DISCLOSURE: Showmax BV has done business with iAfrikan Digital as a client and also sponsored iAfrikan's Annual Tech Round-up 2017 event which was held in Nairobi, Kenya.

Recently, Calvo Mawela (CEO at MultiChoice South Africa stated that as a result of OTT (Over The Top) VOD (Video On Demand) services such as Netflix and Amazon Prime, MultiChoice has apparently "lost over 100,000 subscribers in South Africa and the rest of Africa" as far as their pay-TV offering, DStv, is concerned. Mawela went on to further add that it is because, to summarize, the VOD services are not regulated and are not subject to the same requirements as they are in South Africa.

My reaction upon hearing this was to ask why Mawela is not mentioning Showmax, which I knew to be owned, in some way, by Naspers, MultiChoice's parent company. As Richard Boorman, Head of Communications at Showmax, explained to iAfrikan when we enquired, Showmax in Afrika is part of (a brand/service of) MultiChoice.

"Showmax in Afrika is part of MultiChoice (which itself is a Naspers company). DStv is a brand/service in the MultiChoice stable, as is Showmax." said Richard Boorman, Head of Communications at Showmax, to iAfrikan.

Furthermore, there is also Showmax BV which is incorporated in the Netherlands and as Boorman explained, relates to the European side of business for Showmax. However, even Showmax BV is eventually owned by Naspers.


Naspers Group Structure

It's important, for the purpose of this newsletter, to understand this structure in order to understand what could possibly have motivated Mawela to make his statement regarding the regulation of OTT services. Although, even after understanding the structure and the regulations MultiChoice faces, I don't think it justifies a strong call for regulating OTT VOD services.

The reality is that South Africa is a constitutional democracy which subscribes to the free market system within the boundaries of its constitution. From where I sit, as we speak, there is nothing illegal that VOD services such as Netflix are doing. Their (perceived) dominance, in my simplified view, is a result of them taking advantage of the Internet. This is something Mawela alluded to when speaking to iAfrikan.

"Many of our Premium customers who now have access to fibre at home and more affordable broadband, have left MultiChoice in favour of these services." said Calvo Mawela, CEO at MultiChoice South Africa, to iAfrikan.

However, instead of admitting and conceding that MultiChoice is not structured in a way to be competitive and take advantage of the new trends as far as consumer content consumption goes, I feel that they are both shifting the focus to the weaknesses in how they are structured in comparison to the likes of Netflix who are not concerned about having local offices but rather investing heavily in content their subscribers want to watch. Thus, they (Mawela and Boorman), both call on regulators to shift their focus towards regulating and clamping down on other VOD services instead of them, MultiChoice, looking at ways to become more competitive.

As Boorman put it to us:

"The playing field should be level for all video services. To be clear, the argument isn’t that international OTT services should be subject to more regulation than local services, it’s just that they should be subject to the same regulation as local services. We’re 100% happy that competition should be based on content offering, product features, pricing, etc - the key is that this competition should start from the same base regulatory requirement."

Mawela also shares similar sentiments.

"We would like to clarify our position on the ICASA inquiry where we called for services like Netflix and Amazon Prime to also be regulated as we are. This means these services also need to invest in South Africa by paying tax, adhering to local content regulation and contributing positively to the country. As a responsible and proudly South African company, we believe it is important to make a meaningful contribution to the country. And we believe that all video services should be subject to the same regulations."

The only part I agree with, as I've previously stated in this podcast and in a previous edition of the iAfrikan Weekly Digest, is the part about paying local taxes. As it is currently, many Internet companies, iAfrikan Digital included, are structured in such a way that they pay tax only in the country where they are incorporated yet generate millions in income globally without paying tax in those countries. This, in my humble opinion (IMHO), can lead to countries not benefitting from the economic activity of their citizens despite spending money to make such economic activity.

As far as everything else is concerned, it's fair game.

What are your thoughts on this?

This article first appeared on 21 May 2018 in the iAfrikan Weekly Digest Newsletter, a Pan Afrikan weekly digest of the most important stories of the week which includes insights and analysis on the most topical story of the week. Subscribe here to the weekly digest and receive it every Monday.

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