PAYLATER FOLLOW-UP
Tuesday’s edition made me feel a little uncomfortable. After talking with a few subscribers, it’s clear that some interpreted it as a Paylater vs. Piggybank competition. That was not my intention. Piggybank featured as prominently as it did for two reasons:
- It is the foremost online savings service operating in Nigeria today, and
- I couldn’t resist the urge to alliterate (“Paylater’s Personal Piggybank”)
The larger point was convergence: multiple players starting out solving very different problems but over time, evolving into the same thing. Lending apps facilitating bill payments; savings apps offering credit; money transfer platforms selling insurance, etc. The theory applies beyond Fintech (as I will show in the coming weeks), but Paylater’s announcement was merely a way to introduce it.
One more thing: because their cost structure is so much leaner, fintech startups can, in theory, serve as many customers as the largest traditional banks without maintaining the same capital requirements. Today, they fit into the regulator’s framework by acting as Microfinance Banks (MfBs). One wonders how regulation will evolve to account for them as they - inevitably - become more important. For example, this report says that only 1% of MFBs in Nigeria have a ‘national license’, but what does that *mean* for a startup that serves consumers over the internet without any physical infrastructure?
OH, MULTICHOICE
Africa’s largest television operator, Naspers-owned Multichoice, is reportedly losing premium subscribers, and its CEO is blaming Netflix. On a different day, we will sit down to talk about the irony of a monopoly named ‘Multichoice’. For now, here’s QZ Africa’s report:
Spooked by Netflix’s growing popularity among African viewers, the continent’s largest television operator wants the disruptor to be regulated.
This call for regulation is a common call from established monopolies who find their grip on a local market challenged by a tech disruptor, and MultiChoice is no different. At first the South African company tried to compete, launching its own streaming service as eyeballs moved online. Now it’s resorted to calling for stricter rules in its own market.
MultiChoice CEO Calvo Mawela blamed an unregulated Netflix for their lost[sic] of more than 100,000 subscribers in the last financial year, and an additional 40,000 in this cycle. In a July 12 interview with the Business Day newspaper in South Africa, Mawela called on regulators to clamp down on Netflix and other over-the-top services.
Most of the coverage of this issue online frames Multichoice as a lazy monopoly who wants the regulator, Icasa, to do its dirty work while it feeds fat on the blood of our offspring. I don't know whether that's true, but here is a more charitable framing of Mawela's position:
[...] We embrace [Netflix], they are bringing new technology to the fore, they are bringing choice to the consumer. [...]
We embrace competition and we are ready for the new technological change that is coming with online players coming the market, and we are ready to compete with them toe-to-toe. [...]
Icasa has narrowly defined an inquiry into competition to look at competition to the old, traditional pay-tv. We think that is a debate that we should have had 16 years ago. [...]
So launching a similar TV type of service is like launching an app these days. You don’t need infrastructure. You can ride on top of somebody’s infrastructure. And we are saying to Icasa do not look at traditional TV as it used to be. Look at the whole audio-visual sector, include the likes of Netflix and how they impact on competition in the market because we are seeing a fundamental shift in viewing habits in terms of how people consume content.
Let’s be clear: Multichoice’s argument, that Netflix is not subject to the same regulatory scrutiny or taxation as it is, is true. But it is also irrelevant. If Mawela really thinks the company lost 140,000+ of their most valuable subscribers because Netflix doesn’t pay taxes, then he has no spatial awareness and the die is already cast. But I don't think that's the case.
- The bulk of Multichoice’s costs are in USD, but its revenue is collected in local currencies. Most of these currencies lose over 20% of their value against the dollar every year. Multichoice tries to account for this with its annual price increases, but the same macroeconomic conditions that affect Multichoice also affect its customers, and they react negatively to the cash crunch.
- Asides from live sports and some telenovelas, it’s not clear what unique ‘job’ Multichoice’s DStv is doing in its subscribers’ lives. That is: its content is not just competing for attention with Netflix, but with also Facebook, Instagram, YouTube, Twitter, Spotify, even WhatsApp conversations, and so on. These services are personalized in ways DStv cannot match (the users hand-picked them, after all) and so they are more compelling by definition. So, at the same time prices are rising, the most valuable customers find DStv's core product less valuable over time.
This is pretty clearly not a 'Netflix' problem, but since Multichoice has framed it so, its solution is to take its lackluster content and shove it down consumers' throats (but online 👀). The company already operates DStv Now, which allows premium subscribers livestream regular DStv content, but has announced plans to launch another VOD service to compete directly soon. (Its parent company, Naspers, already owns a third, Showmax). I wouldn’t hold my breath.
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That’s all for today. Please share this edition if you liked it. Thank you for reading!
With love in my heart and barely-microwaved (because power went out soon after I turned the dial) spaghetti in my belly,
Osarumen.
