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DSTV: A Perfection of Monopolistic Marketing
- By Ikem Okuhu
- Published March 28th, 2011
- BrandWorld
- Unrated
Soon after a massive promo, DSTV announced rate increases across all its bouquets. While Nigerians are crying out against this squeeze, the company has been struggling to justify its action, blaming inflationary trends. But IKEM OKUHU looks at the timing, the game-play and marketing permutations.
A few months ago, we did a story here concerning a promo driven by Multichoice Nigeria Limited, managers of the DSTV franchise in Nigeria. The promo was ostensibly designed to make a greater number of Nigerians have access to the very popular satellite television service offering thereby bringing more people into the global community that satellite television has come to facilitate worldwide.
In the promo, DSTV promised that a dish and a decoder would cost a lowly N9,000, down from N25,000. Expectedly, thousands of Nigerians thronged Multichoice’s offices all over the country to take advantage of the price slash. The early birds were lucky. So were those who knew people inside the company.
Those who went a few days after the promo was launched were disappointed. They would not find any package for N9,000 as advertised. Agents, knowing that the franchise owners would not penalise them for breaches, hiked prices. People now paid between N15,000 and N17,000 for a package that was to go for N9,000.
The game was simple: Create artificial scarcity, get people to sweat and then afterwards, offer them the product for almost two times the normal cost. Why not? At N17,000, the discount was still generous. So people queued and paid. We took a position that DSTV was supposed to be responsible for ensuring compliance with its regulated pricing by all its agents. We said that DSTV or Multichoice should actually enforce this compliance.
When the story hit the stands that Monday, many readers, including those that had paid double called and wrote. They were all outraged at the rip-off. Some of them wanted refunds. And DSTV was also so concerned they invited Businessworld editors to their office. At the end of the “peace” meeting, DSTV promised to work on making their agents comply.
Our findings showed that nothing happened. People still paid N15,000 and N17,000. And DSTV apparently did nothing.
If you were a Multichoice, I am sure you will not be bothered. If you place a product in the market and people were glad to pay two times the amount (which still represent a generous discount anyway), I am sure you would not be bothered.
And so the numbers increased. More Nigerians than ever before now owned DSTV decoders and could watch their favourite teams play in the English Premiership and the UEFA Champions League. Women at home can watch as many movies on Africa Magic as they ever wished.
And while they were rejoicing over their new-found status, DSTV announced rate increases across all bouquets. A lot of the new subscribers are still enjoying their new toys at home but then they began to grumble, saying that this South African company is a clever monopolist out to milk as many people as possible in a market it is the sole determinant of prices.
The conclusion of many is that Multichoice organised the promo with this eventual price hike as the motive. Otherwise why the price hike soon after the promo? Why did they not increase the rates before the promo?
Many likened the game to a government that gave people subsidised credit facilities to buy cars only for them to also increase the prices of gasoline immediately after. And this is true. The car owners would want to enjoy their cars and therefore would squeeze themselves to be able to fuel their new cars. And by that token, the government would also recover the subsidy they gave for the cars.
The number of new subscribers that DSTV generated during this promo would be quite high. In my neighbourhood, I have new noticed dishes sprouting in many apartments where none existed before. These people would be captives for the next several years and would squeeze themselves to pay whatever DSTV charges.
This is the game typical of monopolists and DSTV cannot be an exception. Since HITV lost the satellite television battle to DSTV, expectations have been that rates increases was going to be the game this company would play to recover from its three year in the coolers.
And that was the main reason for this promo: get more people to own the dishes, increase rates and make more money out of them and be ready with a fat purse long before the next license review comes around. And this is why many are almost certain that HITV or any other competitor would never see themselves beating Multichoice when next the bidding for this juicy franchise comes around. Meaning? Nigerians should brace up for higher prices.
But as the angst against this strategy increases, Multichoice Nigeria’s Managing Director, Joseph Hunder has been trying to speak to subscribers and make them understand. Hunder said the company has not increased prices in the past five years and since the inflationary trend is getting high, his company had no choice but to review prices upwards.
