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Blurb

How Cable TV could die in Nigeria

It’s a football weekend, but something is missing. The usual deafening screams and chants have gone silent; the football viewing center in your street has been replaced by a grocery store. Not because people are no longer watching matches, but this is 2030 and no one needs Cable TV.

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Cable TV

It’s a football weekend, but something is missing. The usual deafening screams and chants have gone silent; the football viewing center in your street has been replaced by a grocery store. Not because people are no longer watching matches, but this is 2030 and no one needs Cable TV. 

Yes, you read right. This is not an improbable scenario, as the media world is undergoing an organized disruption in the distribution of broadcast content and programmes globally. This timeit’s cable TV companies that are at the receiving end. Ironically, the Cable TV market brought about the end of the dominance of terrestrial free-to-air services in the late 2000s. Now, the wind of change has come knocking again, to claim yet another victim. 

With the momentum being gained by video-on-demand (VoD) and social media platforms like Netflix and Facebook, ten years from now, you will no longer care if DStv changed its subscription model to pay-per-view, or if Startimes finally wrestled top European Leagues from MultiChoice (owners of DStv and Gotv), or offered top Nollywood movies. You will basically control what you watch. It’s happening already. 

MultiChoice subsidiaries, DSTV and GoTV subscriptions, Startimes subscription, Cable TV in Nigeria

Cable tv is gradually fading out

Cable TV market was structured to self-destruct 

By its own doing, the pay-TV market in Nigeria has been structured to conquer itself and offer little competition to VoD service providers. Not that they do not offer quality content, rather by design, cable Tv cannot compete in the world of tomorrow.  

Different factors play against their competitive edge. For example, they lack the financial firepower of techbacked ondemand platforms. Investors in Tech backed content streaming platforms, have the patience required to invest in technology and distribution channels that will provide exponential value.

It is hard to compete with this type of capital. 

[READ FURTHER: Online streaming site Netflix acquires Kunle Afolayan’s movie, ‘Mokalik’]

Leading the pack of companies already making inroads into VoD are services like iRoko. Though they appear struggling to gain massive penetration, they have relied on a combination of online streaming and pay TV to build a war chest for the future. This is especially as the likes of Amazon and Hulu are yet to flood the Nigerian market with the same sort of aggression they used in the US and in Europe. Netflix has signified intent with a host of solid Nigerian content featured on its highly addictive platform.  

By far, the biggest threat to Cable TV is online streaming platforms like Netflix, Hulu and YouTube. The owners of these platforms spend billions of dollars annually investing on content creation and distribution and have reach across the world. All that is required is an internet modem to get into the privacy of your homes, offices or wherever you are. 

MultiChoice subsidiaries, DSTV and GoTV subscriptions, Startimes subscription, Cable TV in Nigeria

Social Media user engagement

Another challenge Cable TV face is the shift in consumption patterns of viewers under 30. Content creation has undergone remarkable changes over the years offering different levels of acceptance. Internet celebrities are created everyday by people who can constantly create viral content. Several video-creating applications abound making it so much easier to create content as well as distribute it. 

[READ THIS: Why TSTV is committed to implementing ‘Pay As You Watch’]

The Harsh reality 

It has been projected by Digital TV Research that in three years’ time, on-demand platforms will have about 2.61 million subscribers in Nigeria — a figure that took Cable TV more than a decade to record — while the number of social media users in Nigeria is expected to climb close to 40 million, in a country of over 100 million internet users. 

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Despite joining the party late, Nigerians are gradually entering the cord cutting era, which has swept the global cable TV market, with media giants like Sky and Comcast merging to combat the onslaught of VoD; more Nigerians are watching less of TV, while VoD and social media are having higher priority for entertainment 

MultiChoice subsidiaries, DSTV and GoTV subscriptions, Startimes subscription, Cable TV in Nigeria

The FANG companies; Facebook, Amazon, Netflix and Google.

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Already, the average watch-time for OTT and social media has grown significantly with the help of cheaper data and faster network, reducing the need for Cable TVIn South Africa alone, DStv has reportedly lost about 140,000 subscribers to Netflix within the space of months, and with the number of Nigeria’s internet and smartphone users increasing on a steady, the loss in South Africa would only be a tip of the iceberg when compared to that in Nigeria when VoD fully integrates into Nigerian households. 

