Vod business-model-handbook-july-20151

TV & VOD for AFRICA

Deep Dive SessionIn partnership with Ericsson

and Balancing Act

TABLE OF CONTENT

• Introduction & Overview

• Power Shifts

• Developed vs Developing Paradigm

• Visual Business Models

• Pay TV

• Netflix

• Amazon

• Youtube

• IPTV/Triple Play

• iTunes

2

INTRODUCTION3

Thursday, 02 July 2015 This Document is classified as Confidential

There is a rapid change in the TV market in Sub-Saharan Africa. Thechange-over to DTT is happening at the same time as VOD offeringsare blossoming in the market. Content, still under developed across thecontinent, is struggling with piracy. Those that expect this market toresemble Europe’s transition from Analog to Digital TV are in for asurprise as the European (and American) transitions did not happen inthe age of Netflix. The Sub-Saharan Africa experience will see highlyfunded international internet offerings competing with localbroadcasters, pushing regulatory boundaries and changing consumertastes. The demand for VOD is clear, how the market will shake out, isnot.

This handbook utilizes visual business modeling to explain the differentapproaches players have taken in the market to approach VOD. Byvisualizing the business model, ecosystem and how the players inter-relate, a different perspective can be achieved.

Analogue FTADTT Providers

DTH ProvidersIPTV Providers

OTT Players (incl. Youtube)

Power shift direction& magnitude

Shift from/to (weight is velocity)

KEY

Digital migration

copyright &Innovation Consulting

2015

4 POWER SHIFTS

Current market power

Future market power

DEVELOPED VS. DEVELOPING PARADIGMS5

6

Metric Developed World Africa

TVs per household Average 1.5 Average <1

Predominant TV technology LCD (moving from CCFL to LED and OLED)

CRT (despite energy consumption – because of cost)

Pay TV vs FTA Predominantly Pay Predominantly FTA

Payment Methods Subscription & transaction supported by wide use of credit cards & online financial services

Outside of MPESA and few other mobile financial services, payment remains challenging

Distribution DTH, DTT, DVD, Internet Limited DTH, DTT, Internet, no DVD distribution

Alternative distribution Non-commercial sharing Commercial piracy

Copyright &Innovation Consulting 2015

DEVELOPED VS. DEVELOPING PARADIGMS

BUSINESS MODELS: PAY TV7

Copyright &Innovation Consulting

2015

BUSINESS MODELS: NETFLIX8


BUSINESS MODELS: AMAZON9


BUSINESS MODELS: YOUTUBE10


BUSINESS MODELS: IPTV/TRIPLE PLAY11


BUSINESS MODELS: iTUNES12


VALUE PROPOSITION ELEMENTS13


While by no means exhaustive, this section highlights a number of the

possible choices that have to be made in relation to crafting a value

proposition that would meet the needs, wants and fears of the African

TV & VOD consumer. This section also highlights, as a primer to a

larger conversation, a number of challenges that impact on these value

proposition choices and considerations.

Beginning with the consumer is a good start to avoid falling into the trap

of replicating developed-world business models that are structurally

unable to address the core African market.

More than just choosing a consumer segment, it is important to

understand the needs, wants and fears of that segment – to gain insight

and develop empathy for your consumers – as a starting point for

developing a value proposition and a larger business plan.



CU

STO

MER

S

Entire Country

SEGMENTS

PR

ICIN

G

STRATEGY

PRICE MODEL

REGIONS Major Cities Selected Major Cities

BusinessesExpatsAchieversCoreYouthFamilies

Market-grab(Subsidised pricing)

Break-even or Cost-plus pricing

Niche value pricing

FEA

TUR

ES

CO

NTE

NT

FEATURES

Local

Intl.

News & Local Int

UG

C

Movies & Shorts

Sport MusicSeriesDocu-

mentary

NewsMovies

& ShortsSport MusicSeries

Docu-mentary

Time-based bundles

Triple play bundles

Device bundles

Per transaction

DelayedMulti-device

Live event streaming

ChannelsVODMobile

Content-based bundles

FTA Paid-to-Air SubscriptionData excl.

priceAd-funded

Recom-mendation

Premium pricing


Friday, 03 July 2015 This Document is classified as Confidential

CU

STO

MER

S

Entire Country

SEGMENTS

REGIONS Major Cities Selected Major Cities

BusinessesExpatsAchieversCoreYouthFamilies

• Challenges with regional distribution in Africa:

Low rural population density

Cultural and linguistic diversity

Low internet, 3G and LTE penetration, and 3G only available in some cities

• Segments:

Affordability is key to accessing core market

Family viewing behavior is changing to multidevice, more personal

experience, which a player would need to account for this when aiming to

capture the home

Business customers are largely restricted to major cities



FEA

TUR

ES

CO

NTE

NT

FEATURES

Local

Intl.

News & Local Int

UG

C

Movies & Shorts

Sport MusicSeriesDocu-

mentary

NewsMovies

& ShortsSport MusicSeries

Docu-mentary

DelayedMulti-device

Live event streaming

ChannelsVODMobile Recom-mendation

• Challenges with content in Africa: International sports rights monopolized by DSTV in most countries

Local content faces scale issue – if one caters to regional diversity, especially in language, markets can be small

Premium international content costs competing with piracy

• Preferences: Strong local content preference (especially with regard to language)

Shorter format content – series over movies

Premium international content

• Features: Appetite for linear channels disappearing globally

Live event streaming proves popular predominantly for sports (but content rights remain an issue)

Mobile and multidevice is increasingly important, as trend leans towards personal viewing experience, throughoutuser’s day

Delayed downloads useful in 3G and poor connectivity markets, and useful for traffic streamlining for MNO

Research indicates that users prefer download vs. streaming, as they are skeptical about streaming quality



PR

ICIN

G

STRATEGY

PRICE MODEL

Market-grab(Subsidised pricing)

Break-even or Cost-plus pricing

Niche value pricing

Time-based bundles

Triple play bundles

Device bundles

Per transaction

Content-based bundles

FTA Paid-to-Air SubscriptionData excl.

priceAd-funded

Premium pricing

• Pricing strategies: Premium content and pricing competes with ubiquitous and largely accepted piracy

Market-grab pricing is challenging with high data prices and/ or content rights

Research shows a willingness to pay more than expected (indications of willingness to spend as much asDTH subscription)

• Price models: Ad-funded pricing has scale challenge because of regional cultural and language diversity

Subscription model is challenging if targeting core, unbanked market (who predominantly use prepaidmobile) – there is limited credit card usage and mobile financial services dominated by a few MNOs

Bundling is a good way to obfuscate data pricing and content, but hitting the mark on value perception ofviewers is challenging (as users attach value to content, and don’t think of paying for data)

Price competes with commercial piracy, which has set price-points below levels acceptable by suppliers



We are a strategic innovation consultancy firm based in Cape Town, South Africafocusing on Technology, Media and Telecoms sectors in Sub-Saharan Africa.

We guide our clients in their applied strategic innovation – based on creative ideas,operational expertise and real world insights gained through human centered designprocesses and other methodologies.

We help our clients go from idea, to execution and profit.

&INNOVATION CONSULTING

www.andinnovation.com

END / THANK YOU

*This Document is classified as Confidential

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