Good talk. But could Multichoice have afforded to increase prices in Nigeria during a period most of its subscribers were actually buying up HITV decoders while not paying their monthly subscriptions? If inflation is at 11 percent and a company is at a level where it is getting more customers, is not economically better to spread cost per subscriber than look at the single metric of inflation?
In the Nigerian GSM market, with all the cost of infrastructure and management of an increasing subscriber base, costs are dropping heavily. Why is the situation in the reverse with DSTV?
But like we said, that is monopolistic competition for you. You are left with little choice. For the next three years at the very least, Multichoice will be the god everybody would be worshipping on the satellite television plane.
Anyway, Hunder had a long letter written to his customers and he had a lot to say. He thinks Nigerians are lucky that rates have gone up only this once in the past five years, unlike South Africa where they are still the only service provider and where fees have been increased on a yearly basis. He also thinks Nigerians pay lower fees than South Africa. Read him:
“It has come to our attention that there are some queries around the DStv subscription price increase that comes into effect on 1 April, and we would like to ensure that the truth is communicated to you, our valued subscriber. In the last 5 years we have only had one price increase 18 months ago. Since then, despite the high inflation rate averaging around 11.95 per cent, we have not increased subscription prices until now. Our current subscription price increase percentage is well below the inflation average with a 5 to 8% increase on DStv Premium bouquet. Additionally, we have added a total of 18 new channels over the last 18 months to the DStv bouquets, thus giving you, our subscriber, even more value and choice than ever before. These channels include channels made in Nigeria and showcased in Africa - displaying Nigeria’s ingenuity and artistry; these include AfricaMagic Yoruba, AfricaMagic Hausa, NN24 and Sound City.
There has also been propaganda in the market that the price in Nigeria is more expensive than other countries, we would like to point out that Nigeria’s subscription of $66 is 21 per cent less than the subscription paid in South Africa which is currently R559 ($80.12) (SA has had annual increases). It is also important to note that the DStv service in Nigeria has the most number of channels, including HD and Nigerian channels. MultiChoice Nigeria is a Nigerian company and is the only pay television operator that has put significant investments into the upliftment and development of communities.
Long grammar! Do you believe him? We leave you to make up your mind.
A few months ago, we did a story here concerning a promo driven by Multichoice Nigeria Limited, managers of the DSTV franchise in Nigeria. The promo was ostensibly designed to make a greater number of Nigerians have access to the very popular satellite television service offering thereby bringing more people into the global community that satellite television has come to facilitate worldwide.
In the promo, DSTV promised that a dish and a decoder would cost a lowly N9,000, down from N25,000. Expectedly, thousands of Nigerians thronged Multichoice’s offices all over the country to take advantage of the price slash. The early birds were lucky. So were those who knew people inside the company.
Those who went a few days after the promo was launched were disappointed. They would not find any package for N9,000 as advertised. Agents, knowing that the franchise owners would not penalise them for breaches, hiked prices. People now paid between N15,000 and N17,000 for a package that was to go for N9,000.
The game was simple: Create artificial scarcity, get people to sweat and then afterwards, offer them the product for almost two times the normal cost. Why not? At N17,000, the discount was still generous. So people queued and paid. We took a position that DSTV was supposed to be responsible for ensuring compliance with its regulated pricing by all its agents. We said that DSTV or Multichoice should actually enforce this compliance.
When the story hit the stands that Monday, many readers, including those that had paid double called and wrote. They were all outraged at the rip-off. Some of them wanted refunds. And DSTV was also so concerned they invited Businessworld editors to their office. At the end of the “peace” meeting, DSTV promised to work on making their agents comply.
Our findings showed that nothing happened. People still paid N15,000 and N17,000. And DSTV apparently did nothing.
If you were a Multichoice, I am sure you will not be bothered. If you place a product in the market and people were glad to pay two times the amount (which still represent a generous discount anyway), I am sure you would not be bothered.
And so the numbers increased. More Nigerians than ever before now owned DSTV decoders and could watch their favourite teams play in the English Premiership and the UEFA Champions League. Women at home can watch as many movies on Africa Magic as they ever wished.
