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Global Meets Local in the African Streaming Market

Niamh Carroll 10 March, 2022 

In North America and parts of Europe, streaming services are starting to brush up against the ceiling of potential subscriber growth as consumers reach saturation point.

Many of the big international services are now looking to other territories to fuel the next stage of growth. Africa is one such market where the number of VOD service users is still relatively low, as Tony Maroulis, principal analyst at Ampere Analysis says. 

“The SVOD market in Africa is relatively under-developed. Within sub-Saharan Africa, South Africa is the only country with a modest SVOD service presence with around 2.2 percent of households subscribing to at least one OTT service,” he said, “The remaining sub-Saharan African markets have significantly lower penetration with less than one percent of households subscribing to an OTT service.”

Most of the international players have some sort of presence on the continent. Netflix is the biggest streaming service in Africa in terms of subscribers. According to figures from Digital TV Research, it has 2.16 million subscribers in the continent. The next biggest in terms of subscribers is Showmax, which has 861,000 subscribers. Apple TV+ and Amazon Prime Video both have relatively small presences in the continent, while Disney+ is scheduled to launch this year.

But while some of the names of the services are familiar, African markets of course each have their own set of streaming services, as well as local intricacies in how the SVOD and AVOD markets are developing.

No one kind of African consumer

The African continent is far from having a homogenous streaming market. 

Sa Eva Nébié is head of research at Dataxis. She notes that the most developed streaming market in the continent by far is South Africa. 

“South Africa is really the ultra-dominant country in the region,” she said, “It’s the country that captures most of the revenues, for more traditional TV as well. Most international players launch in South Africa first.”

Discover Digital is a digital entertainment and VOD services company, headquartered in South Africa and working in the African market. Pieter Verkade, director of marketing and sales at Discovery Digital, says the demographic and economic makeup of Africa’s population have a big impact on the streaming market.

“The way to think of the African market is as a pyramid with a very small top, and a very broad base. So first of all, about 40-45 percent of the population are below 15 years old. So that already gives a very different demographic in the market,” Verkade said. “And then the wealth dispersion is also quite concentrated. So often, it’s about 20 percent of the population or less, who have 70 to 80 percent of the wealth.”

“If you look at the top of the market, these consumers are operating more or less like someone in the European or an American market would, they would have multiple services such as Netflix and Showmax,” he added. 

Where the African market really differentiates from the North America or European market is at the other end of the pyramid.

The role of telcos

Subscriptions to video-on-demand services are not particularly popular with this section of the market. The lack of affordable and reliable broadband access is a major obstacle to many African consumers subscribing to VOD services. 

“Outside of South Africa, there’s a reliance on mobile data. That’s a hurdle for a lot of platforms, because it means in addition to the price of the subscription, the users also have to pay for the data,” said Dataxis’ Nébié. 

While in other markets, VOD services are often backed by large content houses such as HBO or Disney, the connectivity issues in much of the African market mean telcos play a key role. 

“The streaming services more often than not are linked to a telco, because of the need for mobile data,” said Taryn Uhlmann, executive head of content at Discover Digital. “The largest VOD services in each region almost mirror whatever company has the largest telco presence. For example, in East Africa Safaricom has a large presence, and its streaming service BAZE is one of the biggest in the region.”

Telcos have also partnered with international services to help them launch in the continent. Pieter Verkade says that this often follows a similar pattern: international services will launch in partnership with telcos to help them build a base, and then will part ways further down the line. 

“Then the telcos launch their own services, and that’s to ensure that they don’t just become a pipe for international services, but that they stay relevant to their customer base in the market,” he said. 

Dataxis’ Nébié said that telcos’ streaming services have an inherent advantage over international competitors, since the telcos already have relationships with customers.

But Verkade notes that the breadth of telcos’ businesses may mean their VOD services get somewhat lost among their wider offering.

“All Netflix does is streaming, that’s the only thing they talk about,” said Verkade. “One of the challenges for telcos is that they have to talk about their voice products, their data products and their on-demand products. And the on-demand products generate less revenue and will get less airtime, hence will grow a bit less. I think that’s still one of the strategic challenges in the market, is to raise the public’s awareness of those services.”

(Local) content is king

The way that viewers at different ends of the economic spectrum consume their content is very different, but there are also differences in what types of content they want to see on their VOD services, Taryn Uhlmann says. 

“Consumers at the top end of the market – the people who have got the smart TVs and subscriptions to Amazon, Netflix and so forth – they are often not so supportive of the local services,” she said, “They’ve often seen a lot of the content on those local services. A lot of those services don’t have rights to certain content if it’s exclusive to other players, or alternatively don’t have the money or the appetite to go down that road. And so we tend to try and reach that broader base instead.”

In order to win market share from that broader base there is a need for VOD services to provide content that consumers can’t find readily available elsewhere, says Uhlmann. Content produced specifically for that market can be a way to do this. 

“Local content works well because it’s original. So unlike the studio shows, or the big movies, or any of the big series, which are more likely to be pirated, or to be seen on other services, local content provides an opportunity to be original,” she said. 

Removing the barriers to entry

Even outside of the need for mobile data, accessing content on VOD services is not always easy for African consumers.

Pieter Verkade explained some of the barriers. 

“The payment process itself is a challenge,” he said. “Outside of South Africa, payment for services often has to happen through airtime. A lot of systems don’t trust Nigerian credit cards, even if they’re legit.”

“Data costs are coming down but the devices themselves are also an issue,” he added. “Many customers now have smartphones in Africa. But the smartphones available often lack memory and processing power.”

Verkade predicts the latter of these problems will fade, as advanced smartphones become more affordable. And the payments issue could actually open up opportunities for certain types of streaming service.

Taryn Uhlmann says that VAS (value-added services), where consumers can decide what to consume and what to pay for on an ad hoc basis, may become more popular. 

“That can work well for niche markets. For example, if you’re really only interested in Gospel content, you could dip in and out as you want to by paying a small amount each time. And only access it when you’ve got the money or the data,” she said. 

And Tony Maroulis believes that AVOD services could capitalise on the payment barrier.

“AVOD services do remove a key barrier to entry for a lot of consumers – payment,” he said, “This is enough of an issue for Netflix to introduce a completely free tier with a limited catalogue in Kenya to get consumers familiar with its service, and reap the rewards when the market develops.”

 

2022-08-25T17:28:30+01:00

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