Why DStv, Startimes, Adjusted Subscription Prices
Nigeria’s leading Pay TV companies, MultiChoice Nigeria and Startimes recently announced a review of their subscription prices. Earlier in August, Startimes had increased subscription prices by an average of 22% across various plans.
For DStv, a price adjustment of about 13% will only affect the Premium, Compact Plus and Compact packages while the price of other lower tier packages Confam, Yanga and Padi remain unchanged.
Here are five reasons why Pay TV companies in Nigeria are adjusting prices:
1. Increase in Value Added Tax (VAT):
The Finance Act 2020 which was signed into law by President Muhammadu Buhari in January increased Value Added Tax (VAT) from 5% to 7.5% in a bid to increase government revenue after the drop in crude oil price and slow economic growth. However, the COVID-19 pandemic has slowed down businesses and forced other nations to implement tax relief.
The 2020 Half-year Business Insights report by Naspire, a Lagos based research company, revealed that the increased VAT is likely to cause an increase in inflation rate which in turn will erode consumer’s purchasing power.
As at April 1, 2020, 105 countries have implemented tax relief to curb the economic fallout from the pandemic, according to the World Bank, but it appears the Nigerian government has no plan to suspend this VAT increase.
2. Naira devaluation/Fluctuating FX:
The continuous devaluation of the Naira against the dollar (N380 official rate and N470 in the parallel market as at Friday, August 12), which is the global trading currency for many organisations who rely on international trade for their businesses, has had a disastrous impact on businesses and industry.
The Naspire report predicted that the Foreign exchange illiquidity would heighten exchange rate risks for corporate organisations across the economy and also increase the local cost of production which will inevitably lead to increase in the price of goods and services.
For Pay TV companies, a lot of their programming is foreign-owned contents like live sports (EPL, La Liga, Serie A) and movies, whose licensing fees are paid for in FX. To adjust to the present realities of the fall in Naira, price review has become inevitable.
3. Crude Oil price drop and increase in local fuel price:
The drop in crude oil prices and reduced demand due to the Covid-19 pandemic has negatively affected Nigeria’s economy as the country’s budget is largely dependent on revenue from crude oil. Just as highlighted in the Naspire report that capital flow reversal might set in as foreign investors would likely sell-off their assets and move away to less challenging economies. Shoprite and Mr. Price are examples of companies that have taken the hard decision of recently divesting from Nigeria
According to Tunji Adegbite, a business analyst and Founder, Naspire, “I am genuinely unhappy at the ‘exit’ because it sends a negative signal to foreign investors, whom Nigeria is in dire need of. Woolworths, Mr Price, and some other foreign businesses have left while rumours are flying that Multichoice (DSTv) is also thinking of pulling out of bidding for the EPL Rights for Nigeria. Truthfully, Nigeria is a problematic place to do business. The opportunities may be huge but no investor wants to deal with potential anymore. It is about the reality on the ground. Investment decisions are no longer about ‘how sweet the pot is but also about how easy it is to get meat from the sweet spot’.”
Also, the recent hike in petrol price from N123.5 to N143.5 by the Petroleum Products Pricing Regulatory Agency (PPPRA) has increased operational costs (transportation and power generation) which has forced many businesses to start adjusting their prices to conform with the present reality.
4. Rise in Inflation
The National Bureau of Statistics (NBS), reports that inflation was 12.82% (year-on-year) in July compared to 12.56% in the preceding month, representing the highest rate recorded in 27 months since March 2018.
High inflation means a fast rise in the prices of overall goods and services in the economy. The danger as projected by analysts is that price increases will continue in the coming months.
5. COVID-19 pandemic:
According to the Naspire report, economic slowdown as a result of the pandemic and resultant lockdown led to a significant reduction in major sources of revenue for traditional media companies (advertising, events and circulations). This has resulted in a significant drop in cash flow and some media companies have had to increase their prices, reduce staff strength or cut pay as a result.