Multichoice sports strategy: balancing premium pay TV and OTT

Multichoice, South African leading pay-TV operator, has announced the end of its sponsorship contract with the Premier Soccer League (PSL), the country’s top football league, more than a year before the expected end date in September 2025. The decision ends a five-year partnership that began in 2020. While the official reasons for this withdrawal have not been communicated, several factors seem to explain this change in strategy. First, Multichoice is facing a difficult financial situation, marked by a loss of subscribers, particularly in its key pay-TV markets such as South Africa and Nigeria. The decision to stop sponsoring the PSL is also part of a more global strategy to refocus Multichoice. Indeed, sport, broadcast on the group’s SuperSport channels, is mainly accessible to subscribers of the Premium and Mid-Market packages, the most expensive ones and the ones that are experiencing the major drop in customers.  At the same time, the South African group, which relaunched its streaming service with more than attractive prices, announced that Showmax's prices will be increased from 1 August, except for the Showmax Premier League bundles. The platform’s CEO claimed that it was important for them to maintain the Premier League packages at the same prices to give an affordable access to sport and OTT, and especially to one of the region’s most popular football competitions. While its OTT platform has a lower ARPU than its premium pay-TV offerings, can it be sustainable to bet on the former? A decline in pay-TV subscribers, notably within the Premium and Mid-market customer base Multichoice experienced a significant first downturn in South Africa, its most dynamic market with a fall in the number of DStv subscribers since Q3 2023. Notably, subscriber numbers fell by 7% between Q1 and Q3 2023. This reversal prompts questions about the stability of Multichoice’s model in the years to come.  In South Africa, subscriber churn was most pronounced within the higher ARPU segments. The subscriber base for Premium (Premium and Compact Plus) and Mid-market (Compact, GOtv Sura Plus…) packages fell by around 8-9% between Q123 and Q124 meanwhile the Mass market bouquets (Family, Access, EasyView…) contracted by only 2%. Yet, the blended ARPU remains stable at ZAR281 in FY23 and FY24. In response to the financial constraints caused by the fall in the number of subscribers and the economic and social situation in some countries (notably currency devaluations in several markets), Multichoice has increased its rates on its various markets on several occasions. At the beginning of April 2024, the South African group announced new price rises in South Africa with higher increases for basic packages such as 7.8% for DStv Access. Sport content, expensive to acquire, is made available in premium packages To counterbalance...