Netflix In Africa: Why Video-On-Demand Startups Will Still Flourish

Netflix In Africa: Why Video-On-Demand Startups Will Still Flourish

U.S.-based video-on-demand provider Netflix has started 2016 with a big announcement that it is launching in 130 countries, including all 54 states of Africa, as part of a plan to become a global TV network.

The surprise announcement excited consumers across the continent, judging by the frenzy it caused on social media on Jan. 7, CNN  reported.

As the excitement died down, analysts have shifted to looking at the impact the U.S. company will have on the local pay-TV market.

Many Africans, especially in the growing middle class in the cities, are already big fans of Netflix’s original shows and series.

This will prove a challenge to Africa’s leading Pay-TV company, South Africa’s MultiChoice which streams digital satellite TV service, DSTV. Consumers complained of lack of options in Africa’s pay-TV market, something that MultiChoice has taken advantage of, charging higher prices for its packages.

Netflix won’t be the first VOD company to launch in Africa. Several startups have sprung up in recent year to stream movies from a growing local film industry in countries like South Africa and Nigeria.

From niche startups offering hyper-local content to deep-pocketed tech giants with pan-African aspirations, the continent’s VOD race is heating up as new players look to tap into a potential audience of 1 billion African consumers.

According to consultancy firm Balancing Act, more than 100 VOD platforms are now staking their claim to the African marketplace, though most so far have focused on single-territory or regional markets.

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iROKO, founded by Nigerian serial tech entrepreneur Jason Njoku, is one of the leading VOD startups in Africa. Other include Naspers and Wabona in South Africa, BuniTV in Kenya and AfricaFilmsTV in Senegal.

Netflix Impact

According to Njoku, launch of movie-streaming service Netflix across Africa has “zero impact” on these startups.

“If it’s Nollywood fanatics, you know those guys can watch three-to-five hours per day, so iROKO is still the only place they can find most of what they are looking for,” he said on his blog.

“Considering we are one of the biggest actual producers of Nollywood, I don’t see that changing anytime soon. In time, we will be able to produce 200 movies a year ourselves, no shaking. And with the evident collapse of the DVD market, this only makes us stronger.”

Naspers, the largest listed company in Africa, said it was not worried about Netflix’s arrival in South Africa, adding it believed the market for video on demand was large enough to accommodate more players.

Growth of VOD consumers is expected to be faster in Africa than any other region. The African market is unique globally in that most users are connecting to the Internet for the first time through mobile devices rather than fixed networks, according to a 2014 Sandvine report.

Netflix will still have to tackle high costs of Internet and mobile data due to lack of quality broadband infrastructure on the continent, according to Ventures Africa.

African VOD startups have been able to thrive despite the Internet troubles facing their consumers, something Netflix will have to work around in Africa.

Netflix is also not targeting the same market local VOD startups are looking to capture.

“People fail to remember that Netflix is an 18-year-old company; 18 years they have been refining their skills at getting people to subscribe for content. They are just awesome at it. But Africa is a little different,” Njoku said.