Discuss: DStv pay-per-channel challenge
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MultiChoice cannot allow subscribers to choose the DStv channels they want and pay only for them due to how global channel distributors sell their content to broadcasters.
For many years, DStv customers have complained about paying for the channels they never.
While DStv’s top-end Premium and Compact Plus bouquets each offer well over 100 channels, many viewers only find value in their sought-after sports, flagship movies, documentaries, and news channels.
These subscribers argue they could pay far less for their packages if DStv only gave them the channels they wanted, while the broadcaster could still make money.
The rise of on-demand video streaming services — which allow users to choose the content they want to watch when they want to watch it — has exacerbated DStv customers’ frustration.
However, television broadcasting expert Thinus Ferreira has explained why paying per channel was simply not feasible for DStv.
Ferreira used a hotel buffet as a metaphor for explaining how MultiChoice’s channel licencing agreements work.
With a buffet, customers pay a single price for all the food on offer, instead of paying for individual dishes.
However, a part of what they pay still goes towards food they may not consume.
In this metaphor, DStv is the hotel, its packages are the buffet, and the various foods in the buffet are the channels DStv gets from distributors.
“Channel distributors have been selling and bundling their own sets of channels as a type of ‘mini-buffet’ to operators,” Ferreira explained.
“Imagine every time the hotel buys lamb for its buffet, it’s forced to also buy a bag of potatoes. So it simply offers potatoes as well.”
“Operators who have had little choice — basically a take it or leave it — simply took it, paid for it, and effectively sold it on to the consumer within the TV buffet.”
Ferreira said a broadcaster that primarily wanted The Disney Channel or ESPN might not necessarily have wanted Disney XD and Disney Junior but had to take the entire bundle, or it could not offer any of the channels.
Ferreira said that not enough people would have been able to afford only the most valuable “lamb” channels.
In addition, DStv would make very little to no money from the low-value “potatoes” channels.
For its services to remain economically feasible, MultiChoice would have to charge substantially more for the high-value channels, negating the benefit of the separation.
Linear TV business models in trouble
Ferreira said that the traditional linear pay TV structure worked for a long time due to the “masses who stormed the buffet.”
“There were enough customers willing to pay the average price so that the economy of size of bundling worked,” he said.
“Thanks to scale, the operator paid to get the channels it really wanted plus the TV trash, passed the cost on to the end-consumer, who could channel roam between a bit of great, a fair amount of average, and a lot of tasteless, never-watched channels.”
However, due to cheaper options like on-demand streaming drawing traditional TV viewers, the bundle-buying model is becoming increasingly unfeasible, not only for DStv but for many satellite and cable TV operators in other parts of the world.
Video streaming services have much less restrictive content licencing agreements — particularly in terms of duration — and can benefit from a larger pool of global subscribers, whereas broadcasters are limited to certain regions.
In addition, the cost of licencing sought-after content like live sports events was growing far faster than inflation, a rate which MultiChoice cannot easily exceed in price adjustments without invoking the anger of its subscribers.
“MultiChoice has to pay a lot more to keep having premium rugby or English football,” Ferreira said. “It also has to pass that cost on to the consumer and increase the price of the buffet package.”
Ferreira said that South Africans were always looking for a bargain and for who might be trying to “scam” them.
When compared to online streaming services, many now regard DStv to be too expensive.
“Although taking the family to the buffet costs a lot, people paid it begrudgingly because they believed they got what the price was worth.”
While streaming services do not offer quite the expansive feast of DStv — particularly when it comes to sports — Ferreira believes they are regarded as “good enough” for their lower price.
Dad has learned to make a sacrifice and eat some rice, but he now tells everybody that he’s also saving a lot of money.
“Where does this leave the buffet and the hotel that bundled a fantasy of food? It’s sadly starting to unravel,” Ferreira said.
“If not enough people are willing to pay for it — and in the US they are not — the operator is going to reach the point where it is no longer economically feasible to offer a buffet.”
Ferreira said this is why there are many channel carriage battles currently taking place between channel distributors and pay-TV operators.
“Operators no longer want to take bulk channel bundling when they’re forced to sell that through to consumers who don’t want hundreds of TV channels of mostly nothing and repeats.”
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