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Netflix brings opportunities for ISPs and media producers in the region

Saturday January 16 2016
EANetflix

Netflix offers original and exclusive content. FILE PHOTO | JASPER JACOBS

The entry of Netflix — an American multinational provider of on-demand Internet streaming media — into the African market brings with it a mixed bag of fortunes and challenges for viewers, Internet service providers, content producers and pay TV providers. But the elephant in the room remains Internet speed and pricey data plans.

The question of Internet speeds in the region has been the talking point as Netflix says a viewer needs a minimum recommended speed of 1.5 mbps in order to access the service, but for a high definition quality movie download, a viewer requires 5mbps downstream speed, which would require a 4G network.

4G LTE wireless broadband is 10 times faster than 3G — and is able to handle download speeds between 5mbps and 12mbps and upload speeds between 2mbps and 5mbps, with peak download speeds approaching 50mbps. 3G has an average speed range between 0.5mbps are1.5mbps and a peak of 5mbps.

In the region, 4G is currently confined to Mombasa and Nairobi in Kenya, and available only in Kigali, Dar es Salaam and Kampala in Rwanda, Uganda and Tanzania respectively.

READ: EA states to roll out faster Internet speeds but rules pose a hurdle

While the majority of East Africans use mobile data, there is a growing number of domestic Internet users on the broadband network, which in Kenya is dominated by AccessKenya, Jamii Telcom and Wananchi Online through Zuku Fibre. These providers are expected to scramble with other ISPs like Safaricom to come up with affordable data plans to get a share of the demand sparked by the entry of Netflix.

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Currently, it costs a subscriber to Zuku Wifi between Ksh2,800 ($27) and Ksh9,799 ($95) for the 1mbps and 50mbps respectively a month, for an unlimited connection. Safaricom’s Internet bundles cost Ksh100 ($0.9) for 130MB, which diminishes with usage.

In Uganda, subscribers pay an average of Ush12,500 ($4) per GB by purchasing a 10GB bundle from MTN Uganda, Vodafone, or Airtel Uganda. 10 GB can give at most three hours of non-stop streaming, implying East Africans will dig deeper into their pockets to enjoy Netflix.

In Tanzania, Tigo offers weekly 2GB bundles costing Tsh7,000 ($3). In Rwanda, MTN charges Rwf18,600 ($25) for monthly 5GB bundles.

“On our data network, customers will be able to enjoy HD streaming on Netflix and this, coupled with the wide array of smart devices available from Safaricom, will give our customers the choice to access Netflix on the go or at home,” said Sylvia Mulinge, Safaricom’s director of consumer business.

Netflix subscribers in East Africa can choose from three packages: Basic at $7.99, Standard at $9.99 and Premium at $11.9 per month on a device of their choice.

In comparison, in Uganda, DStv offers Premium and Compact+ subscription packages at $96 and $65 respectively per month. Charges for Compact, Family and Access bouquets are $37, $21 and $11 respectively.

In Rwanda, Access bouquet is charged at $13 while  Family and Compact English offers attract charges of  $26 and $35 respectively. The Premium East Africa bouquet costs $98.

High cost and the added complication of online payment through credit card its could prove to be a drawback for Netflix. Card payments in Kenya account for a negligible percentage of transactions, while the National Bank of Rwanda statistics show there were only 2,540 credit card holders by December 2014. In Uganda, almost 85 per cent of retail transactions are in cash. The situation is the same in Tanzania.

On the other hand, Netflix could adapt to the region’s business system and set up a mobile money payment system for subscribers here, who are already widely using M-Pesa, Airtel Money and Tigo Pesa for online payments.

For content producers in the region, Netflix’s new model of country-specific content may help them grow but the future balancing act lies in being an exclusive content owner in order to gain and retain subscribers. This could provide an avenue for locally produced films and documentaries.

The region’s film industry could also find an avenue for growth since Netflix partnerships with local producers will be inevitable.

“If Netflix puts up our content for the regional audience, consumers could discover a wide range of local productions never seen before since the available avenues are yet to exhaust what we have to offer. The demand could guide us on what to produce in future for the video-on-demand market,” said Jane Murago-Munene, executive director of the Pan African Federation of Filmmakers (Fepaci).

Netflix is expected to spend up to $5 billion on producing original content in 2016 as it tries to reduce its reliance on traditional Hollywood studio-produced television shows and movies.

Competition

MultiChoice officials in Kenya say Netflix is not a threat.

“The differentiator, like all video entertainment providers either on satellite or DTT or via Internet, is the ability to deliver content that appeals to subscribers. What has been seen in the US and Europe is that people often subscribe to more than one service, so it’s not an either-or situation with Internet TV,” said Philip Wahome, the corporate communications manager at MultiChoice Kenya.

Wananchi Group CEO Santiago Benedit

What is Wananchi Group’s take on the entry of Netflix to the Kenyan market?

We welcome it and our customer base is quite excited too. We have prepared the network for the influx of customers. Subscribers to Netflix can count on Zuku Fibre’s fast and unlimited broadband of upto 50mbps, to complete their experience.

Do you think Netflix is a market disruptor?

The world over, Netflix has always been a market disruptor by its very nature. Internet TV can only grow with the most solid home Internet service provider. As a matter of fact, online conversations are already underscoring the inescapable relationship with Zuku Fibre precedent for a fulfilling Netflix experience.

You provide broadband and content. How will you balance this since you will also serve broadband users who will choose Netflix?

In terms of Internet, Zuku Fibre is Netflix’s lifeline. We power the process by offering unlimited broadband up to 50mbps and provide the option of multiple device usage using one connection. Zuku TV on the other hand offers local content as well as all the free-to-air channels that will complement the Netflix Box Office content.

Do you think subscribers will be open to paying for your Triple Play package and still top up for Netflix?

Zuku Fibre’s Triple Play serves the consumers pretty well. The top up for Netflix should work to enhance the brand experience.

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