TV & VOD for AFRICA Deep Dive Session. In partnership with Ericsson and Balancing Act

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1 TV & VOD for AFRICA Deep Dive Session In partnership with Ericsson and Balancing Act

2 2 TABLE OF CONTENT Introduction & Overview Power Shifts Developed vs Developing Paradigm Visual Business Models Pay TV Netflix Amazon Youtube IPTV/Triple Play itunes

3 3 INTRODUCTION There is a rapid change in the TV market in Sub-Saharan Africa. The change-over to DTT is happening at the same time as VOD offerings are blossoming in the market. Content, still under developed across the continent, is struggling with piracy. Those that expect this market to resemble Europe s transition from Analog to Digital TV are in for a surprise as the European (and American) transitions did not happen in the age of Netflix. The Sub-Saharan Africa experience will see highly funded international internet offerings competing with local broadcasters, pushing regulatory boundaries and changing consumer tastes. The demand for VOD is clear, how the market will shake out, is not. This handbook utilizes visual business modeling to explain the different approaches players have taken in the market to approach VOD. By visualizing the business model, ecosystem and how the players interrelate, a different perspective can be achieved.

Those that expect this market to resemble Europe s transition from Analog to Digital TV are in for a surprise as the European (and American) transitions did not happen in the age of Netflix.

4 4 POWER SHIFTS Analogue FTA DTT Providers Digital migration OTT Players (incl. Youtube) KEY IPTV Providers DTH Providers Power shift direction & magnitude Shift from/to (weight is velocity) Current market power Future market power

5 5 DEVELOPED VS. DEVELOPING PARADIGMS

6 6 DEVELOPED VS. DEVELOPING PARADIGMS Metric Developed World Africa TVs per household Average 1.5 Average <1 Predominant TV technology LCD (moving from CCFL to LED and OLED) CRT (despite energy consumption because of cost) Pay TV vs FTA Predominantly Pay Predominantly FTA Payment Methods Subscription & transaction supported by wide use of credit cards & online financial services Outside of MPESA and few other mobile financial services, payment remains challenging Distribution DTH, DTT, DVD, Internet Limited DTH, DTT, Internet, no DVD distribution Alternative distribution Non-commercial sharing Commercial piracy

Pay Predominantly FTA Payment Methods Subscription & transaction supported by wide use of credit cards & online financial services Outside of MPESA and

7 7 BUSINESS MODELS: PAY TV

8 8 BUSINESS MODELS: NETFLIX

9 9 BUSINESS MODELS: AMAZON

10 10 BUSINESS MODELS: YOUTUBE

11 11 BUSINESS MODELS: IPTV/TRIPLE PLAY

12 12 BUSINESS MODELS: itunes

13 13 VALUE PROPOSITION ELEMENTS While by no means exhaustive, this section highlights a number of the possible choices that have to be made in relation to crafting a value proposition that would meet the needs, wants and fears of the African TV & VOD consumer. This section also highlights, as a primer to a larger conversation, a number of challenges that impact on these value proposition choices and considerations. Beginning with the consumer is a good start to avoid falling into the trap of replicating developed-world business models that are structurally unable to address the core African market. More than just choosing a consumer segment, it is important to understand the needs, wants and fears of that segment to gain insight and develop empathy for your consumers as a starting point for developing a value proposition and a larger business plan.

This section also highlights, as a primer to a larger conversation, a number of challenges that impact on these value proposition choices and considerations.

14 PRICING FEATURES CONTENT UGC CUSTOMERS 14 VALUE PROPOSITION ELEMENTS REGIONS Entire Country Major Cities Selected Major Cities SEGMENTS Families Youth Core Achievers Expats Businesses Local News & Local Int Sport Movies & Shorts Series Music Documentary Intl. News Sport Movies & Shorts Series Music Documentary FEATURES Mobile VOD Channels Live event streaming Multidevice Delayed Recommendation STRATEGY Market-grab (Subsidised pricing) Break-even or Cost-plus pricing Premium pricing Niche value pricing PRICE MODEL Per transaction Data excl. price Time-based bundles Contentbased bundles Triple play bundles Device bundles FTA Ad-funded Paid-to-Air Subscription

