IROKOtv, a Nigerian Video on demand (VOD) platform has announced that it will be cutting the salaries of 49 employees and furloughing another 83 employees in Nigeria after a drop in revenue due to the Covid-19 Pandemic.
According to the platform’s founder, Jason Njoku, the economic situation and uncertainties caused by pandemic forced the company to make the decision.
So we had a decision to make. We had to right-size IROKO for any reality. Because you know what? No-one knew what was going to happen next.Jason Njoku, Founder IROKOtv
Dropping Number of Subscribers
During the early days of the lockdown, IROKOtv registered a boom in sales, driven by high consumer sentiment. According to Jason, the platform hit its highest daily addition within the first few days of the lockdown.
However, as the lockdown became protracted and insecurity began to spread, consumer confidence dropped, causing a significant drop in the number of daily subscribers.
While IROKOtv was losing subscribers, Netflix, YouTube and other international streaming platforms were gaining a lot of them. Jason said he was not surprised that it is an out of Africa thing. He added that for their kind of paid product the surge didn’t last.
IROKO furloughs 28% of its Nigerian Team
Following the significant reduction in the number of subscribers, the company said it is furloughing about 28% of its Nigerian team. The Furloughed employees would be unpaid, but will still be eligible to use IROKO’s health insurance due to the current health crisis.
Jason shared that the company opted to furlough instead of sacking because they wanted to retain the option of scaling quickly in case things become better.
I wanted to safeguard the business I also wanted to hedge my doom and gloom bet that things may not be as bad as I thought they were. So we retained the option of scaling up again pretty quickly.Jason Njoku, Founder IROKOtv
About $200-250k lost in Revenue per month
Despite the furloughing of staff, Jason has revealed that IROKOtv still remains unprofitable. The company is expecting a loss of between $200-250k/month for the rest of the year.
According to the company, the naira devaluation from N360 – N450 increased the operation cost of the company, thereby reducing profit. Jason says their goal is to reach cash flow positive.
“our AWS bills are $45k/month. Just like that. Things just got real for us. Devaluation = N360 –> N450. In April that went from N16.2m/mth to N20.25m/mth. Scaled the rest of 2020 = N32m per year newly budgeted expense (assuming N450). Our N3,000 annual subscription just went from $8.33 to $6.67.”Jason Njoku, Founder IROKOtv
He added that the platform’s annual subscription of N3000 dropped from an equivalent of $8.33 to $6.67, thereby reducing the revenue it generated. He further added that price increase isn’t feasible since they provided important and essential services.
To soften the impact of the drop in revenue the company is cutting the salaries of about 16% of its Nigerian team. Jason says the company is planning very conservative fundamentals to see it through this period.
He added that Africa is not the rest of the world where trillions of dollars in palliatives are being pumped into resuscitating the economy. He further added that with the triple threat of COVID-19, Oil and economic collapse, there are very few moves a business can make.
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