Racing Netflix For South Africa’s Video-On-Demand Market

By Dana SanchezPublished: September 18, 2015, 12:50 pm
In Africa’s most developed economy, satellite TV dominates home viewing for the growing middle class, but rapid roll-out of fiber optic broadband has Internet video streaming companies racing to get a piece of the market, Reuters reports.
In the last year, five South African video-on-demand services have launched. When U.S. streaming giant Netflix announced global expansion plans in January, it raised speculation that it has set its sights on South Africa.
Local video-on-demand services are being offered by telecommunications giants such as MTN, Naspers and Telkom, and startups such as Vumatel.
The most recent entry in the race comes from outside the continent. PCCW Ltd., controlled by Hong Kong billionaire Richard Li, announced it will offer a video-on-demand service for South Africa that will compete with Netflix and Naspers, Bloomberg reported Wednesday.
Netflix isn’t technically available in South Africa, but that hasn’t stopped locals from bypassing regional restrictions and subscribing to the service, MyBroadband reports. “Questions of legality aside, the bottom line is that services like OntapTV and ShowMax compete against Netflix.”
Fiber costs more to install than fixed line connections, but once the cost is covered it delivers data speeds 10 times faster than fixed-line copper connections, according to Reuters.
“There’s an almighty gold rush to try and put in fiber and that’s bringing in these streaming services,” said Dion Chang, analyst and director of Flux Trends, a technology consultancy, in a Reuters interview.
Start-up telecoms companies such as Vumatel have signed deals with wealthy South African neighborhoods to supply “fiberhoods” with high speed Internet.
National fixed-line operator Telkom hopes to bring fiber to 1 million households by 2016.
Last week, Africa’s largest mobile operator, MTN, said it would waive data charges for subscribers accessing its video-on-demand offering, FrontRow.
“We know connectivity is coming to South Africa,” said Richard Boorman, spokesman for the Napsers-owned video-on-demand service Showmax, launched in August.
“The thinking from our end is to make sure we are investing now to take advantage of this boom in connectivity.”
An estimated 1 million South African households have the bandwidth speed to stream videos. This number is expected to grow in coming years as fiber optic Internet providers race to roll out new services, according to Reuters.
PCCW bought a majority stake in mobile video-on-demand service Vuclip in March and is expanding the service into new markets, including Africa, Bloomberg reported. Netflix wants to expand in up to 200 markets including Africa by the end of 2016.