Naspers to Divest itself of MultiChoice as Netflix Threat Gets Stronger

Naspers to Divests From MultiChoice As Netflix Threat Gets Stronger

South African media and digital holdings company, Naspers, has announced plans to list its satellite television service, Multichoice on the stock market. The move involves Naspers giving out shares to existing investors before listing the company on the stock market.

The new company will launch on the Johannesburg Stock Exchange and will be known as Multichoice Group. The spin-off company will also include MultiChoice South Africa, MultiChoice Africa, ShowMax and Irdeto.

Listed as a Naspers “Video Entertainment” business, MultiChoice is one the most important companies in its portfolio. Multichoice is the same company that runs DStv, the biggest and most profitable TV operation in Africa. The company also runs the low-level GOtv service, a streamlined version of DStv for low and middle-income earners.

And according to a press release by Naspers, “listing and unbundling MultiChoice Group is intended to create a  leading entertainment business listed on the JSE that is profitable and cash generative.”

The company explained that the listing is aimed at creating more value for the social diversity programme in South Africa. “This unbundling and listing is expected to deliver value to the South African economy as well as to Naspers and Phuthuma Nathi shareholders.”

Netflix Continues to Take Bites Off MultiChoice

However, despite the official explanations, the decision to unbundle Multichioce may have been influenced greatly by the competition from US streaming service Netflix.

MultiChoice has been struggling to develop a video-on-demand platform that rivals Netflix. Over the past few years, the company developed ShowMax, an on-demand video service, and DStv Now, a service that existing DStv subscribers stream channels and selected shows.

However, both internet services are struggling to gain traction and subscribers.

Meanwhile, as DStv falters, Netflix has continued to rise on the continent. Although it is still new to the continent, the US company has garnered over 400,000 subscribers within two years operating in Africa. Whereas, MultiChoice boasts just around 13.5 million subscribers in over 20 years in business.

Netflix and iROKOtv Running Off with Local Content Deals

Interestingly, Netflix’s growth is only just beginning. The company announced an $8 billion budget to develop original content for different sections of the world. And just last week, the company snapped up the licence for Nollywood blockbuster, “Lion Heart”. The movie is locally produced and stars a host of top Nollywood actors.

The company already holds rights to other hugely popular Nigerian movies, like October 1, the Visit and the Wedding Party. However, this is the first time Netflix will get the licence before the movie premieres.

Like Netflix, Nigeria’s iRokoTV has been a long time player in the industry and has been getting more contents. In fact, long before Netflix made the move, Jason Njoku’s iRokoTV has snapped up rights deals and develops original contents.

Additionally, MultiChoice’s DStv and GOtv subscription costs are extremely high compared to Netflix and iROKOtv. This has hurt the company’s growth for years. But with both Netflix and iROKOtv having much cheaper subscription prices, MultiChoice is in a tight spot.

And this is something that significantly worries Naspers. Although it has quite a lot of local contents, MultiChoice no longer looks like a viable portfolio company. Moreso, when you compare it with Naspers and other portfolio companies like Tencent.

MultiChoice Says Netflix Needs to be Regulated

Rather than becoming innovate, MultiChoice is blaming its relative stagnation on regulatory issues. It blames the absence of regulation for the growth of Netflix, renewing calls for regulation on Netflix.

That’s a long shot though. However, it appears that unbundling MultiChoice is the best way Naspers believes the company can re-emerge strong.

The move would obviously make MultiChoice more independent and more flexible to develop on the same pedestal as Netflix. “The combination of MultiChoice’s reach, Showmax and DStv Now’s cutting-edge internet television service, alongside Irdeto’s 360-security suite, will provide a unique offering”, Naspers said.

This is something to look forward to.

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