And while they were rejoicing over their new-found status, DSTV announced rate increases across all bouquets. A lot of the new subscribers are still enjoying their new toys at home but then they began to grumble, saying that this South African company is a clever monopolist out to milk as many people as possible in a market it is the sole determinant of prices.
The conclusion of many is that Multichoice organised the promo with this eventual price hike as the motive. Otherwise why the price hike soon after the promo? Why did they not increase the rates before the promo?
Many likened the game to a government that gave people subsidised credit facilities to buy cars only for them to also increase the prices of gasoline immediately after. And this is true. The car owners would want to enjoy their cars and therefore would squeeze themselves to be able to fuel their new cars. And by that token, the government would also recover the subsidy they gave for the cars.
The number of new subscribers that DSTV generated during this promo would be quite high. In my neighbourhood, I have new noticed dishes sprouting in many apartments where none existed before. These people would be captives for the next several years and would squeeze themselves to pay whatever DSTV charges.
This is the game typical of monopolists and DSTV cannot be an exception. Since HITV lost the satellite television battle to DSTV, expectations have been that rates increases was going to be the game this company would play to recover from its three year in the coolers.
And that was the main reason for this promo: get more people to own the dishes, increase rates and make more money out of them and be ready with a fat purse long before the next license review comes around. And this is why many are almost certain that HITV or any other competitor would never see themselves beating Multichoice when next the bidding for this juicy franchise comes around. Meaning? Nigerians should brace up for higher prices.
But as the angst against this strategy increases, Multichoice Nigeria’s Managing Director, Joseph Hunder has been trying to speak to subscribers and make them understand. Hunder said the company has not increased prices in the past five years and since the inflationary trend is getting high, his company had no choice but to review prices upwards.
Good talk. But could Multichoice have afforded to increase prices in Nigeria during a period most of its subscribers were actually buying up HITV decoders while not paying their monthly subscriptions? If inflation is at 11 percent and a company is at a level where it is getting more customers, is not economically better to spread cost per subscriber than look at the single metric of inflation?
In the Nigerian GSM market, with all the cost of infrastructure and management of an increasing subscriber base, costs are dropping heavily. Why is the situation in the reverse with DSTV?
But like we said, that is monopolistic competition for you. You are left with little choice. For the next three years at the very least, Multichoice will be the god everybody would be worshipping on the satellite television plane.
Anyway, Hunder had a long letter written to his customers and he had a lot to say. He thinks Nigerians are lucky that rates have gone up only this once in the past five years, unlike South Africa where they are still the only service provider and where fees have been increased on a yearly basis. He also thinks Nigerians pay lower fees than South Africa. Read him:
“It has come to our attention that there are some queries around the DStv subscription price increase that comes into effect on 1 April, and we would like to ensure that the truth is communicated to you, our valued subscriber. In the last 5 years we have only had one price increase 18 months ago. Since then, despite the high inflation rate averaging around 11.95 per cent, we have not increased subscription prices until now. Our current subscription price increase percentage is well below the inflation average with a 5 to 8% increase on DStv Premium bouquet. Additionally, we have added a total of 18 new channels over the last 18 months to the DStv bouquets, thus giving you, our subscriber, even more value and choice than ever before. These channels include channels made in Nigeria and showcased in Africa - displaying Nigeria’s ingenuity and artistry; these include AfricaMagic Yoruba, AfricaMagic Hausa, NN24 and Sound City.
There has also been propaganda in the market that the price in Nigeria is more expensive than other countries, we would like to point out that Nigeria’s subscription of $66 is 21 per cent less than the subscription paid in South Africa which is currently R559 ($80.12) (SA has had annual increases). It is also important to note that the DStv service in Nigeria has the most number of channels, including HD and Nigerian channels. MultiChoice Nigeria is a Nigerian company and is the only pay television operator that has put significant investments into the upliftment and development of communities.
Long grammar! Do you believe him? We leave you to make up your mind.
