Why digital natives need to leave their ivory towers: the DStv example

I recently had an interesting discussion on an email group I’m part of discussing the merits of Netflix over pay TV and Naspers‘ Africa-wide satellite offering DStv. The discussion then devolved into a “DStv better bring out a streaming solution or they will end up failing as a business”.

Suuuuuuuuuuuure, one of the world’s largest media companies is going to let its pay TV cash cow just disappear thanks to some American upstart? Let’s crunch some numbers here:

Multichoice, the Naspers subsidiary that controls DStv, has over six and a half million subscribers and recently reported a fairly impressive R7.6-billion in profit. Yes, you read that right: profit. That means after all its expenses, it has over R7-billion a year to toss around.

A business with this kind of momentum isn’t going anywhere. Yes, we can complain that DStv and its ilk aren’t innovative and that they don’t care about those of us who use streaming media services but would you? Again let me prove my point using some simple references:

According to South African fixed line giant Telkom there were close to 800 000 ADSL subscribers in the country in 2011. I’m focusing on ADSL because it’s the only stable connection for video streaming in the country. Let’s assume that each and every one of those ADSL subscribers were using a streaming service for R100 per month (the price of Netflix per month) you’re making revenue of R80-million per month or just under R1-billion per year. That’s not an insignificant amount of money but takes absolutely no costs into the equation and assumes the entire ADSL base takes up the service. Not looking so appealing anymore is it?

It’s easy to spend R750 a month on uncapped ADSL and Netflix when it’s a small percentage of your salary as a social media manager. It’s less easy to stomach when you’re making R4 000 a month and wondering how you’re going to keep your family fed for the month.

I’ve focused mainly on Netflix but the same applies to iTunes, Spotify and even services such as Dropbox.

Large portions of the African continent have never heard about the cloud, streaming audio or even sent an IM. What they do know is USSD, SMS and maybe an MMS. They buy cellular credit in increments of R5 rather than loading data bundles and the telcos don’t even have cabling going into where they live.

This isn’t a uniquely African issue: in the Philippines textbooks are provided as messages on pre-packaged SIM cards for feature phones. It’s easy to think about digital education offerings via tablets and even Khan Academy but people simply don’t have the kind of access they need for that.

Look a little closer to the ground and note how mobile money has changed with M-Pesa, or the Praekelt Foundation‘s fight against AIDS and Ushahidi‘s various services. These are the guys showing the world what’s really possible. They are at the tip of the iceberg as mcommerce starts to boom in Africa. The common thread among all these services: feature phones.

My moral is this: it’s time for digital natives in South Africa and Africa as a whole to stop looking to developed nations for inspiration. Get out of your “Digital Ivory Tower” and consider the average monthly spend on Mxit is a whole R5. You want to make lots of money with your next product: target the man in the street that needs a problem solved not an iPhone-toting hipster.

Image: Tom Verre (via Flickr).