Multichoice is intensifying its investment in the streaming platform Showmax, choosing to forego dividends for shareholders and instead allocate funds towards the platform’s growth. In its annual results for the fiscal year ending on March 31, 2023, Multichoice reaffirms its commitment to Showmax and justifies its decision by citing the challenging South African market, uncertain currency outlook, funding requirements of the Rest of Africa business, and the need for investment in driving Showmax to become the leading streaming platform across the continent.
Multichoice previously announced a partnership with US media giant COMCAST, owner of NBCUniversal, and UK counterpart SKY to develop “Showmax 2.0.” This new platform, majority-owned by Multichoice (70%) and with a stake sold for $30 million to the UK and US partners (30%), will leverage Peacock’s technology and combine Multichoice’s diverse local content with global content from its partners. Showmax 2.0 aims to compete with top global streaming platforms like Netflix and Disney+ in Africa, as well as African platforms such as Wi-flix. The launch of Showmax 2.0 is planned for the second half of the 2024 financial year.
Multichoice’s strategic roadmap for Showmax 2.0 includes ambitious goals, such as reaching $1 billion in revenue within five years, achieving trading profit breakeven by 2027, and targeting a 25% EBITDA margin and 20% free cash flow margins at scale. Additionally, Multichoice has significantly raised its growth expectations for the platform by 2032 and it’s content production by 2033.
To support these aspirations, Multichoice has been and will continue to allocate funds to the Showmax project in the foreseeable future. However, this focus on Showmax has impacted the company’s margins, which contracted by 7% in the past fiscal year due to South African macro challenges and increased investment in Showmax.
The number of Showmax subscribers remains undisclosed, consistent with Multichoice’s practice since the platform’s launch in 2015. Some experts speculate that this secrecy might stem from a relatively low subscriber count. However, Multichoice does reveal that the number of paying subscribers has grown by 26%, indicating positive growth. Shareholders seem to be receptive to the company’s bet on Showmax, as evidenced by a slight increase in the share price following the release of the annual results.
Despite this marginal improvement, Multichoice’s share price has declined by 38% over the past four months, despite the company’s introduction of two major products—Showmax 2.0 and Moment, its fintech venture. Several factors contribute to this downward trend, including a decline in DStv, Multichoice’s core offering, which lost over 100,000 subscribers between January 1 and March 31. Shareholders also appear less enthusiastic about new opex-heavy products, and tough macroeconomic conditions in South Africa, such as inflation and load shedding, further challenge the company.
To potentially alleviate the crisis, Multichoice may consider the interest shown by French media giant Canal+, which has been steadily acquiring Multichoice’s ordinary shares over the past year. With Canal+ already holding a 30% stake, only 5% away from the mandatory offer threshold of 35%, the company might view this as a solution. Notably, Multichoice’s financial results booklet mentions DStv only seven times, while Showmax is mentioned twenty times, indicating the significant reliance on Showmax’s success as a pivotal factor in the company’s survival.
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