P L ATC O
PLATCO
Heading for the Summit of Digital Entertainment Business PRODUCTION: David Napier
Platco Managing Director talks Enterprise Africa through the company’s strategy for competing in a challenging and crowded industry, where uncertainty is certain and innovation is a must.
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South Africa’s digital TV migration, the process of moving from analogue to digital terrestrial television (DTT) signals, has been a debacle from the beginning. Deadlines have been missed, legal battles have been fought, uncertainty has caused slowdowns in the roll out of programming, and the public has been left wondering what the future holds for their TV service. The DA’s shadow minister of telecommunications and postal services, Marian Shinn has called the DTT migration an ‘appalling state of
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affairs’ and ‘a failed R8.5bn process that must be stopped’. The confusion caused by the splitting of the Department of Communications has fuelled the critics, and disagreements from broadcasters have created an atmosphere of doubt. But one organisation that is looking through these challenging and unpredictable times towards a bright future is Platco, the independent distribution company which aims to help free TV broadcasters cost-effectively reach audiences. Part of eMedia Investments, Platco was formed
INDUSTRY FOCUS: ENTERTAINMENT
//BETWEEN 2016 AND TODAY, WE’RE SITTING ON 1,050,000 ACTIVATIONS SO WE’VE BEEN ABLE TO GROW THE MARKET SHARE BY ALMOST 700,000 IN A PERIOD OF AROUND 20 MONTHS// in 2013 to offer customers an alternative to ‘paid for’ TV services being offered by large satellite broadcasters like DStv. “The free to air market was quite rapidly migrating across to paid satellite television, particularly DStv which is owned by MultiChoice. What we were seeing in the free-to-air space is that audience numbers were starting to decline, as was revenue, and we couldn’t compete as a single
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free-to-air broadcaster in a multichannel environment against the other three channels which are owned by the public broadcaster. It was decided that, with government not looking like it would get its act together in time to launch a viable DTT service, we would either be swallowed up or have to go it alone in order to secure our future in a multi-channel environment and that was the reason for the launch of Platco,” details Managing
Director, Patrick Conroy. Through its OpenView HD (OVHD) digital decoder, Platco can bring viewers a range of free-to-air platforms including SABC 1, 2, and 3, e.tv, e Extra, eMovies, Glow TV, Beatlab.tv, BBC World News, eToonz, Trace Sport Stars, Mindset TV, Da Vinci Learning and many radio feeds among others. Customers simply pay a one-off fee (R399) for the decoder, excluding the cost of installation of a satellite dish, should it be needed. After that there’s no more fees or contracts and you can sit back and enjoy the entertainment. Despite the DTT migration situation, Platco has realised positivity and reached an important milestone recently, installing one million set top boxes. And Conroy
PLATCO
believes there is more growth to be had yet. “Platco was launched in a bit of a hurry and the content offering was fairly weak with retail model not being thought through,” he says. “We had a high retail price, poor content and, no surprises, the uptake was low. Between October 2013 and March 2016, we’d only activated 388,000 set top boxes in a country with 15 million TV households, 10 million of which are free-to-air TV viewers. We had to revise price points, subsidise the set top boxes, revisit our relationships with retailers, improve content significantly, and we expanded our marketing. Between 2016 and today, we’re sitting on 1,050,000 activations so we’ve been able to
grow the market share by almost 700,000 in a period of around 20 months.” Of course, this boom in activations has positioned Platco among the big names in the market and the challenge is now to try and differentiate and innovate in an effort to remain different from the paid for satellite providers while still providing quality programming. “We are the David against the Goliath that is MultiChoice,” admits Conroy. “DStv has been able to establish itself in the country since the late 90s and they have been able to become the only alternative to free-to-air. They’ve secured movie rights, sports rights, and a bouquet of several hundred channels that they can offer the public,” he says. “But we’ve seen that, looking at the country’s 15 million TV households, only around five million are linked to satellite television, leaving around 10 million that need to migrate from analogue free-to-air to something else, and they can’t go to DTT because it hasn’t launched yet thanks to the failure of the State. The alternatives are OpenView HD or DStv and what we’ve been able to do with a low price point is offer an affordable set top box and not charge monthly subscription fees. Once you’ve bought the box, you then get content for free and we use our advertising model.” LEADING FREE CONTENT In a bid to strengthen its offering and solidify its market position, Platco, and eMedia Investments, are always on the lookout for new partnerships that can bring the best content to its platform. “From a content point of view, we have BBC Worldwide News on the platform and we have been talking to Discovery but we’re yet to agree a deal,” explains Conroy. “Our success has come from our own channels such as eExtra and our two