The struggle to remain relevant in the face of certain defeat 

MultiChoice and Startimes have seen their fate, and it does not bode well for both cable TV companies; that’s why they’ve joined the bandwagon and launched their streaming platforms, DStv NOW and Startimes ON, to avoid being buried by the on-demand onslaught. MultiChoice began to battle this rising tide in 2015 when it launched ShowMax. 

In a smart move, the two companies began these streaming services to get a share of the cake when the cord-cutting era finally takes over, and cable TV becomes redundant. It’s one of the ways they are trying to fit into the paradigm shift and lifestyles of the premillennial generation. 

While DStv Now accounts for 10 million downloads and Startimes On boasts of 5 million plus, both companies are still offering free services to boost the number of their users. However, the hope of taking on these established streaming platforms is also being threatened by the English Premier League and UEFA’s decisions to begin their own Netflix-styled football-focussed streaming service. 

They have also doubled down on creating their own content. Shows like Big Brother Africa are designed to keep subscriptions high during the offseason. There is also a significant rise in their funding of Nollywood content. However, these are all short term plays and they know it. 

Streaming is the future, and the world is getting used to it. It’s still 2019, but 2030 is just around the corner.  

 [KEEP READING: 14 ways to turn your small business into an asset of value]

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Olalekan is a certified media practitioner from the Nigerian Institute of Journalism (NIJ). In the era of media convergence, Olalekan is a valuable asset, with ability to curate and broadcast news. His zeal to write was developed out of passion to shape people’s thought and opinion; serving as a guideline for their daily lives. Contact for tips: [email protected]

1 Comment

1 Comment

  1. Chinegwu kenny

    July 9, 2019 at 1:01 pm

    Before Streaming market grows in Nigeria we need to have Cheap, Available and fast.. and none data capped nternet services.

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Blurb

Analysis: Nestle Plc, dragged by uncontrollable forces in a forgettable 2020 

Nestle Nigeria must bear in mind that the year to beat is its 2019 performance, and not the forgettable 2020.

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Shortly after Nestle Nigeria released its FY 2019 results last yearanalysts wrote lofty and pedantic reviews on what was a truly decent year recording of about 19% improvement in operating profit. A precursor to stellar achievements in the coming year was everyone’s apparent projection. As it turns out, both controllable and uncontrollable forces have played their part in piling misery on the fortunes of the food giant. 

2020 was hard-hitting. Covid-19 greeted Africa fully in the second quarter, straight away making life difficult for individuals and businesses. Its sour fruits are responsible for Nestle Nigeria’s outward financial decline. Its effects have been ever-present since, cutting across all the quarters. In Q2 of 2020, Pre-Tax Profit immediately dipped from N17.4billion to N16.4billion. By the end of Q3, pre-tax profit had succumbed 12.83%, eliminating almost the good work from the year before and by FY 2020, Nestle closed with a 14% decline in profit position. 

Through all of this decline, Nestle Nigeria has been resilient enough to maintain revenue on a flat line. FY 2020 showed top-line increase by 1%, however, this bore no positive consequence nor impact to profit position. The only other area where Nestle Nigeria showed class was in the management of its distribution/marketing expenses which decreased by 4.8%. 

Other variables suffered negative differences. Cost of sales increased from N155billion in 2019 to N168billion in 2020, while both administrative and finance costs endured 9% and 95% increases respectively. 

Nestlé’s negative growth in recent times has been due to improper cost management causing increases in its cost of sales. Given that most of the company’s input is locally sourced, the pressure on cost must have resulted from local supply chain disruption induced by the ban on interstate movement during the early periods of the pandemic. 

Furthermore, there have been a few situations where gains from a reduction in the cost of distribution expenses is immediately eroded by increases in administrative costs in the same cycle. 

The food giant has all it takes to do better and make even more revenue beyond the N287billion amassed in 2020. As a market leader that has cemented its position in Nigeria amongst respectable and formidable opposition, Nestle Nigeria needs to broaden its horizons and maximize the revenue it generates from exports like it did in 2019. 

