MultiChoice outlines its biggest risks

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Following on from the announcement by Naspers that it will spin off its MultiChoice pay-TV division next month, Naspers has now issued the ‘pre-listing’ prospectus for investors and shareholders.

As is usual the document lists all the elements that could go wrong, as well as providing detailed reports of the media division’s recent trading history.

The downside risks section pulls no punches, and says that the likes of Netflix, Amazon and YouTube and similar operators pose a significant threat to its future business prospects. But it also talks about regulation, policy changes and rival satellite and terrestrial pay-TV operators getting in the way of future success.

These rivals often charge lower fees than currently levied by MultiChoice, or even give their content way for free (as with YouTube). In the rest of Africa, outside South Africa, “various competitors have entered or plan to enter the video entertainment market,” warns the prospectus.

Top of the worry list for Naspers is China’s StarTimes Group which already competes and operates a satellite service in South Africa and satellite and terrestrial services in various African countries, including the significant markets of Nigeria and Kenya.

The document warns: “The rate of technological change and adoption of new technologies currently affecting the video entertainment industry is rapid. Trends, such as the convergence of television, the Internet, mobile telephones and other media, have created an unpredictable environment. New technologies or industry standards have the potential to replace or provide lower‑cost alternatives to products and services that are currently sold by the group.”

Naspers also warns that piracy remains a very real threat. “The delivery of subscription programming requires the use of conditional access technology to prevent unauthorised access to programming. The group mainly utilises conditional access technology supplied by its subsidiary, Irdeto. Conditional access technology cannot completely prevent piracy, and virtually all video entertainment markets are characterised by varying degrees of piracy that manifest themselves in different ways. In addition, security technology cannot completely prevent the illegal retransmission or sharing of a television signal once it has been decrypted, although it can help trace it and identify its source.”


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