//ADVERTISERS ARE SEEING IT AS ANOTHER PLATFORM TO REACH THEIR AUDIENCES, PARTICULARLY THE LOWER-MIDDLE CLASS ECONOMIC BRACKETS// movie channels which have been hugely popular. In South Africa, you tend to find that blockbuster Hollywood material does fairly well, but you have to mix that up with local programming that contains our vernacular languages to draw the audiences. We’re now starting to get that balance right with the content offering.” Going forward, Platco will review the vast range of choices available for expansion and growth, and will chose the correct avenue following extensive research. Conroy is quick to state that any decision relating to potential monetising of the company’s offering in the future will not be taken lightly. “We’ve been looking at various options” he says, “do we introduce a more advanced set top box, do we introduce video on demand (VOD), do we look at an over-the-top (OTT) player, do we have a tiered payment model – we’re playing with those ideas, but what we see is the growth of OpenView in the past few months has been positive; we’re activating on average 39,000 boxes every month. This means we could activate two million set top boxes by 2019 and what has started to happen is that the market has realised it is possible for another direct-to-home (DTH) operator to work in South Africa with over a
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INDUSTRY FOCUS: ENTERTAINMENT
million activated households. Also, advertisers are seeing it as another platform to reach their audiences, particularly the lower-middle class economic brackets. “We haven’t committed to a specific strategy in terms of other revenue streams but it’s something we will get to. Right now, it’s about increasing scale and our foothold in the market.” In terms of the OpenView set top box, Platco is happy with its design and distribution and is looking at further improvements for the benefit of the end user. “The big thing about innovation is that you must do so much research before you move on your idea,” says Conroy. “You have to be careful about what you want to do. We’ve been looking at introducing PVR functionality into this market and what the cost would be but all the research suggests that at this point, the market doesn’t want PVR at high price point. We don’t want to slow down our progress; at the rate we’re acquiring households we’re sticking to a ‘if it ain’t broke don’t fix it’ mentality. Clearly, we want to future proof the box as much as we can but we won’t be putting anything into the market that would risk our current growth as that is what is critical to our survival.” GOOD YIELD GROWTH Talking about geographic growth and the potential of expanding Platco’s operations across the continent, Conroy is wary of too much too soon and says when the company does come to consider Africa as a new frontier, a careful and calculated approach will be taken. “It’s something that we will look to in the future but, as eMedia Investments, there’s been several ventures into Africa all of which have failed to be successful,” he says. “I think the secret to success in Africa is first to get your home market
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sorted and then be specific about where you base yourself outside of SA, choosing locations with good yield. Nigeria, for example, is a very difficult market to operate in, there’s strong competition in East Africa in Kenya and Tanzania that you’d be respectful of, and so you’d need to think about your model. Namibia and Botswana are big countries with small populations, Mozambique is a big country but they speak Portuguese – Africa is a very difficult, complex, dynamic market and it’s not homogenous by any stretch.” With the ever-shifting entertainment market already leagues ahead in some developed markets – thanks to reliable highspeed fibre connections and longestablished digital signals – Conroy hopes to use the experience of the likes of Netflix, NOW TV, Amazon Fire, Apple TV, Hulu, Time Warner and many more to establish the best
offering OTT and VOD services. We should be able to leapfrog some of the hurdles that our contemporaries face in develop markets.” FUZZY ECONOMY With the health of the South African economy a cause for concern for many companies - after technical recession, slow GDP growth, high unemployment, and ratings agency downgrades – Conroy admits that the negative feeling surrounding the economy has effected the business, mainly through currency pricing. “The Rand price does affect us as it effects the manufacture of our set top boxes which are built locally. We do purchase various chips and boards from South Korea but the box is assembled locally and as the currency price moves, it can make things more expensive for us,” he says. “Of course, there’s also the cost of programming which is all Dollar based and it can be difficult to
//I THINK THE SECRET TO SUCCESS IN AFRICA IS FIRST TO GET YOUR HOME MARKET SORTED AND THEN BE SPECIFIC ABOUT WHERE YOU BASE YOURSELF OUTSIDE OF SA, CHOOSING LOCATIONS WITH GOOD YIELD// working model on which to base future growth. “I think it’s a very exciting time as South Africa is unlike the rest of the developed world in a sense that there’s still a future for traditional media and we’re less likely to be disrupted by new OTT players,” he says. “There’s few fibre connections, most people are still watching analogue free-to-air so we’ll be lucky in the sense that we’ll be able to look at how business models work in markets like Europe and North America and adapt accordingly, offering a blend between being a traditional TV broadcaster and
