
The impact of the arrival of Netflix in Africa at a continent-wide level of ambition has taken everyone by surprise and receives a high rating. This is clearly a player to watch closely.
Since January 6, 2016, Netflix is now available worldwide except in China and some other countries. The official statement is here, when you scroll down the page.
Beginning in December 2015, there were 562 million subscribers to broadband globally (excluding Middle-East and Africa), potential clients for Netflix. Half of those broadband internet subscribers are in Asia Pacific. On 31st. Decembre 2015, Netflix had 70,84 million subscribers including 43,40 million in the USA. Netflix will spend USD 6 bn. on content in 2016.
Reactions in Africa
The reactions of the broadcast and VoD players was not long in coming. They were a mixture ranging from apprehension to enthusiasm, depending on the type of player. Here are some questions from our African contacts:
Is there room for other VoD platforms related to Africa? Will Netflix nibble away at the customer base of pay TV services in Africa? Can the Netflix service successfully enchant Africans with its local content offer? Will African producers be able to sell quality content to Netflix easily? How will the producers contact the company? Will Netflix establish partnerships with African telecom operators? What about service payment? How will Netflix adapt its service to local realities?
Some African producers welcome the initiative: they see a new distribution channel with more money injected into production on the continent, and large-scale promotional activities for local content. A positive note for the competitors and the players in the pay-TV sector: the launch of Netflix in Africa will increase brand awareness and popularity of Internet TV and VoD services locally. Jason Njoku, iRoko TV makes the point that it will continue to have Nollywood content in depth, something Netflix is unlikely to have.
And in the short term, the other main beneficiaries could be the telcos that will sell more high speed internet access. A 4G operator in Nigeria (see below) began to launch a bid highlighting Netflix ... and its broadband services.
Strengths and weaknesses
All that for now is known is that Netflix:
-had customers already informally in Africa, particularly in South Africa and probably in Nigeria, Ghana, Kenya, using VPN / proxy connections.
-they tend to be drawn from the upper level of the middle class and be younger.
- will be in direct competition with the biggest pay TV operators DStv and Canal Plus.
-will behave in a professional manner in terms of payments for content.
-will probably announce an overall African subscriber level at the end of 2016 which will allow some judgements to be made about its progress.
-does have local content but it is not yet in depth.
-does not have a local subsidiary on the continent.
-has not announced partnerships with telcos or ISPs in Africa, but will go over their networks, and thus take an important share of their bandwidth.
The VoD market in Africa is still hampered by high broadband Internet costs - costs that affect all actors on the Internet VoD segment.
In addition, some platforms VOD and pay television related to Africa have signed exclusive agreements with talented African producers. However, what will happen when some of these contracts expire will prove interesting.
There are rumors about the fact that Netflix would aim to generate tens of millions of dollars on the Nigerian market but given the declining state of the Naira these may remain rumours in the short to medium term.
And in South Africa, the streaming service will cost 126 rand ($ 7.99) a month for use on a single screen. As for service in high definition (HD), it will cost R158 rand ($ 9.99) per month for viewing on two screens simultaneously. Finally, the premium service in high definition (HD Ultra-Premium) is charged at 190 rand ($ 11.99) per month, with the ability to look on 4 screens. Netflix is offering a one month free trial to new clients.
The VoD segment in is still very embryonic right across Africa. However, the pay TV segment has become stronger with about 18 million customers to date. Therefore, the arrival of Netflix in Africa has implications particularly for pay television services. The biggest player in this segment in Africa, DStv-MultiChoice (a subsidiary of Naspers) has, over the past two decades, worked hard to get exclusive broadcast rights for African and American television programmes, developing multi-year deals with Hollywood studios and other international distributors. Naspers has also launched several VoD initiatives such as Showmax, DStv BoxOffice and icflix.
In addition to the pay-TV platforms and VoD services Naspers, Netflix is also in direct competition with new South African players in the video on demand space, such as FrontRow (rebranded as VU) from MTN, and the Chinese conglomerate PCCW (ONTAPtv.com).
The head of Netflix, Reed Hastings recalled that with video on demand on the Internet, linear television appears as an outdated business - which is still far from being a reality on the continent due to lack of bandwidth. But the growing success of YouTube, undisputed number one VoD platform in Africa proves the demand is there.
With the current media furore, Netflix has so far refused to comment on its arrival in Africa anywhere in the media as far as we can see from our monitoring of it.
Although absent from the last DISCOP 2015, Netflix has done two productions related to Africa: "Beasts of No Nation" and Jadotville. The film EbonyLife (Nigeria) 'FIFTY' officially entered the Netflix catalogue in December 2015, and the SVoD giant earlier acquired a high-end Nollywood production, "October 1" by Kunle Afolayan.
Balancing Act identified in the latest update of its report on ‘VoD and Africa’ over 130 VoD platforms, including 3 leaders and forty with a significant presence. However, Netflix’s pricing looks likely to be at the top end of the range, leaving space below.
For now, Netflix does not seem to rank Africa in its 2016 priorities. This year it looks likely to be relying on rapid growth in Australia and Japan, and a good reception in India.
The best African policy makers can come up with so far are the Kenyan attempts to run censorship duties on Netflix content: this is the usual moral panic over content that treats people like adults. Perhaps they should have spent more time before this announcement in trying to establish affordable and reliable bandwidth for their citizens?
Netflix prospects for Africa
The Netflix service becomes legal, easier and cheaper for end users across Africa.
This year, Netflix could take market share on the continent - in the rich young population. Since Netflix is available in Arabic, the service could also affect North Africa. Since Netflix content is also available in Chinese, it could attract the Chinese community in Africa, and so on with other diaspora niche audiences.
Tomorrow's opportunities for Netflix
Africa is made up of a large population - over one billion people. Up to 70% of the content that its citizens consume is of African origin. Nollywood has an important place in this local content. Since telecom operators are investing in broadband Internet infrastructure, content online could be the next consumer boom in Africa (over a 2-5 year time frame depending on the country).
In the following years, Netflix could grow very rapidly through urban Africa, for many reasons, such as: the fact that its brand is well known, its catalogue is rich, its application is robust, etc.
Netflix has other arrows to its bow with its financial strength and bargaining power. As a player, it could begin to provide African producers advances for the best of content that travels well. Netflix could also start to engage in financing original African TV series and films, competing with DStv and others for the best talent.
It might also establish partnerships with African telcos that finally drive the telecoms sector to provide better, more affordable bandwidth.
AllAfrica Editors' note: This report has been updated by Balancing Act since first published.