Nigerian video-on-demand (VoD) company IROKO is to focus on subscriber growth after selling its ROK film studio to CANAL+ Group, with the aim being to hit the one million user mark and list on the London Stock Exchange.
Disrupt Africa reported earlier this month ROK, the African film studio and international TV network led by Mary Njoku, wife of IROKO chief executive officer (CEO) Jason Njoku, and incubated by IROKO since 2013, had been acquired by France’s CANAL+ Group.
IROKO and CANAL+ have been working together since 2015, an arrangement that will continue even after the purchase of ROK, which Jason Njoku said in a blog post was to his knowledge the largest media deal in West African history, and possibly Africa outside of South Africa.
“Mrs Njoku didn’t sell her shares, Vivendi Canal+ acquired IROKO Ltd shares in the ROK Group, so she retains her stake. This is a fantastic exit and considering ROK was only six years old and required less than US$1 million equity and debt US$1.4 million (Bank of Industry loans), it was a big exit,” he said.
Njoku did however say ROK was the reason IROKOtv has been able to survive over the last three years, generating more than 75 per cent of its 2018 revenue. Now that it has been sold, the company needs a new strategy, and that is to focus on subscriber growth with the goal of reaching one million in the next few years. Once that target has been reached, IROKO hopes to list on the London Stock Exchange.
“Enough of the cash from the sale will be retained in IROKO, so in theory, we don’t actually need to raise further financing anytime soon. We may not raise money at all again before we exit,” Njoku said.
“We intend to continue to focus our efforts on subscriber growth as the only KPI which really matters. That will be at the expense of any cash flow or EBITDA profitability in the near future. This is consistent with pretty much all of the SVOD services I am aware of, both large or small.”
One million subscribers, he said, would make IROKO a “tier one paid service”.
“Investments in content, product, engineering and most importantly distribution is required to even remotely stand a chance of reaching this goal,” said Njoku.
“Selling ROK was for one simple reason. A bet that the team can solve content distribution in Africa with a cumulative investment of US$15 million to US$20 million in less than 18 months.”
In order to achieve this, IROKO will scale its telesales efforts. Njoku wants 1,000 agents by the end of this year, 2,000 by the end of 2020 and 2,500 by the end of 2021.
“We now have more than enough capital to invest in marketing and productivity which we believe will yield immediate results from August onwards,” he said.
IROKO is currently in the process of discontinuing the kiosks programme it currently operates in a host of Ghanaian and Nigerian cities, which Njoku said has been good for visibility and customer support but difficult to scale. Prices are coming down, while the platform will also diversify away from just Nollywood into being a major African distributor of Bollywood, Telenovela, Korean and kids content.
Once IROKOtv hits one million subscribers, its intention is to explore a listing on London Stock Exchange.
“The target valuation would be anywhere north of US$100 million. This will most likely be in 2022, where our revenue would be US$20 million with an operating margin of less than US$1 million, or possibly negative,” said Njoku.
He is optimistic of reaching these targets.
“I feel like for the first time we at IROKOtv have a clear path to one million subscribers. Most of the expected competition is no more. Looking at India subscribers for Hotstar, Amazon Prime and Netflix, gives you a sense of the difficulties of reaching that one million subscriber number. It’s not easy. It’s not for the faint hearted. We have a real opportunity. Mrs Njoku has literally given us a window to go for greatness. Now run and fly through it,” he said.