Market Insight

Two new satellite platforms launch in South Africa

October 14, 2013

Constantinos Papavassilopoulos Constantinos Papavassilopoulos Principal Research Analyst, Service Providers & Platforms

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This week saw the launch of another platform in South Africa's already crowded satellite TV market. The new service, called OpenView HD, launched on 15 October, offering a total of 16 TV channels, including four in high definition. The company behind the platform is Hosken Consolidated Investments, owner of commercial TV channel e.tv. The service is subscription-free though customers will have to pay 1,600 rand ($160) for a satellite dish and set-top box plus installation. On 30 September, state broadcast signal distribution company Sentech launched its own free satellite platform, Freevision.

In contrast to OpenView HD, Freevision provides no HD channels but, instead has a more generous SD channel offer of 38 channels. Freevision is offered at a lower cost at 1,350 rands ($135). Sentech is also the sole network operator of the DTT platform which has yet to launch in South Africa.

The managing director of OpenView HD stated that the platform is targeting 200,000 customers by October 2014 (one year after launch) and two million by the end of 2015. The two million will be the platform's break-even point but company said it aimed to reach five million subscribers by the end of 2018.

Delays in South Africa's transition from analogue to digital terrestrial television (DTT) have clearly played a part in the proliferation of satellite services. Public service broadcaster SABC and e.tv wanted to launch new channels directly on the DTT platform had to postpone their plans due to the government's inconsistencies and bad planning that have so far stalled the digital transition. Many see the Freevision service as a transitory one, between the end of analogue terrestrial TV and the initiation of the DTT platform. The vast majority of the channels on the Freevision and the OpenView HD services will also be transmitted from the DTT once it launches.  

OpenView HD and Freevision are, at least at this initial stage, direct competitors. They both offer a package of channels (mostly general entertainment channels and no premium content) at a total cost that covers only the equipment and installation. At the moment the only really distinguishing factor between the two is that Freevision offers no HD channels, but that might change in the near future as SABC and e.tv prepare to switch their broadcasting format from SD to HD.

The business models of the two services are likely to diverge in the future, however. OpenView HD's parent company Platco Digital has never hidden its intention, should the opportunity arise, to launch a low-cost pay TV service targeting middle and low-income families and therefore not competing directly with Multichoice's DStv. While Platco Digital announced that the platform's revenues will come from the carriage deals it had secured from the TV channels on the OpenView HD package, the company has never ruled out categorically the possibility of charging a small monthly amount to all its customers when the conditions in the South African TV market become ripe. One potential model which could be relevant to OpenView HD is the German satellite service HD Plus, where customers, buy a set-top box pre-loaded with a 12-month free trial of HD channels. This model has proved very successful in Germany: in Q2 2013 the service had just under three million customers, including 1.2 million paying subscribers.

A basic prerequisite of this model (also followed by My-HD in the Middle East) is the active collaboration, as a partner in the whole business, of a satellite operator. The fact that SES has signed a contract with e.tv and will provide two transponders for the OpenView HD platform might provide an indication about the future of this service. Both e.tv and SES have hinted that should the service prove to be successful in South Africa they have plans to extend it elsewhere in the African continent.

E.tv is also betting that the pay TV landscape in South Africa is in a process of considerable change. There is renewed interest in new pay TV ventures by companies not formerly involved even in the television business. By the end of July, five companies (Kagiso Media, Siyaya Free to Air, Mindest Media Enterprises, Close-T Broadcasting Network and Mobile TV) had filed applications with the Independent Communications Authority of South Africa (ICASA) asking for licences for pay TV services. In August, ICASA organised a series of public hearings at its headquarters for interested applicants to state their cases. The basic aim of these prospective pay TV operators is to offer a small bouquet of, mostly general entertainment and thematic, channels at low cost.

In that sense they do not pose a serious threat to Mulitchoice, the largest pay TV operator in the country and in the whole African continent, which operates the satellite service DStv and, according to IHS Electronics & Media data, managed to attract 4.5 million paying customers by Q2 2013. The real threat for Multichoice is from the Chinese pay TV operator StarTimes Group which in May 2013 acquired a majority stake in the beleaguered pay TV operator TopTV. StarTimes had announced plans to totally revamp TopTV and has already rebranded the service from TopTV to StarTimes TV. By mid-year, the Chinese group had attracted 2.5 million subscribers in 10 Sub-Saharan countries. The Chinese have earmarked around $50m for further investment in Africa with-if needed- another $400 million available for TV projects.

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