The Nigerian Senate might be a bigger problem to South Africa’s DSTV than Netflix

On Wednesday, Nigeria’s parliament discussed a motion on the “Unwholesome Practices by Multichoice Nigeria (DSTV) – a subsidiary of South African-based Multichoice Africa”. On the same day, the pay TV service hit the streets of Lagos, Nigeria’s commercial nerve, informing subscribers of better value on their subscriptions. Earlier in the week, the Consumer Protection Council (CPC) had ordered MultiChoice Nigeria to compensate its subscribers and henceforth provide them toll-free lines for their complaints. This is the latest of consumer-related issues to have faced the cable TV company in recent times, exerting more pressure at a time it risks losing a huge portion of its market to online TV subscription services like Netflix.

Blame Monopoly

DSTV has for decades been the sole provider of premium entertainment on TV and this has made it easy for it to increase prices with little or no objection from consumers, most of who believe cable TV is a luxury and only for those who can afford it. Truly, it was too expensive for an average Nigerian in the 80’s and even 90’s but as the middle class grew and DSTV expanded its target market, it signed on subscribers whose use of Cable TV had nothing to do with class but was more about having access to much needed entertainment. This class wants value for every kobo (100 kobo = 1 naira) spent on subscription. Hence, there have been issues between DSTV and its subscribers in recent years but the pay TV service has had it easy due to the inefficiency of the CPC. Now functional, the CPC is handing out penalties and making bold statements that would ensure other players see the consumer as king.

While DSTV’s monopoly in Nigeria has allowed it to increase prices at will for years, cable costs in other parts of the world have also grown astronomically as a result of monopoly. According to Andrew Dodson of Cut Cable Today, average cable bill in the United States would only be $35 per month, as opposed to $99.10 per month, had pay TV prices tracked with inflation during the past two decades. The website claims that cable prices have risen at four times the inflation rate during the past five years. Huge price increases have thus made customers to flee. In the third quarter of 2015, pay TV lost 300,000 subscribers. Most of these subscribers moved to more affordable streaming services like Netflix and the live streaming service Sling TV. As internet access and quality improve in Nigeria, a similar switch would be witnessed.

Now we know our job

Nigeria’s Consumer Protection Council (CPC) might not have done enough in the past to protect cable TV subscribers in the country against DSTV’s excesses, but it has now come out in full force. After an extensive investigation over alleged violation of consumers’ rights by the company, the CPC noted that DSTV’s billing system is “not contemporaneous with the provision of service” and is therefore not in the best interest of consumers. The consumer protection council has ordered MultiChoice to suspend its service when consumers are away, release free-to-air channels even when subscription had expired and compensate consumers for lost viewing time. It also ordered the cable television company to introduce local toll-free lines and equitable spread of popular sports channels.

Apparently in compliance with the CPC’s orders, MultiChoice has introduced two sports channels which can be viewed on a plan that costs about N6,000 ($30) per month. Nigerian subscribers can now watch the English Premier League and the Spanish La Liga. This move, to many Nigerians is fair enough. But they would have wanted the CPC to move earlier. But it is not only the CPC that is moving late, the United States’ Federal Communications Commission (FCC) has also just taken steps to increase competition in the US cable set-top box industry. Cable customers in the US rent the boxes at an average cost of $231 per year in addition to cable TV charges.

What now?

Compliance to recent orders by the CPC regardless, MultiChoice should prepare itself for what may come out of a public hearing Nigeria’s Senate President said lawmakers would have with stakeholders like the Nigerian Broadcast Commission (NBC) and the Consumer Protection Council. The hearing, according to Dr Bukola Saraki is aimed at working out “ways to ensure that Nigerian customers are protected from exploitation, and to guarantee that our regulatory agencies begin to take their responsibilities as ‘Watchdogs’ more seriously”.

“Distinguished Senators noted that Multichoice’s arbitrary subscription charges, price hikes and refusals to adopt a pay-as-you-use model, affect Nigerian subscribers negatively,” the Senate President said in a statement.

With other issues raised by consumers seemed to have been addressed by the CPC, the pay-as-you-use-model is expected to be advocated by stakeholders at the public hearing to be organised by the Senate Committee on Information.

As far as MultiChoice is concerned, its business model for now does not accommodate pay-as-you-watch which the company has noted is being mistaken for pay-per-view, as the company wants to be able to offer affordable services. “Anywhere in the world, pay per view is materially more expensive for the person who wants to watch only that piece of content, than binding all the content together and spreading over the time market. It is just a mathematical calculation; it is not that complicated,” Tim Jacobs, chief executive officer of Multichoice in an interview published last October.

However, what Nigerian consumers are asking for is not a model that charges $99 for the Manny Pacquiao versus Mayweather fight, but one that allows consumers to subscribe for the channels they watch. As far as Nigerian consumers are concerned, whether they will end up paying much more than they pay now if they choose the channels they want to pay for, is a discussion for another time.

While MultiChoice faces the threat posed by the fast growing Video-on-Demand industry in Nigeria, especially Netflix whose arrival in the country is putting providers of similar service on their toes, it also faces a threat to its business from the Nigerian Senate which is firing regulatory bodies up to ensure the South African company dances to the tunes they play.