CASE STUDY:

MultiChoice 'welcomes' Netflix competition in South Africa Johannesburg Pay television service provider MultiChoice says it welcomes competition from Internet video company Netflix because it gives consumers "more options". This is according to a statement from Naspers owned MultiChoice, which has responded to questions from Fin24 about the launch of Netflix in South Africa. Netflix went live in South Africa on Wednesday night as part of the streaming service's expansion to 130 countries. Pay TV service DStv is part of MultiChoice. And as of September 2015, MultiChoice reported that it had 5.6 million DStv subscribers in South Africa, an increase from 5.2 million in September 2014. "MultiChoice welcomes competition in the pay television and entertainment industry we believe it is good for consumers as it gives them more options and the ability to compare services," MultiChoice told Fin24 in an email. MultiChoice further explained that it has been expanding its video on demand offering to customers. 'Premium', 'Extra' and 'Compact' customers, for example, have access to a 'Catch Up' service, said the company. Premium customers also have access to Catch Up content via the DStv Now mobile app, the company added. Meanwhile, local analysts said that MultiChoice could ward off competition from Netflix with DStv's sports channels. "The real strength of DStv lies in its live sports coverage, and that's an area where no video on demand service can compete at this stage," Arthur Goldstuck, Managing Director of local technology research company, World Wide Worx, told Fin24. But Goldstuck cautioned that DStv subscribers who do not want sport content could leave the pay TV service for the likes of Netflix. "People who subscribe to DStv only for movies and series can be expected to migrate rapidly to video on demand, because it will simply make more sense both economically and in terms of choice of content and viewing time," said Goldstuck. Netflix costs $7.99 (about R128) per month in South Africa compared to the top range DStv premium package which costs R699 per month. Local IT consultant and prominent technology blogger, Liron Segev also echoed Goldstuck's views. "We want the ability to customise our packages so we pay for what we want," Segev told Fin24. "So unless you want sports, DStv is going to become irrelevant for those people who can currently afford DStv," he added. While Netflix has launched in South Africa with shows such as Suits and Narcos, other content like House of Cards, Orange is the New Black and Grey's Anatomy are unavailable locally on the web service. Netflix told Fin24 that this is owing to content rights that "sit with other platforms". However, Netflix said it plans to expand South Africa's viewing catalog. Netflix further said that it plans to spend about $5bn on programming rights in 2016, which will include securing titles that will be exclusive to Netflix. MultiChoice, in the meantime, has confirmed to Fin24 that it holds rights to certain Netflix shows. "As a result of our ongoing contracts with content providers, MultiChoice holds the rights to a number of series across the African continent including shows like House of Cards," MultiChoice told Fin24. "Where we hold the rights, we will continue to screen these on DStv and offer it on our DStv Catch Up and DStv Now services. We already offer a number of shows express from the US within hours of the US broadcast time, and will continue to ensure our customers get access to the best international content first," said the company.

QUESTION:

Classify the market structure of Pay TV service in South Africa. Substantiate your answer by applying the features of your chosen market structure to the Pay TV service in South Africa. (17 Marks) NB: //Please note that whole answer is worth 17 marks, please try to elaborate as much as possible, as my lecturers are very fussy.////