Nigerian video-on-demand (VoD) company IROKO is to pivot from focusing on African growth and target customers in North America and Western Europe as it looks to stem losses caused by, among other things, COVID-19, at the cost of around 150 jobs.
IROKO, which sold ROK, its African film studio and international TV network, to CANAL+ Group last year and had been targeting an initial public offering some time this year, has been hit hard by the economic fallout from the crisis after initially seeing positive signs.
While initially international subscriptions daily additions grew by 200 per cent, with April the company’s best month ever, consumer confidence then ebbed before collapsing completely. In a blog post, IROKO’s chief executive officer (CEO) Jason Njoku attributed this to the economic impact of COVID-19, at a time when the company’s revenues were being further squeezed by the latest rounds of naira devaluations and an amendment to the Nigerian Broadcasting Commission (NBC) code regarding payments to artists.
IROKO furloughed 28 per cent of its team members in May, but has now had to take even more drastic measures as it looks to reduce its losses. While losing subscribers in Africa, internationally the company is “effortlessly growing”, according to Njoku. The CEO, who added that IROKO has accumulated net operating losses of over US$30 million over its lifetime, will now be defocusing on Africa, at the cost of around 150 jobs.
“All of the macro and individual issues plaguing West Africa were essentially not major issues in the West. Yes, jobs were being lost. Yes, economies were contracting, but with all the stimuli leaders were injecting, it made the impact on the average person marginal,” Njoku said. “Our annual ARPU internationally is US$25-US$30. When people talk to me about Netflix and their impact globally, and then in Africa, I always smile. My response is the same. Globally, streaming media is booming. In Africa it is regressing.”
IROKO is now “pausing the burn”, and plans to “hunker down and see what the next 18 months brings”.
“Even after pushing incredibly hard in Africa for the last five years, our international business represents 80 per cent of our revenue today, so by taking out Africa growth-related costs, we cut our US$300,000 per month burn to less than US$50,000 a month. Still high, but once things normalise we should have a clear path to free cash flow and profits in 2021,” said Njoku.
“We still believe in Nigeria, We still believe in Ghana, We still believe in Africa. It’s a strange thing to realise that even after almost nine years with IROKOtv, five exclusively focused in Africa, we still may be too early for Africa.”