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Pay TV: How Increased Competition Brings Hidden Costs

By Livinus G. Acholonu

Over the last 13 years, the Nigerian pay-television market has seen new service providers arrive at intervals, provoking, somewhat correctly, greater viewing choices for audiences. This year, two new providers-Kwese TV and TSTV-joined the fray, sparking delight among subscribers.

While the latter has kicked off, the former appears to be held down by an incubus, notably arising from accusations of intellectual property theft and squalid pre-launch preparation, which have eroded the optimism among those it initially seduced with grand promises.

On the face of it, competition is good for consumers, as it offers benefits in terms of pricing and variety. Looked at more closely, pay-television economics, which in recent times has proved to be treacherous to many recent entrants into the Nigerian pay-TV market space, indicate that the vaunted benefits are imaginary.

Though curious, it is true. With competition, subscribers can actually end up paying more-for less content.

With new operators in the market, it is likely to become difficult for Nigerian pay television subscribers to enjoy all the sport they want on a single platform. Take sport, for instance. A household desirous of seeing the EPL, boxing and Formula 1 (DStv), the NBA (Kwese), Bundesliga (Star Times), on a single service and at a reasonable price will have to subscribe to three different Pay TV services. This, without doubt, requires hardware for different operators, making competition is anything but consumer-friendly.

To acquire a Kwese hardware and have it installed, a subscriber will have to pay N10, 000. Monthly subscription is N6, 275. The DStv hardware (dish and decoder) costs N9, 900, while the cost of installation is N5, 000. Subscription for DStv Compact is  N6, 300. StarTimes Combo decoder sells for N5, 900, with installation attracting N5, 000. Monthly subscription is  N4, 800.  In the heady post-launch days, the decoder was said to cost N5, 000, with subscription put at N3, 000.

Also ignored is the fact that the Pay-TV eco-system is radically different from what obtains in many other businesses. In the pay television eco-system, the right to broadcast or redistribute the most appealing content is divided between operators. As such, the fierceness of the competition for the acquisition of such content could lead and actually has led to astronomic hikes in costs.

Pay TV operators in Nigeria are part of the global premium content-seeking community and, are therefore, not insulated from the same tough negotiations and often high prices for content as operators in Europe, the US and Asia.

Content costs are almost always denominated in hard currencies such as the US dollar, Euro and the British pound. This, naturally, tends to take costs into the stratosphere. Content-related costs are a major factor for the high subscription prices Nigerian subscribers have experienced recently, especially with the slender value of the naira-a victim of serial devaluation.

A large slice of the monthly subscription paid by a consumer is made up of costs that distributors/vendors (Pay TV companies) are required to pay to the mega-networks-companies that create content or package Pay TV channels. For every household receiving that package, whether or not anyone in the household watches the channel, Pay TV providers pay a fee.

The mega networks, as anyone familiar with their operations would know, have clear and stringent rules on how their television shows and channels can be sold to viewers. These include what packages can contain their channels.

With sport being one of the most valuable pay television properties and a major influence on many consumers’ decision to acquire a Pay TV package, competition for rights acquisition are cut-throat, with costs rising dramatically over the years. This has seen rights for popular sports leagues such as US National Basketball Association (NBA) granted to new market entrants, while other key sporting content remains in the hands of more established providers.

In Nigeria, the television rights for the English Premier League (EPL), SuperSport, exclusive broadcasters of the EPL in Nigeria and majority of countries in Africa, paid an eye-watering sum for the rights.

The amount paid, knowledgeable people said, is far higher than it had ever shelled out. These costs, unavoidably, will be a key driver in the higher subscription costs paid by subscribers.

The Nigerian pay television sector is notorious as a mausoleum of failed providers, whose programming was not appealing. Frontage Satellite Television (FStv), the country’s first indigenous pay television service operator in 2004, died at infancy. So did HiTV, and DAARSAT.

From the look of things, subscribers will be better served by established Pay TV operators that offer the most appealing local and international content, a great user experience on all devices and excellent service- all at affordable prices.

*Acholonu, a retired broadcaster, is based in Abuja


Comments expressed here do not reflect the opinions of vanguard newspapers or any employee thereof.