The rise and fall (?) of African VoD startups

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Years since the continent’s first video-on-demand (VoD) startups launched to market, many people insist the African VoD space is still in its infancy, with the best yet to come.

However, as many of the pioneer startups in the African VoD space struggle for profitability – with some even closing down -, and as global corporates begin to flood the market, it begs the question whether the era of Africa’s VoD entrepreneurs may be coming to a close.

With Africa’s billion-strong population, and increasing internet penetration, the opportunity for a thriving VoD market is self-evident. Local startups were quick to realise this opportunity, and were definitely the first movers.

Nigeria’s iROKOtv launched in 2011, and Kenya’s Buni.tv in 2012; followed by a number of other services springing up continent-wide, such as South Africa’s Wabona, and Y Combinator graduate Afrostream targeting the West African francophone market; to name a few.

Unsurprisingly, their services quickly began to take off, as African consumers jumped at the easy access to their favourite local content. For many, it seemed the age of African VoD was in bloom; and satisfyingly, this time the local entrepreneurs were the ones to build, develop and serve their own markets.

The trials and tribulations

But behind the scenes, things were less rosy.

In 2015, iROKO started to make big changes. The company shut down its desktop service for African users, saying it would focus on a mobile-only experience for African markets, with founder Jason Njoku blaming 3G infrastructure as making streaming too difficult in an African context.

Then the company revealed substantial downsizing at its Nigerian operations, laying off staff in Lagos, in favour of new hires in London.  The company made a statement that it was moving to “where the talent is”, as iROKOtv “strive[s]for profitability”. Before long, iROKO said it was moving into content distribution.

Things changed again this year, with iROKO closing multiple content development and capital deals to the total value of US$19 million; with Njoku saying the funds will be channeled towards local content production – the startup aims to produce 300 hours of original video content in 2016, with the expectation of doubling that by 2018.

Buni.tv has seen similar tribulations.

In early 2015, Buni.tv founder Marie Lora-Mungai announced the decision to merge her assets with those of film producer Tendeka Matatu, to form Restless Global.

Restless Global was to unite all of the pair’s operations under one umbrella, covering everything from finance to distribution and becoming the first African studio to be involved at every step of the content production and distribution pipeline.

“Separately, our various business divisions face some tough competition, but together, we’re able to leverage a real competitive advantage,” explains Lora-Mungai.

“The African VoD space is extremely competitive right now,” she said.

Later in the year Buni.tv announced a series of partnerships making the service available across Africa, the US and the UK.

Lora-Mungai said the startup was “trying out different business models”, in an experimental phase to understand the market.

Then just last month, the company was acquired by France’s TRACE TV; with the French player planning to launch its own African VoD service later this year. Buni.tv’s content catalogue will be merged into the TRACE Play service.

South Africa’s Wabona was one of the startups to shut down in 2015, with the co-founders pointing to the lack of funding, and difficulties in developing sustainable business models in the African VoD space.

Conversely, as the local startups struggle to stay afloat as the market matures, corporates are marching in en masse.

South Africa’s Times Media Group launched its own service, Vidi; Naspers last year rolled out its new Showmax platform; Ericsson followed suit in November 2015 with its mobile focussed service NuVu… and then Netflix arrived.

With all the corporate money, reputation, and ability to operate at scale… is the “boom” era over for homegrown African VoD entrepreneurs?

Competition is key

Not necessarily, says Anesu Charamba, ICT team leader at Frost & Sullivan Africa; but it will depend on who makes headway against the myriad of market competitors.

“Whether the ‘boom’ is over or not isn’t necessarily the question. The entrance of global players, like Netflix and Showmax, into the African market validates the magnitude of the opportunity,” Charamba says.

“However, the success of these players is still being judged as there are multiple competitors in the market.”

iROKO’s Njoku is adamant there is still space for local providers providing niche content.

“What iROKO is, and has largely always been known for, is the home of Nollywood. Home and abroad,” he argued shortly after Netflix’ launch.

“If it’s Nollywood fanatics, you know those guys can watch 3-5 hours per day, so iROKO is still the only place they can find most of what they are looking for,” he said.

“Considering we are one of the biggest actual producers of Nollywood, I don’t see that changing anytime soon.”

Meanwhile, there are still further challenges facing the continent’s battling VoD companies. The provision of stable internet, internet speeds, as well as the cost of data and devices all weigh heavy on Africa’s VoD players for now.

Will our VoD entrepreneurs reign victorious, or will corporates manage to pressure them out of the race?

It’s a long game

For my part, I believe the local knowledge and years of experience in African markets place VoD entrepreneurs in good stead to compete against the new entrant corporate services. Startups’ flexibility, their ability to adapt to market demands, and to answer consumer preferences, are all unique strengths.

However, there is a lack of support and financial backing; as well as an implicit reliance on other players – operators, for example – to address the infrastructural issues, such as data charges, which if solved, would help underpin VoD uptake.

The challenge for African VoD startups is how long they can weather the game, before the environment is conducive for VoD to bloom across the continent.

This is an environment which will only be achieved if infrastructure providers commit to action to better serve Africa’s consumers; governments commit to supporting them; and we encourage investors to put their backing behind local entrepreneurs to help them play the long game.

 

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Inspired and excited by the African tech entrepreneurial scene, Gabriella spends her time travelling around the continent to report on the most innovative tech startups, the most active investors, and the latest trends emerging in the ecosystem.

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