Wed 07 Oct 2015, 15:45
It is of concern that some recent social media circular, from an unverified source, with some incorrect information is circulating on DStv services. We do understand the current economic challenges that exist for both our customers, prospects and our businesses and will always create the best balance to deliver the best affordable video entertainment to our customers and sustain the DStv business in Ghana.
Please see below, a response to the issues raised in the social media circular.
We will continue to share more information on our services and challenges with our concern subscribers and prospective Ghanaian subscribers. Thank you.
1. ’Each time the USD goes up, they increase prices, however, the opposite is the case when USD depreciates against the Ghana cedi. ‘– on 1st of September 2014 premium was increased to GHS 335, on 1st of November 2014 premium was reduce to GHS 299: a reduction of GHS 36. There was no increment until the 1st of April 2015. We do take the appreciation of the local currency into consideration in our annual price increase. As the annual increase is cost based, any appreciation of the local currency will have a positive influence on the annual price increase for subscriber.
2. '80% of the programs remain the same. Most of their programmes are repeated more than 10 times within a month except football which per its nature (i.e. frequency of matches played in a week) does not permit such repetition. Hence no justification for the constant rise or indexing their transmission in dollars': programme repeats are an integral part of any television environment. Channel providers internationally repeat movies and programmes to allow viewers to plan viewing time at their convenience. The purchasing of programme and movie rights is based on a model whereby programmes and movies are purchased for a certain number of screenings. This allows for the movies or programmes to be shown at different time slots to allow viewers a choice of when they would like to access the programming. Repeats in the case of a multi-channel environment allow subscribers not to miss out in instances where two or three interesting programmes are flighted at the same time. DStv has “express from the US” where we show series 24 hours after they are run in the USA as well as premier movies that have now moved closer; form a 2 year window to a 10 month window as per the legal standard.
3. ‘When it rains there is chaos with the network’ - signal interruptions may occur during heavy downpours where the raindrops fall through the signal – this is a feature on all satellite systems worldwide unlike cable TV. Cable TV is not currently an option in this environment.
4. ‘To make matters even worse, they disconnect you almost immediately not taking into consideration the track record of your payments’: MCG has suspended the 2 day grace period previously offered to subscribers due to debts that it incurs. In lieu of that we send DSD reminders to the customer’s TV screen or an SMS message.
5. ‘No phone calls to the top 20% or 30% subscriber base for a customer satisfaction survey’ - the various channels and DStv run online surveys /opinion groups and telephone research frequently. This is not restricted to the top 20% - 30%. And because of our large subscriber base the pool to choose from is quite large depending on the information being sought.
6. DStv transmits from south Africa where the rand is relatively stable (and for close to 15 years has traded with the dollar within the region of rand 11-12) to other unstable economy like ours: most of DStv’ s content/channels are purchased from the UK and USA. Each JV then remunerates MultiChoice Africa for these channels at the going exchange rate. Subscription prices in Africa vary in each country according to a number of factors, ranging from the cost of doing business, the available infrastructure and the cost of providing the service. These costs may be influenced by the economies of scale that may or may not be present. Subscription prices are not related to operations in South Africa or their respective prices. The price differences may also be due to the accommodation of differing tax regimes and operational cost structures. Worldwide, pay television services are discretionary services and depend on the acquisition and provision of entertainment (premium) channels and content that are not available elsewhere – for example on free-to-air channels. Channel suppliers charge a premium price for these channels. Sports rights and other content are acquired by pay television operators and channels through a bidding process that has the effect of escalating the final price depending on available bidders and what they are willing to pay. Consequently, pay television services are targeted at people with discretionary income, and cater for different market segments (not necessarily a single mass market) – this is the norm worldwide.
Multichoice, as a pay television operator, operates in line with international norms in pay television, and its services are both comparable and competitive. It is also important to note that MultiChoice has to pay for satellite capacity for both final transmissions to subscribers and getting the channels from their sources in the US, UK, Brazil and so on to one of its uplink sites (backhaul), as well as pay the channel operators for the programming content. These are by far the biggest costs of the service, as well as the provision of an encryption system and billing system capable of recognizing which subscriber has paid and how much. Unlike in telecommunications or cable television, where once the cables are laid there are minimal costs associated with the network, the costs of satellite transponder capacity are on-going and are dependent on the bandwidth utilized. This has a direct impact on the number of channels that MultiChoice is able to have on DStv, as well as the quality thereof.
It is also particularly important to note that satellite pay television services operate in global markets, are capital intensive and are thus more expensive than cable services, whose sunken costs are recovered once the service attracts subscriptions. Satellite pay television businesses have recurring high costs, including the leasing of transponder capacity and signal distribution for both backhaul (the process of getting the channels into one central place for final compilation into the DStv bouquet) and uplink, which are denominated in foreign currency. Consequently, Multichoice Africa’s services are affected by, and are extremely sensitive to, exchange rate fluctuations.
