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Reduction in cost of decoder is driven by technology cost – Hundah

Recently, Multichoice, the owner of DSTV pay television in a promotional programme slashed the price of its dstv decoder. At a private media meeting   with selected journalists, last week, at the corporate headquarters of  the Company, the Managing Director of Multichoice, Joseph Hundah explained the reasons for the company’s price change and also, talked about other sundry issues. McPhilips Nwachukwu was there.

Recently Multichoice sliced the price of its Dstv Decoder to 9,900. Why did it take this long for you to consider a reduction in price?

I think the simple thing is: let me use an analogy. As you know, the price of flat screen television when it first came out was extremely high. But over time, it became much more affordable. As technology improves, as manufacturing processes improves, as one gets what you call economies of scale, the more people buy those tvs, the more the manufacturers subside the cost of making the sets and the price comes down naturally.

So, I think that the reduction of the decoder price gradually has been coming down over a long period of time and that explains why the price was put at over 40,000 some time in the past and down to the price it sells now.

Joseph Hundah Managing Director of Multichoice

Also added to that, there is also an element of a price cut on the manufacturing side. There is also an element of multichoice coming in and subsiding those boxes, in other words, saying that we have to reduce the entry price into our products and so we will be prepared to put our own profits against reducing those prices. In other words, we are making a loss from those decoders.

I think that simply is a promotional thing; and it is really about making our products cheaper for the consumers. You know, when Multichoice first started, we only had one bouquet, which was the premium bouquet; and as I speak to you now, we have five bouquets.

We have the Premium bouquet,  compact plus bouquet, family and Access bouquets. And if you look at the biggest market that has been going on as in the family and Access bouquets, it is always cheaper to the consumer; but what you find out is that the cost of the hardware doesn’t really march the subscriptions.

So, we are able for a period of time to  invest in acquiring customers to see whether those elements would do better in terms of growing at the lower end of the market.

So the reduction of price in decoder is driven by two things : one, the reduction in the cost of manufacturing and two, subsidization of our boxes by Multichoice.

When you say that the exercise is promotional, does it mean that  the price will not go up again?

It could go up; but am not really sure by how much. Again , it depends on the economies of scale. How decoders we have out there? And how much does it cost us to bring the decoders in? The price will probably go up , but it will be quite a while before that happens.

Are you saying that this new price regime is not driven also by the emergence of new competitors like the HiTv and Star Times in the market, which also come up with their own subsidised decoders?

Not really, because the technology is completely different. Our box is far superior in terms of the technology used in designing the box, and  in terms of the activities of the box. It is far superior. Again, the box is made in a completely different place.

Yes, competition has role to play. It makes every body better. When HiTv came to the market, we were happy and we said welcome to them because we believe that  their appearance in the market will make us become more focused and our own presence will also make them stay focused and ultimately, the consumer will benefit from it. The only problem with competition is about that  saying that competition tends to bring about… In other words, HiTv will never pay the  kind of price we started paying for sports…

That is the only problem with our industry, unlike in  telecom industry, where competition seems to reduce the price of the services, in our own case, it actually reduces margins, because the programme actually just goes up once…
So in the whole of this promotional exercise, where does your existing customers fall in to be rewarded ?

This the kind of  comment we have listened to over time. A lot of people were saying, we see you offer promo for new customers, what of the people that had been existing ? And we do explain to them: for the first time this year, we ran what we called the Subscriber Win Now Campaign.

Basically, we gave out more than 40 plasma televisions and 40 hdp viewers  to winners across the country. And in the exchange , what the customers were expected to do was to pay monthly subscriptions to qualify and stand the chance to win those prices. What we also do is that subscribers that pay the normal monthly subscriptions, we tend to give them small gifts. Some get cellphones, some get usb flash drives and some, small cameras as well.

So, we really do invest in not only acquiring new customers, but also in doing things to retain the old customers that we have.

It is observed that most subscribers after making their subscriptions find it difficult to connect to programmes and would be challenged to make series of calls to your office to be connected. What is being down to address this challenge?

It is more about communication issue than technical or services issues. You should remember that most people use generators in their houses, unfortunately, when they are out at work, which is the time they usually go to pay, the generator at home is switched off and the decoder is also switched off and consequently, the receiving device at home wont be on own to connect with the decoder signal as at the moment of payment, when it is being connected in the office to activate the subscriber’s account.

So we cannot send the signal to you when the decoder is switched off. If you are lucky that when the signal is sent and there is NEPA on, then, you are immediately connected.

How would you describe the performance of dstv in the Nigerian market generally?

I think the growth of the market in Nigeria has been quite phenomenal. In the last two and three years  , I think we have  grown by about 400%. Certainly, the market has been vibrant, and like I was saying before, despite the lost of the EPL, we have been really growing exponentially, which I think this is driven by a number of factors:

One, that of hardworking. The workforce here in the office, I think in terms of customer services, make sure that people are happy, help to make customers stay with our services. Also , over the years , we have introduced the lower price bouquets, which have really helped us reach the new market in the pay tv sector of the industry.


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