Where next for Africa’s biggest broadcaster?

MultiChoice just published their financial results for 2023-24.

Things don’t look great.

Their legacy subscription business is struggling, and their new revenue lines are not growing as quickly as they need to be.

Here are the key things you need to know:

1. MultiChoice posted record losses

MultiChoice posted posted a net loss of 4.15 billion ZAR ($219 million) in the year ended 31st March 2024, on top-level revenue of 55 billion ZAR.

This is an increase from last year’s loss of 2.92 billion ZAR.

2. Currency devaluations played a huge part

The results were been heavily impacted by currency devaluations, particularly in the Group’s second biggest market, Nigeria, where the Naira halved in value over the year.

Other international business operating in Sub-Saharan Africa will be all-too-familiar with this pain.

If we look at cash flow, there has been a slight decline over the past few years, but it’s not as bad as the headline numbers might suggest.

3. African consumers are struggling, particularly in key markets

Rising living costs across Africa are squeezing customers.

Nigeria and South Africa have faced particularly challenging macro-economic environments

Unfortunately, MultiChoice relies on these two countries for 74% of their total subscription revenue.

4. MultiChoice’s core business is stuttering

Longer-term trends show consumers moving away from traditional PayTV. This has been exacerbated in Africa by cost-of-living crises.

As a result MultiChoice has seen Africa-wide declines in both the number and value of its subscribers.

5. Enter… MultiChoice 2.0

MultiChoice have been trying to reposition themselves as less of a traditional broadcaster, and more of a high-growth tech empire.

They have revamped their streaming platform, Showmax, as well as acquiring a 49% stake in Betting group Kingmakers back in 2021.

They’ve also invested in Moment, a payment-processing company.

In theory, all these businesses feed off each other. Moment processes subscription payments, live sports converts people to the betting platform, and so forth.

6. The investment into sports betting is yet to pay off

KingMaker’s flagship BetKing brand made a positive EBITDA of $2 million in Nigeria, but currency devaluation sent it into a loss overall.

The brand has struggled to compete with the superior products of competitors such as SportyBet, and MultiChoice have already written off around a third of their investment.

I also have reservations over the prospects of the newly-launched SuperSportBet in South Africa.

The South African betting market is relatively mature and it’s not clear why users would switch to SuperSportBet from more established rivals with better products. I’ll cover this more in an upcoming post.

7. Streaming and technology lines are yet to generate significant revenues

Much of MultiChoice’s communication to investors seems to pin the Group’s future on the success of Showmax.

But the division still represents less than 2% of the Group’s overall revenues, and made a loss of $139M on revenues of just $54M—an estimated loss of around $60 per subscriber per year, on a service that costs between $4 and $8 per month.

Last year MultiChoice told investors that Showmax should “deliver an additional $1Bn revenue in the medium term.”

Users may be moving away from traditional TV, but it’s not clear whether they are moving to Showmax.

8. Does Canal+’s valuation make sense?

MultiChoice this month accepted a takeover bid from Canal+ valuing the business at ZAR 55 billion ($2.9 billion).

The move could transform the broadcast landscape in Africa. The resulting group would be able to leverage cost synergies and potentially wield more bargaining power when it comes to live sports rights. Canal+ also comes with around 8 million PayTV subscribers in Africa, mostly in Francophone countries.

That said, the price looks very high to me.

$3 billion for a loss-making business whose core revenue line is stagnating, and who is pinning its future on a product that generated just $54 million in revenues last year?

It sounds awfully like… the valuation of a tech company.

We will explore the valuation of MultiChoice in more depth in a future post.