News Sport Movies & Shorts Series Music Documentary FEATURES Mobile VOD Channels Live event streaming Multidevice Delayed Recommendation STRATEGY Market-grab

15 CUSTOMERS 15 VALUE PROPOSITION ELEMENTS REGIONS Entire Country Major Cities Selected Major Cities SEGMENTS Families Youth Core Achievers Expats Businesses Challenges with regional distribution in Africa: Low rural population density Cultural and linguistic diversity Low internet, 3G and LTE penetration, and 3G only available in some cities Segments: Affordability is key to accessing core market Family viewing behavior is changing to multidevice, more personal experience, which a player would need to account for this when aiming to capture the home Business customers are largely restricted to major cities

penetration, and 3G only available in some cities Segments: Affordability is key to accessing core market Family viewing behavior is changing to

16 FEATURES CONTENT UGC 16 VALUE PROPOSITION ELEMENTS Local News & Local Int Sport Movies & Shorts Series Music Documentary Intl. News Sport Movies & Shorts Series Music Documentary FEATURES Mobile VOD Channels Live event streaming Delayed Multidevice Recommendation Challenges with content in Africa: International sports rights monopolized by DSTV in most countries Local content faces scale issue if one caters to regional diversity, especially in language, markets can be small Premium international content costs competing with piracy Preferences: Strong local content preference (especially with regard to language) Shorter format content series over movies Premium international content Features: Appetite for linear channels disappearing globally Live event streaming proves popular predominantly for sports (but content rights remain an issue) Mobile and multidevice is increasingly important, as trend leans towards personal viewing experience, throughout user s day Delayed downloads useful in 3G and poor connectivity markets, and useful for traffic streamlining for MNO Research indicates that users prefer download vs. streaming, as they are skeptical about streaming quality

monopolized by DSTV in most countries Local content faces scale issue if one caters to regional diversity, especially in language, markets can be small Premium international content costs competing

17 PRICING 17 VALUE PROPOSITION ELEMENTS STRATEGY Market-grab (Subsidised pricing) Break-even or Cost-plus pricing Premium pricing Niche value pricing PRICE MODEL Per transaction Data excl. price Time-based bundles Contentbased bundles Triple play bundles Device bundles FTA Ad-funded Paid-to-Air Subscription Pricing strategies: Premium content and pricing competes with ubiquitous and largely accepted piracy Market-grab pricing is challenging with high data prices and/ or content rights Research shows a willingness to pay more than expected (indications of willingness to spend as much as DTH subscription) Price models: Ad-funded pricing has scale challenge because of regional cultural and language diversity Subscription model is challenging if targeting core, unbanked market (who predominantly use prepaid mobile) there is limited credit card usage and mobile financial services dominated by a few MNOs Bundling is a good way to obfuscate data pricing and content, but hitting the mark on value perception of viewers is challenging (as users attach value to content, and don t think of paying for data) Price competes with commercial piracy, which has set price-points below levels acceptable by suppliers

largely accepted piracy Market-grab pricing is challenging with high data prices and/ or content rights Research shows a willingness to pay more than expected (indications of willingness to spend as

18 VALUE PROPOSITION ELEMENTS We are a strategic innovation consultancy firm based in Cape Town, South Africa focusing on Technology, Media and Telecoms sectors in Sub-Saharan Africa.

18 18 VALUE PROPOSITION ELEMENTS We are a strategic innovation consultancy firm based in Cape Town, South Africa focusing on Technology, Media and Telecoms sectors in Sub-Saharan Africa. We guide our clients in their applied strategic innovation based on creative ideas, operational expertise and real world insights gained through human centered design processes and other methodologies. We help our clients go from idea, to execution and profit. &INNOVATION CONSULTING

We guide our clients in their applied strategic innovation based on creative ideas, operational expertise and real world

19 END / THANK YOU

ICT Practice. IDA Lighthouse Series : Frost and Sullivan APAC Telecom Research Team

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