Communiqué 31: What makes South Africa attractive to streaming giants?
Netflix, Amazon, Spotify, and Disney+ all chose South Africa to launch in Africa. Why?
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What makes South Africa attractive to streaming giants?
Let’s play a drinking game. Every time a streaming company announces it’s launching in or expanding to Africa and South Africa is either the first or one of the names on the list, you take a shot.
This year, when Disney+ announced its expansion to 42 new countries, including six in Africa, South Africa was on the list. In 2018, when Spotify began its Africa expansion, South Africa was first. In 2016, when Netflix and Amazon Prime were first moving into Africa, South Africa was on the list.
What’s more? Netflix’s first-ever African original, Queen Sono, was filmed in South Africa. In January, it announced a $1-million creative equity scholarship for Africa, but to be rolled out initially in partnership with higher educational institutions in South Africa. It then added that “fund administration partners for East Africa and the West and Central Africa regions will be announced, along with the calls for applications, in due course.”
According to Sa Eva Nébié, head of research at Dataxis, a media and telecom market research firm, “South Africa is really the ultra-dominant country in the region. It’s the country that captures most of the revenues for more traditional TV as well. Most international players launch in South Africa first.”
All this is interesting for a few reasons:
South Africa is not the largest economy in Africa. Nigeria and Egypt are.
It’s not Africa's largest consumer market. Nigeria is.
South Africa’s film industry is also not the biggest on the continent. Nigeria’s is.
Yet, South Africa is a more attractive destination for foreign media investment. Why is this the case? What makes South Africa stand out among other countries on the continent?
While searching for answers, I spoke with Thinus Ferreira, a South African TV critic and journalist. By the end of our conversation, I realised that there’s more to this than meets the eye.
South Africa is doing fine, but there’s still so much more room for growth and investments, especially in infrastructure. There’s also a lot more that other African countries can do, and Thinus outlines exactly what.
Our conversation has been lightly edited.
David: What would you say streaming companies like Netflix, Disney+, and Spotify find the most appealing about South Africa, especially when they're considering it as the base for regional operations?
Thinus: South Africa, Nigeria and Kenya in East Africa are the biggest and most developed TV industry markets across Africa, so companies, especially international companies, prioritise these regions first when they look at the continent since they’ll be able to scale up quickest in terms of customer acquisition, customer growth and retention.
South Africa has the most advanced TV ratings system on the continent. It’s not something many African countries think of or invest in. An accurate and representative measurement system, done by Nielsen, for instance, provides a proper and trusted “feedback loop” for companies, advertisers, ad buyers, ad planners, etc. They can measure and get answers to questions like how many people are watching a TV show, watching or using their service, seeing their ads, and seeing their content.
Africa needs more investment in companies, tracking and measuring expertise to create viable, trusted viewership, listenership and audience measurement systems.
Perhaps also interesting to mention is that even though South Africa’s economy isn’t doing great, it’s stable and open, so investors know what they’ll get. They know what the macro-infrastructure is. Things like inflation and currency are relatively stable, so it’s slightly easier to make investment decisions and to decide, “Okay, let’s start rolling out Disney+ from there”.
David: That makes a lot of sense. In addition to the economic factors, what cultural and consumer behavioural trends contribute to South Africa's entertainment and media industry?
Thinus: In South Africa, as in some other countries like Nigeria, there’s been a long history of people who have grown up on “American fare” in terms of film and TV content. People have been exposed for decades to “Hollywood” as it provides a template of “how to be” or who and what to mimic to create or grow the local entertainment media industry. It has sort of provided the template of how to go about it.
Although far from what it should be, there is also relatively stable and growing broadband internet access. It’s expensive, but hopefully, costs will come down in future. People have relatively easy access to the internet through mobile devices in cities, so consumers are exposed to new technology and streaming services.
Overall, South Africa and the rest of Africa need more investment in internet infrastructure to make it more accessible and reduce the prohibitively high data price. This will allow more consumers to go online, use e-commerce, and grow the digital video industry across the continent in every African country.
David: By your estimation, what opportunities do these companies see in South Africa that make it a worthwhile investment destination?
Thinus: There’s a type of “economic racism” – I’m not sure what the right word is – from international companies who still see Africa as “dark Africa” and will economically, in a sense, “colonise” it only when they have to – or out of necessity.
In terms of TV markets, countries like South Africa and Nigeria have more viewers than countries like New Zealand and Australia and are getting close to being on parity with the United Kingdom. A viewer is a viewer, is a consumer. Yet, global companies will run to these other countries first when it comes to global rollouts of products and services, and Africa is always still last in the row or gets left out.
