Naspers Competes With Netflix In Europe By Offering Hyper-Local, Original Content

Written by Dana Sanchez

South African media giant Naspers is launching its internet TV service ShowMax in Poland, and says it plans to provide hyper-local content and original productions rather than trying to compete with expensive shows designed to appeal to global audiences.

It’s competing with the much older, more established U.S. video streaming and video-on-demand service Netflix, which launched in 1998. In January 2017, Netflix reported 93 million subscribers worldwide, WSJ reported. More than 49 million are in the U.S.

Netflix announced at the Consumer Electronics Show in January 2016 that it had become available in 190 countries —  everywhere except mainland China, Syria, North Korea and the territory of Crimea. As of October 2016, Netflix supports 18 languages including Polish.

Cape Town-based Naspers started out as a South African newspaper publisher and is now a global investor in tech companies. Its most successful venture to date was an early-stage investment in Tencent Holdings Ltd., the Chinese creator of WeChat.

Africa’s most valuable company, Naspers saw its stock gain a 27-percent return in the past year, according to Frontera News. A major technology investor, Naspers has a market capitalization of $70.93 billion. The company reported a net profit margin of 18.29 percent in the third quarter of 2016. It generates a 6.18 percent return on assets and a 10.35 percent return on equity.

Its ShowMax content has been tailored specifically for Poland with a focus on local TV shows and movies, Naspers said in a press release. Poland has a vibrant TV and film production industry, and for launch ShowMax says it acquired exclusive rights to popular local shows including political satire “Ucho Prezesa” (“Ear of the Chairman”) as well as a catalog of movies by Polish directors. These include the 2016 box office hits “Pitbull” and “Planeta Singli.” Plans are underway for original productions.

“This is a big deal for us, especially coming just 18 months after we launched ShowMax,” said ShowMax CEO John Kotsaftis in a prepared statement.

ShowMax launched in South Africa in August 2015. It’s available in 37 countries in Africa and 28 countries outside the continent. In Europe, New Zealand, Australia, North America and Canada, Afrikaans-speaking expats can watch kykNET programming, Channel 24 reported.

ShowMax says it attributes its success to features such as the ability to download content to Android and Apple smartphones and tablets for viewing offline, user-selectable bandwidth capping function, and partnerships with local connectivity providers.

Naspers is looking to partner with mobile-phone operators in Africa to boost its video-on-demand business and help compete with Netflix, Bloomberg reported.

“A service like ours isn’t static. It’s a constant process of making improvements and rolling out new features, monitoring the impact, and then making further tweaks,” said Barron Ernst, chief product officer for ShowMax in a press statement in July, 2016.

More than 7 million people pay for online video in Poland, population 38 million. The key to success, Kotsaftis said, is catering for local needs. “To deliver on this and be close to the market, we chose to set up operations in Warsaw, headed up by a respected Polish pay-TV and internet TV pioneer. This team is aggressively developing a strong portfolio of local content including commissioning original productions.”

Former Google executive Maciej Sojka was hired to set up and run ShowMax Poland. Sojka ran YouTube partnerships for Central and Eastern Europe, the Middle East and Africa.  ShowMax Poland’s executive team includes Grzegorz Esz as head of marketing (formerly with T-Mobile and UPC Polska) and Jerzy Dzięgielewski as head of content (ex-HBO Central Europe).

ShowMax Poland is tackling three key consumer challenges, Nasper said: having access to local content so people don’t feel the need to resort to pirate sites, helping subscribers discover relevant new content, and having conveniently accessible, high-quality video free from the malware sometimes present on Polish pirate sites.

“Poland is an interesting market in that local content features heavily on pirate sites, with many of these sites actually charging for access. In fact, pirate sites account for a significant portion of all online video revenue. This tells us there’s a ready appetite to pay for a truly Polish service with content that excites and entertains people,” Kotsaftis said.

ShowMax’ strategy for original production differs from the competition, Kotsaftis said.

“I think the key difference in our approach to original productions is we’re looking hyper-local. We’re not trying to compete with prohibitively expensive shows designed to appeal to audiences worldwide. Instead we think there’s strong demand for local content that only works at the local level.”

Netflix is also commissioning original content, Jon Russell reported in Telecrunch in July. But Netflix has an overseas problem, Russel said:

Anyone who has signed up for the (Netflix) service from outside of the U.S. since its huge global expansion in January (2016) will know, Netflix has far less content internationally — particularly outside of major European countries which have some parity with the U.S. It’s well documented, and it is a process that will take time to change. Netflix is commissioning original content from places like India and playing a waiting game on other licensing, but until then the sparse entertainment options on offer to many will have a tangible impact on growth. “When you look at (Netflix) content in Asian countries, it is significantly lower,” said Aravind Venugopal, vice president at Singapore-based Media Partners Asia. “It just doesn’t have the amount of local content that some of the (streaming and pay TV) competitors have.”

Netflix has publicly stated its intention to develop a homogenous catalog of content, but at the same time acknowledged that it will take time. Not only is there existing content that it can’t license right now until current terms expire, but there are competitors sprouting up and even the potential for competition from production companies which are experimenting with their own offerings.

Naspers plans to target all of sub-Saharan Africa for mobile partnerships,’ Naspers CEO Bob Van Dijk said in January at the annual meeting of the World Economic Forum in Davos, Switzerland. “Working together with telcos will be a big part of what we do. We are live in Kenya and there are several others” that we are targeting, he said, according to Bloomberg:

While the Cape Town-based Naspers’ satellite pay-TV business has long dominated the sub-Saharan African market, it was hurt in 2016 by falling currencies against the dollar and new competitors such as Netflix and Econet Wireless Global of Zimbabwe. Naspers is seeking to maintain its market-leading position with online products like Showmax, which offers movies and TV shows such as Game of Thrones and Vikings.

“There’s not a lot of cable on the continent and never will be,” Van Dijk said. “The video-on-demand business will have to be a mobile play through affordable data.”

Naspers posted a 31 percent rise in its (2016) first-half profit as strength of its e-commerce businesses and stake in Tencent outweighed slumping earnings in the pay-TV service, Bloomberg reported.