Between October 8 and October 11, Kenya, was the cynosure of all eyes, as it played host to the 2015 CNN MultiChoice African Journalist Awards. Within the period, Nigerian journalists, who were in attendance, found time to interview Mr. Tim Jacobs, Managing Director of MultiChoice Africa.
Jacobs was appointed CEO of MultiChoice Africa in April 2015. He originally joined the MultiChoice group in 2013 as Chief Financial Officer of MultiChoice South Africa Holdings, and was appointed Director of Finance for MultiChoice South Africa Holdings and the MultiChoice South Africa board in April 2014.
In June 2014, he assumed the role of Pay TV Chief Financial Officer. He is a chartered accountant, having served articles at Ernst & Young in Johannesburg.
Jacobs had earlier worked as Financial Director of Air Liquide Proprietary Limited, an industrial and medical gas company. In 2001, he joined Nampak Limited as Chief Financial Officer and was appointed to the Nampak Board in 2005. By September 2009, he joined Transaction Capital Limited, a specialised financial services group as Chief Financial Officer and in 2012 served as Chief Operating Officer for the SA Taxi Finance Holdings Proprietary Limited, a subsidiary of Transaction Capital.
Jacobs spoke on several economic issues on the company’s African and Nigerian operations.
Excerpts from the interview:
Experience with Nigerian market
I have been coming to Nigeria not specifically for MultiChoice but for other companies that I have worked probably for the last 15 years or so. I have to say that the change in Lagos is quite significant. The thing I like most about Nigerians is the kind of deep passion to be entrepreneurial, to get things done, to try to make a difference in people’s lives, which means that people are already focused on business opportunities, they are focused as consumers, on what they need. They are very clear in their own mind about what it is they are trying to do.
I think some of the other countries I travelled to are little bit more formalised; you know, people with formal jobs, the kind of go-get attitudes is a little bit less pronounced because they do a 9-5. So, for me, Nigeria is a really interesting market opportunity; it is also very difficult.
The Nigerian market and the Nigerian consumer are very active; they don’t like surprises in the system; they tend to react quite strongly to anything they perceive as negative, which obviously, as a consumer-based business, means that we need to be on top of our game. We need to make sure that what we do in the country really makes sense for the consumer.
We also understand that there are times when we do things that are not popular, but we do it in the interest of the business. So, because we are very conscious of the way the consumers are likely to react, we tend to think quite deeply before we do stuff that is going to result in a negative impact. John (John Ugbe, MD, MultiChoice Nigeria) and his team really think deeply about what we need to do with the price increase, for example. We try to minimise the impact. In Nigeria, we have been very fortunate that after the price increase we put through on April 1, we haven’t had to put another price increase into the market yet.
Obviously it depends on the currency; if the currency does move materially, we may well have to do that but at the moment, we have been able to avoid doing that in Nigeria. And I think that is largely because the government and the Central Bank have been very strong on the policy decision-making. They haven’t reacted to short-term movement in the black market rate and the weakening of the oil price; they have managed to hold firm. So, we’re very hopeful that the currency stays, so we don’t need to put a price increase. But obviously, time will tell.
Improvement on content
I don’t think that an improvement on content is the issue right now. If you think about the Nigerian market, we have all the Africa Magic channels. We have new shows that are coming into Africa Magic all the time; really strong tele-novellas. Now, I don’t think we can say we are going to improve on that. What we are going to do is to refresh. The MNet team that based in Nigeria is constantly looking at scripts, constantly looking at new programming. So, as one really popular series kind of comes through, we replace it with another one.
A couple of months ago, we put Zee World into the African continent, Nigeria included. That has been resounding success as the market has really responded well to that. So, in combination with the existing line up, refreshing the existing line up, the programming within those channels and bringing stuff like Zee World on, I think the offering we got at the moment in the Nigerian market is very strong.
Striking balance between cost of doing business and profit target
Just to put this into context, Nigeria is actually one of the cheapest subscription models we run on the continent. You guys can easily go to the Internet and see what consumers in other countries pay. Nigeria pays $20 cheaper than, probably, all of your neighbours. Now, some of that is because of other considerations … there’s the VAT rate and other things the consumer has to pay for in other countries. But Nigeria is a very affordable pay television market; it is one of the cheapest in the world. What we have done in the Nigerian market is to keep the price low over many years in order to try and stimulate the market because Nigeria is a potentially large economy.
We have so many potential subscribers. Our growth in Nigeria, I would say, has been good. I think our GOtv platform, which kind of attracts the lower end of the market, has been doing incredibly well over the last year, particularly about December last year when we introduced a very cheap price. So we subsidise very deep to get to $20. That has obviously stimulated demand but we need scale.
In Nigeria, what we are always hoping for is that we can keep the prices reasonably low if we get the scale. We just launched MNet Igbo as we continue trying to satisfy many segments of the market. We are happy to continue to invest, but we need to obviously see the scale coming into the business. When we get that, then we keep the balance, then we keep the price reasonably low and provide good additional content.
Pay per view
Pay per view is a very simple financial equation. If you want to do pay per view, you have to take whatever content the person wants to watch. Let’s take the obvious one, the EPL. You take the cost of the EPL, you say how many subscribers do I have, then I divide the cost by the number of subscribers that want to watch EPL and that’s how many people pay for it.
Now, we have worked the numbers. Anywhere in the world, pay per view is materially more expensive for the person who wants to watch only that piece of content, then binding all the content together and spreading over the time market. It is just a mathematical calculation; it is not that complicated.
I have got two examples that can show you what has happened elsewhere in the world. In the US, the Manny Pacquiano and Mayweather fight, if you wanted to watch it for one evening, one day cost $99! It’s not a full day; it’s a couple of hours. Rugby World Cup in the US at the moment, as I understand it, is also close to $90, $89 or something, for the duration of the World Cup. So let’s call that a month and half.
If you want to watch Rugby World Cup in the US, you pay a single fee of almost $90. In Nigeria, you guys are paying for premium subscription, just over $60 a month equivalent and that $60 a month gives you all of the content. Okay, maybe Nigerians don’t want to watch Rugby, but the same principles apply if we want to charge you the same way – pay as you go for the EPL. Remember, the EPL is a right cost and much more expensive than the Rugby World Cup or the Manny Pacquiano fight. The pay as you go is a nice concept. Everybody likes it. And the reason people think it is an option is that they think about Netflix. You know I can go and get a VPN and I can just watch whatever I want with $10 a month. But, remember, their content is old content. It’s stuff that is not fresh, it is not stuff that is happening now and with sport TV in particular, it only means anything to people when they watch it live. Nobody wants to go three weeks after Chelsea plays Man U and say, watch it over again. It has 10 per cent the value of the live match. So I don’t know if that just helps you to understand a little bit about how the pay per view module works.