Video on Demand in Sub-Saharan Africa

Last time I was in Lusaka, Zambia, I chatted to a taxi driver. I asked him what he did when he wasn’t driving. “I make music”, he told me. As a sometime musician myself, I asked him what he did. “I download from Internet and then I burn CDs and even sometimes DVDs,” he replied.

Pirated CDs and DVDs, readily available from street vendors, are much more affordable to most people than full retail price music and movies. With the lack of mass-market high speed internet, is there a viable market for VOD in sub-Saharan Africa?

Maktar Diop, vice president of the World Bank, said, “of the 89 million recorded internet users in Sub-Saharan Africa, half of them were in Nigeria. Two countries (Kenya and Nigeria) account for 62 per cent of internet users.”

Not surprisingly then, both Kenya and Nigeria have already spawned several film and video platforms.

Kenya’s Buni TV (“Buni” means “innovation” in Swahili) launched in April last year, and has reportedly grown to reach more than 500,000 viewers.

Iroko TV is another big name in providing video on demand (VOD) services to consumers in Africa, with a library of over 5,000 Nollywood films. Iroko has just received a further $8m investment, including from Kinnevik (owners of MTG/Viasat), primarily to secure content licenses. Iroko has a subscription service,  iROKOtv PLUS, which is now generating more revenue than the ads on its basic service.

Although carriers, like Liquid Telecom, are laying the foundations of an international fibre network (and will be offering their own IPTV service in Narobi, competing with Zuku), aspiring VOD providers are also looking to mobile networks. Already Iroko identifies more than 40% of its traffic from tablets and mobiles, and offers mobile web and apps for both its free and premium services.

Some of the other typical challenges, outside of connectivity, that market entrants can expect to face include competition (from existing broadcast platforms such as the ubiquitous DStv),  piracy, regulation, and content rights and fees. Payment mechanisms, in a region where not all have bank accounts, is also difficult, although tying together mobile money services such as M-Pesa as well as mobile delivery could be key.

“Fixed-line internet is slow-going around the continent so the answer is to go mobile,” says Simbarashe Mabashe, chief executive of Wabona, a Cape Town-based start-up focused on South Africa, Zimbabwe and Tanzania. “Mobile is the VOD infrastructure of choice and I think whoever cracks that wins the game.”

Sylvain Béletre, principal analyst at Balancing Act, has just published a list of 2014 predictions for the African audiovisual and broadcast sectors. He points out that the population in Africa is expected to double by 2050, with young people making up the vast majority. The number of television households is currently only a fraction of the population, with 24.3 million in Nigeria, 11.5 million in South Africa, 5 million in the DRC and 4.4 million in Kenya. But this statistic is going to grow significantly by 2050 and VOD services will have to supply huge content to this increased viewership in the region. “There is no doubt that the market is growing”, Béletre confirms.

In sub-Saharan Africa video uploads have increased 40% year on year, and aggregate views in the region are growing at 90%.

As to international VOD brands, such as Netflix, if South Africa is a guideline, viewers still have quite some time to wait. South Africa’s Telkom, wanting to sell more xDSL and fibre to the home, has reportedly been in talks with both Netflix and other international media companies, but so far, no visible progress.

Yet, as the mobile market in Africa continues to grow and fixed-line internet access improves, combined with low cost smart devices (especially from China), there is little doubt that video on demand will be one of the continent’s exciting business opportunities.

by Philip Haggar