7. Their main operational cost in Ghana is electricity which does not experience frequent price increases to warrant their frequent increases in their subscription. Their skeleton staff here in Ghana, whose main function is receipt of payment of bills and reconnection, are paid in cedi’s without frequent changes in their salaries: MCG employs over 115 staff whose salaries increase every year based on performance and inflation. The departments include Sales, Marketing, Finance, Credit Control, Human Resources, Call Centre. MCG also engages 120 dealers and sales representatives. Multichoice Africa's cost structure has various input costs, which include salaries, technical infrastructure costs, satellite lease costs, facility costs, marketing costs and programming costs. In determining its price increase Multichoice Africa takes into account many factors including, and amongst others, the impact on the subscriber, current inflation, and efficiencies effected within the company that may offset the necessity for a price increase. Unfortunately, it is necessary to effect price increases due to the ever rising costs to the business. Multichoice Africa’s pricing is determined by a variety of factors, including the quality of the channels it provides, leasing of satellite capacity. DStv provides premium content and variety. We offer the best entertainment available and we offer it on early release, while it remains fresh. DStv has been benchmarking itself with international leaders, in providing the best television entertainment. When benchmarked against these international operators prices are highly competitive. The amounts are influenced by a variety of factors, including the cost of acquiring quality exclusive content and providing it on early release, the cost of transponder capacity, the customer service levels and other investments made to the service.
In Ghana investments include:
- over GHS19.5m ($6m) in the development and production of the local premier league including 2 outside broadcast (OB) vans, training and broadcasting coverage,
- GHS58m ($19m) in a digital terrestrial network in Ghana,
- uplink investment of over GHS6.5m ($2m) to enable addition of local stations to digital platform,
- training and conferences for stakeholders and partners (currently over 1600 partners spread over the country with over 5,000 staff)
- GHS15 million ($5 million) to the construction of a new head office in Abelenkpe, Accra,
- GHS200,000 ($60,000) in Ghana boxing support in 2014,
- $30 million in VAT and various company taxes since 1999; and
- Over of GHS7m ($2.2million) in the business from 1999, as capital investment
These figures exclude:
- more than GHS1.4 million ($450 000) spent on staff and value chain development and training,
- $490,000 payment of license fees to the national communication authority,
- approximately GHs960,000 ($300,000) invested on training in television production skills; and
- approximately GHS1.28 million ($450,000) spent so far in establishing 89 Multichoice Resource Centers in all 10 regions, providing educational content to secondary school students.
DStv enjoys economy of scale transmitting all across Africa with South Africa being the lowest subscription fee country and Ghana amongst the highest fee countries. The frequent increase in subscription in the unstable currency economies does not make economic sense since such relativities in the operational cost resulting from unstable currency need to be distributed evenly across their coverage region. Each country runs as a separate JV. Costs cannot be spread across. The DStv service is an imported service – it is provided by Multichoice Africa, a foreign based company. The role of Multichoice offices in each country is to provide a convenient payment point for local subscribers and to deal with whatever subscriber issues that they may have locally. Also, the majority of the costs incurred by Multichoice Africa are foreign currency (us dollar or euro) denominated – this includes the cost of international channels and a large part of the satellite transponder space. For this reason most of the costs are payable in foreign currency.
8. ‘There are other transmission services providers such as Vodafone, Tigo, Globacom, MTN whose charges are relatively stable, with their transmission plants situated in Ghana unlike DStv, and who are more likely to be affected by the instability in our currency, so how can another be taking Ghanaians and other African nationals other than South Africans for a ride’: the nature of the DStv pay TV service does not use transmission sites. Satellites eliminate that need. However GOtv, which is a DTT technology has 12 sites in Ghana
9. ‘Another question is even if some subscribers such as the hoteliers are using DStv for commercial gains can manage their charges to contain such exorbitant increases, how many of such hotels are on the clientele list of DStv to warrant such indiscriminate increases in their subscription without recourse to the individual private consumer?’ : price increases have to be across board and not dependent on a hotel / subscriber ratio
10. ‘Finally and not exhaustive and the least of my considerations, are we as Ghanaians deriving the utmost benefits from these high subscription, where we are charged monthly whether viewed or not? In South Africa you are charged according to viewership, that is you pay as you view, but in Ghana the story is different and the worst and the nauseating part of it is when it rains.’: South Africa does not have a pay as you view option. Multichoice Africa’s business model, like many other pay-tv operators, is to buy complete channels from various channel providers across the world and package these into different bouquets. Multichoice has to pay for all the channels on its bouquets in full, every month for every subscriber. The DStv service is almost like the purchase of a newspaper – which is paid for in full and in advance whether one reads the whole paper or sections thereof. Each DStv package comprises a selection of channels which are paid for a complete month or multiples of complete months.
In all instances, Multichoice has no way of knowing whether a subscriber is viewing their services or not; as neither the decoder nor the smartcard have a counting mechanism, which can determine the number of days the smartcard is in the decoder and the decoder is switched on. This is much like the publisher of a newspaper is unable to determine whether one only reads the political section or the sports pages of a newspaper, and it is unheard of for people to want to buy a newspaper in sections or on the basis of the fact that they only read the paper halfway due to any number of circumstances beyond the control of the publisher.
For the record,” pay as you watch” services also have very limited “application” in the rest of the world. Some pay TV operators that also produce their own content offer pay per view services for certain events such as boxing. Other services that are similar to pay per view, such as video on demand (VOD), are also offered but these services require a significant amount of satellite bandwidth and are probably more suitable (“cost effective”) if offered on a cable/broadband networks – for pay per view or VOD services to be financially viable, an operator also needs a significant amount of subscribers who take up these services, which is currently not the case.