House of Reps PAYG model could put DSTV, Startimes and others in a difficult position

The House of Representatives is considering different recommendations to reduce the price of using DSTV, GOTV and other video-on-demand services in the country.

The recommendations were presented by an Ad–hoc Committee on Non–Implementation of Pay As You Go (PAYG) and sudden increment of tariff plans by broadcast digital satellite service providers. They include switching to a Pay Per View or Pay As You Go model as well as a reduction in the price of services.

DSTV, TSTV, OurTV and Startimes are the providers that are still operating in Nigeria.

TSTV already operates a pay per view model which lets users select the channels that they want to view and be charged for those ones only. In October, the company’s CEO said that users can recharge as low as N50 on their account and be charged a fee as low as N2 daily to view specific channels on the decoder.

Also Read: OurTV is Bringing Free-to-air TV Service to Nigerians, But Can it Succeed Where TStv Failed?

This PAYG model will favour consumers who do not always use their decoder and those who do not find all of the channels interesting.

Multichoice says PAYG model can not work

Multichoice, which is the parent company of DSTV and GOTV, has repeatedly made its stand known that it cannot switch to a PAYG model. Noting that it is only in Nigeria that such a demand is being made, the company said in February that it can not upturn its entire model just because a set of subscribers find themselves on the losing end.

The company’s Chief Customer Officer, Martin Mabutho, painted the scenario of playing a football match where one team is scoring and another is losing. He said requesting for a PAYG model is like people asking for a refund because some 45,000 supporters of the losing club would exit the stadium.

Despite that, its competition, TStv, has started operating the pay per view model with subscription charges as low as N50, Multichoice says that switching to this model will be even more expensive for Nigerians than keeping its regular subscription model. The cost of switching to this model will also trickle down to the consumers while the company ensures that it stays profitable.

In the recommendation by the ad-hoc committee, they recognized the fluctuations in the foreign exchange rate as well as the increase in the value-added tax from 5% to 7.5% that companies now pay.

The weakening of the Naira against the dollar led to Multichoice’s announcement that it may not renew EPL and UEFA broadcasting rights. The company said that it is not making enough profit from Nigeria to justify renewing the rights which cost $250 million and $100 million respective.

Also Read: DSTV May Stop Showing the EPL and UEFA Champions League in Nigeria After Next Season

Away from the high cost of operations, switching to a pay per view or pay as you go model will require Multichoice and Startimes to re-engineer their operating model for Nigeria.

Mabutho, defining Multichoice’s stand, said it will be almost technically impracticable for the company to overhaul its model to pay as you go. Therefore, a price reduction may be the only recommendation that DSTV can comply with.

Price reductions will have a negative effect on the revenue each satellite service provider generates from Nigerian users. With Multichoice already complaining of low revenue from Supersport, a price slash by Nigerian regulators will further bring down its annual revenue to new lows.

Although TStv already operates the pay per view model, a price slash will also weaken its cash position. This may lead to a quick demise of the broadcast company especially considering the increasing cost of operations because of the constant rise in the price of foreign currencies.