maintain an affordable price point at R399 with vast currency fluctuations. It is certainly linked to political instability in South Africa with the President replacing his Finance Minister for unknown reasons and leaving our currency yoyo-ing – it’s like a scary roller coaster ride for us on a daily basis.” The fiasco that has been the digital switch over has also been a result of economic downturn, falling down the government’s list of priorities. For now at least, Platco and Conroy think that switch over may never be completed. “There was a point in our corporate
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INDUSTRY FOCUS: ENTERTAINMENT
history where we desperately wanted digital terrestrial television to succeed but that came undone unfortunately because of a number of factors including opposition from incumbents, our public broadcaster constantly changing its view, and policy uncertainty thanks to the frequent change in Communication Minister,” explains the MD. “We always go back to square one and we feel there is a lack of understanding within government about broadcasting and the future of multichannel entertainment. With all of the challenges that South Africa has, DTT has not been at the top of the agenda. From our point of view, we’re thinking that the DTT ship has sailed and it’s looking increasingly like the SA market will be a DTH market, for which we are well-positioned.”
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LEADING FROM THE TOP Conroy has been with Platco since March 2016 but has been involved with the wider eMedia Group for more than 17 years. He is a journalist by trade and as such has developed a deep understanding of what is required in the media business. One of his biggest achievements is taking part in a South African-led ascent of Mount Everest in 1996, the memories of which have helped him to write a new book. “I never intended to write a book – I was a victim of technology,” he recalls. “I realised one evening that it was 20 years to the day since I arrived in Kathmandu to cover the Everest expedition as a journalist, and I was foolish enough to take out my diary and put the first entry onto Facebook. Immediately people
PLATCO
came back to me and asked what happened next so I realised that I would have to blog this in real time and re-tell the story using the diary as the base. It snowballed and people from all over the world started following me so it generated attention. I decided to take all the posts and compile them, and the total came to around 55,000 words and I realised that was book length so I sent it to a publisher and they loved the idea.” The excursion recounted by Conroy was, at the time, one of the deadliest in the peak’s history, and the has helped to bring new evidence into discussion regarding
the exact happenings during the expedition, much of which still remains in question. He describes the journey as one of ‘peaks and troughs’ that must be planned for, much like the South African economy. Putting this experience into practice, Conroy and team are always busy planning for the future, and with investments into programming, technology and research, this is a company that we can expect big things from. With global demand for new content, and new ways of delivering that content, continuing to rise (take a look at the recent Netflix figures, adding 5.3 million users in 2017 and
spending around $8 billion on new content next year), the appetite for VOD, OTT, DTH and digital services remains. This is an important industry for South Africa, and one that Platco will look to summit in the long-term future.
PLATCO 011 537 9300 info@platco.co.za www.platco.co.za
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My background is in journalism and I started my career working for one of the only independent media outlets in South Africa during the apartheid era – Talk Radio 702. I was lucky enough to be with them during the birth of our new country under the leadership of Nelson Mandela. 702 put a lot of faith in me, sending me to spend time on Everest with the very first South African Everest expedition. I moved through a couple of other positions before joining eMedia Investments and helping them launch the country’s very first 24-hour news channel which I ran for eight years before coming to Platco. “Both have their peaks and troughs. The lessons that I took from Everest that you can apply in business is that you must plan as well as you can for what lays ahead but there will always be challenges and risks. At times you are going to have to make tough decisions which will take you further away from your goal but you must recalibrate the situation and try a different route. You must blend planning with flexibility in order to get to where you want to be. Everest takes so much time; you don’t just arrive and start making your way up. There’s no straight line to the ultimate goal in life or business.”
MANAGING DIRECTOR
PATRICK CONROY www.enterprise-africa.net / 9
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THE BUSINESS MAGAZINE FOR AFRICA’S INDUSTRY LEADERS
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Journey of a
Lifetime
Exclusive interview with CEO Andrew Darfoor ALSO IN THIS ISSUE:
Buffalo Coal / Nautic Africa / Grindrod / SAOTA
AS FEAT UR ED IN
ENTERPRISE AFRICA
DECEMBER 2017