Management must strive to obtain optimum turnover from both its food and beverage segments. The era of ceding market shares every other quarter must be made history, and quickly too. 

Whilst the world and businesses come to terms with Covid-19 and as vaccines circulate, Nestle Nigeria should bear in mind that the real year’s performance to beat in 2021 is its stellar performance in 2019, not the forgettable 2020. 

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Blurb

Dangote Sugar, sweet in more ways than one

Significant growth in gross revenue was driven largely by sale to Nigerian Bottling Company Limited and Seven-Up Bottling Company Limited.

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Quick take: Sustained cost pressure weighs on profit, Dangote Sugar Refinery: Revenue recovers but cost pressures remain

By refining capacity, Dangote Sugar Refinery Plc (DSR Plc) is acknowledged as the largest Sugar Refinery in sub-Saharan Africa and one of the largest in the world. With up to 60 percent market share, it is also clearly, the most dominant player in the Nigerian sugar market.

DSR Plc recently released its audited Financial Statements for the year ended December 31, 2020 and overall and year-on-year group performance results were very good.

Despite the impact of the Covid-19 induced lockdown which curtailed distribution across the country and resulted in decreased revenues from income generated from freights, gross revenues increased by over 33 percent year-on-year to ₦ 214.3 billion. The significant growth in gross revenue was driven largely by a rise in revenue from the sale of its 50kg sugar, with the two main customers being the Nigerian Bottling Company Limited and Seven-Up Bottling Company Limited who operate principally from Lagos.

READ: Dangote Sugar completes acquisition with Savannah Sugar Company Limited 

Year-on-year, gross profit increased by over 40 per cent to ₦ 53.75 billion, Profit before tax increased by almost 53 per cent to ₦ 45.62 billion, and Profit after tax increased by 33 per cent to ₦ 29.78 billion.

Notwithstanding the good result, the group operating results showed some issues and headwinds. First, during the year, DSR Plc wound up Dangote Niger Sugar Limited (one of four companies that had been set up to acquire large expanse of land and locally grow sugarcane as part of its concerted backward integration project). The winding-up was sequel to continued community dispute over land acquired in Niger State for this purpose. This winding-up event cost DSR Plc approximately ₦ 100 million.

Second, there continues to be a heavy reliance on Lagos for its gross revenues as revenues generated from Lagos State increased significantly from circa 33 per cent at the end of 2019 to over 50 per cent by the end of 2020. The share of the Lagos segment in gross revenue thus continued to grow and currently represents a significant market concentration risk for DSR Plc.

READ: Nigeria’s biggest oligopolies: Who are the real beneficiaries?

Third, provision for impairment on financial assets or in simple terms, receivables that are unlikely to be collectable, also trended upwards from ₦ 1.3 billion in 2019 to ₦ 1.45 billion by end of 2020 with net financing expenses also rising significantly from ₦ 516.2 billion in 2019 to ₦ 1.92 billion by the end of 2020. This rise in expenses was largely driven by a significant rise in exchange losses incurred in the ordinary course of business, rising from about ₦ 7 million in 2019 to over ₦ 1.57 billion at the end of 2020.

Finally, administrative expenses represented mainly by employee salaries grew year-on-year by over ₦ 1.2 billion.

With the recent reopening of land borders, we expect that revenues and margins will become squeezed as sales and production volumes become constrained by the influx of largely smuggled, lower quality, and much cheaper sugar and its substitutes. DSR Plc’s sugar refinery is also strategically located very close to the Apapa port and its logistics operations, distribution of raw materials and delivery of finished goods will continue to be impacted by the infamous Apapa Traffic Gridlock and road diversions/closures around the axis. Although the effort of Lagos state and the recent introduction of the electronic call up of truck by the NPA has eased the issue, still, it needs to be watched closely.

READ: Dangote Sugar yearly revenue surge by 33%, announces a dividend of N1.50

Earnings per share at the end of 2020 was ₦ 2.45 (2019: ₦ 1.87; 2018: ₦ 1.85)

Subject to approval at its forthcoming Annual General Meeting, DSR Plc board of directors have proposed a dividend of N1.50k per ordinary share (2019: ₦ 1.10k, 2018: ₦ 1.10k).

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This performance is sweet in more ways than one.

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