Multichoice Faces Turbulent Times, experiencing 99% Profit Drop in H1 2024 

Multichoice Group, Africa’s leading pay-TV operator and parent company to DStv, Showmax, and SuperSport has experienced a financial blow as they report a staggering 99% decline in its half-year profit for 2024. In its Tuesday statement, the South African media giant cited an “extremely hostile” business environment across its African markets, with weakened local currencies and surging inflation—especially in Nigeria and Zambia—heavily impacting its bottom line.

The Power Struggle: Africa’s Currency Crisis and Consumer Squeeze

Operating in over 50 sub-Saharan countries, Multichoice’s reach across the continent is unmatched. Yet, the group’s extensive footprint, which has traditionally brought market dominance, is now exposing it to the brunt of Africa’s economic volatility. As currencies, particularly the Nigerian naira and Zambian kwacha, remain weak against the dollar, the value of revenues generated in these regions has plummeted when converted to South African rand. The result? A reported earnings drop of 10% to 25.4 billion rand ($1.41 billion) on a nominal basis—though this managed a 4% uptick when foreign exchange effects were excluded.

As consumer spending in Africa’s most populous nation wanes, Multichoice faces its first tangible signs of a potential exodus, with South African subscriptions down by 5% and a significant 15% dip across other regions. It’s a stark contrast to the company’s heyday when DStv was a household staple and SuperSport’s soccer rights were prized.

Showmax’s Pricey Gamble

Much of Multichoice’s financial strain appears rooted in its aggressive bid to expand its streaming platform, Showmax, a home-grown alternative to global streaming giants like Netflix, Amazon, and Disney+. Launched in 2015, Showmax has gradually positioned itself as an African streaming solution, with localised content and exclusive African series.

However, the pursuit of this venture has come at a steep cost. With streaming costs soaring, Multichoice’s incremental investments in Showmax were, by their own admission, a major factor in the headline losses reported this quarter. According to the statement, without Showmax’s investment demands, trading profit would have soared by 28% on an organic basis. Instead, Showmax’s development has hit its “peak investment cycle,” with losses expected to persist as the platform battles giants with deeper pockets and more expansive content libraries.

“We are committed to the Showmax journey,” Multichoice explained. “However, we are aware that maintaining this growth will demand further sacrifices and sustained investment. This is a challenge we’re prepared for.” 

Multichoice’s relationship with Nigeria has recently been tumultuous, to say the least. In May 2024, the company announced a 25% hike in DStv and GOtv subscription prices. This move, which Multichoice justified as an inflationary adjustment, was met with public backlash. Furthermore, a Nigerian court had issued a ruling against any price increases by the company. Yet Multichoice went ahead, leading Barrister Onifade to sue the company for contravening the court’s order, seeking damages worth a billion naira. The Nigerian Competition and Consumer Protection Tribunal eventually mandated a N150 million fine, underscoring the regulatory and reputational risks in Africa’s largest media market.

Multichoice has expressed that it remains focused on the Nigerian market, but the current climate—with inflation, currency devaluation, and regulatory hurdles—continues to present steep challenges. By Multichoice’s estimates, it may need to shore up an additional R2 billion in cost savings across its entire footprint by the fiscal year ending in March 2025, to offset the hit from weakened currencies and consumer downturns.

A Legacy Under Strain

Multichoice is no stranger to adversity. Born in 1986 as M-Net, a pioneering force in South Africa’s television industry, it quickly expanded to cover the continent, gaining an audience with its blend of live sports, movies, and series. Over the years, the addition of SuperSport and DStv solidified Multichoice as the heart of African pay television. Now, with nearly four decades in the industry, the company finds itself at a crossroads, contending not only with the digital shift brought by streaming but also with the fragile state of the African economy.

Today, the Multichoice Group is far from its former market stronghold. While the satellite TV company has a historic advantage, the road ahead demands a balancing act. With the Showmax venture poised to burn through capital, the company’s next steps will require finesse. Multichoice has shared plans for further inflationary price adjustments, despite Nigerian backlash, and expects foreign exchange losses to reach R2.1 billion on “non-quasi equity intergroup loans.”

What’s Next for African Viewers?

The African entertainment landscape is transforming. Consumers accustomed to DStv’s comprehensive sports coverage, local series, and global entertainment will now contend with steeper prices. For Nigerian subscribers, the 25% hike looms large, testing their loyalty and paving the way for alternative options. Meanwhile, local competitors and international streaming giants are waiting in the wings, offering increasingly competitive content and pricing.

The question remains: Can Multichoice weather this perfect storm of economic and competitive pressures? The company’s actions in the coming months will provide the answer.