So it’s not that they see South Africa or other African countries as a “worthwhile investment” – the truth is they need to continue to grow or deliver profits and value to shareholders. What happens is that the American market or their “domestic” market becomes saturated or growth slows, and then they’re forced by necessity to expand globally.
Once a Netflix or a Walmart can no longer add a lot of new customers in the United States, then they suddenly “are willing” to go into these other international markets which you would have wanted them to expand into organically and not just because they’re, in a sense, “forced” to venture into Africa.
With almost every video streaming service, Africa is last in line after Europe, Asia, South America and other places. How often do you see a “global tour” being announced for something and if you know the world map, Africa is completely ignored and skipped over? It’s 2022, and it’s wrong.
David: This is an interesting perspective, and I’ve written about it in the past. The first time was when Netflix launched in Nigeria. It was evident that it did so because growth had slowed in the US, and it needed to expand into more international markets. The second was when it introduced its Mobile Plan, which was clearly targeted at African consumers.
This brings me to my next question. How are South Africans responding to international streaming platforms like Netflix and Prime vs local ones like Showmax?
Thinus: It’s difficult to tell since it’s still very new. It’s also difficult because Netflix, Showmax and others are secretive about both viewership figures – which again is why accurate and credible ratings and viewership organisations and companies like Nielsen are essential – and subscriber figures, meaning how many sign-ups and customers they have.
South Africans are signing up, experimenting, and using global and local services. It’s also growing fast but from a small base. So it would, for instance, be possible to say, “Service A has grown by 50% year-on-year”, but it’s easier to do when you’re smaller because going from 5 customers in year one to 10 customers in year two is a 100% increase – although it’s not really a “lot” of customers.
Streaming will continue to grow, but it will grow in SA and elsewhere in Africa as fast or as slow as the ecosystem around it can grow – meaning internet access and the local TV and film industry having the capacity, money and willingness to produce content to attract people to these services.
In the United States, the latest consumer research shows that TV or video consumers now subscribe to around three or four different video streaming services already. It will be interesting to see how various African countries grow in terms of this and how long it will take.
For instance, will a Nigerian consumer of TV and film by 2025 perhaps subscribe to at least one global and one local streaming service at the same time, or will 60% of Kenyan video consumers by 2026 maybe use at least one traditional pay-TV service like MultiChoice’s DStv or GOtv and at least one streaming service like Amazon Prime Video or Disney+? The evolution of this consumer market – and being able to track it accurately – will be hugely important and exciting.
David: My final question is, in some sense, different from the others. But I’m still curious to hear your thoughts. What government policies and business incentives, if any, would you say have contributed to making SA’s media and streaming landscape a preferred destination?
Thinus: Nothing much, to be honest. And once it happens, governments will probably be slow or stupid to act appropriately. Once again, Africa is a bit slow to act and behind the times.
Individual African governments or regulators should have started implementing processes to look at how to amend existing broadcasting and video regulations to protect their local TV, film and broadcasting industries from the foreign influx of services.
Not a single African government has yet looked at or enacted regulations to compel global streamers like Netflix, Apple TV+, Amazon Prime Video or others to feature a percentage or to produce a certain percentage of local content.
In France, streamers like Netflix must invest between 20% to 25% of their French revenues in local content, but Nigeria or South Africa or Ghana or Zambia have no such regulations, and government officials seem clueless or disinterested in keeping up with the times and how the digital video content economy globally has rapidly been changing.
I get the sense that this conversation isn’t complete if I don’t dig deeper into the possibility that some government policies and a more welcoming business environment have helped South Africa’s media industry grow. For example, my research has pointed to policies and initiatives such as:
Production and post-production incentives from the Department of Trade and Industry -- The South African Emerging Black Filmmakers Incentive, Foreign Film and Television Production and Post-Production Incentive, etc.
Some of these have then led to the low cost of production, which could also be an incentive to foreign media investors.
Furthermore, when I think about how slow African governments are to introduce regulation into this industry, a few questions come to mind, and I want to throw them out to you.
Could it be that the reason why African governments haven’t created such regulations is that the market isn't that big enough yet, collectively?
Do we really want governments that are generally bad at managing these sorts of relationships properly (case in point, the Nigerian government and Twitter) to introduce any form of regulation?
I’ll leave you with these questions. What do you think?
Editor’s note: An earlier version of the article mentioned that Netflix and Spotify have South African offices. They don’t, and the article has been updated to reflect that correction.
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