MultiChoice recently announced that Showmax incurred a loss of R1.2 billion in the last financial year, while choosing not to disclose the complete historical losses of the streaming service. This forms a significant part of MultiChoice’s overall loss for the financial year.
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Showmax plays a crucial role in MultiChoice’s growth strategy, as the company aims to position it as the leading streaming service in Africa. With Africa considered the final frontier for subscription video-on-demand (SVOD) growth, MultiChoice is investing billions of dollars into its streaming plans.
To drive its expansion, MultiChoice plans to relaunch Showmax with NBCUniversal’s Peacock technology platform. Collaborating with NBCUniversal and Sky, MultiChoice aims to enhance its content offering, including live English Premier League football matches. Under the partnership, MultiChoice will hold a 70% stake in the new Showmax group, while NBCUniversal will own the remaining 30%.
Yolisa Phahle, MultiChoice’s CEO for connected video and general entertainment, is optimistic about Showmax’s potential. She expects the service to attract three times the number of customers originally envisioned, catering to African customers’ affordability and content preferences.
However, Showmax has faced challenges so far, struggling to gain traction in some markets and ultimately shutting down operations in Poland due to slow growth. Additionally, the service continues to burn cash, though the precise extent of the losses remains undisclosed.
During an analyst briefing, MultiChoice CFO Tim Jacobs stated that they have no intention of revealing Showmax’s historical losses, and this will remain the case going forward. However, he did reveal that investment in the streaming platform is projected to peak between R3 billion and R4 billion in the 2024 financial year. The timing of the Showmax launch will depend on factors such as data connectivity and prices, and Jacobs stressed the need for early investment to stay ahead of the curve.
Regarding profitability, Jacobs anticipates a short J-curve if the business scales as expected. Phahle also believes that Showmax will follow the 3 to 5-year J-curve trajectory seen by its global peers in the streaming industry. The company aims to generate revenue of over $1 billion within five years and achieve a trading profit breakeven by full-year 2027. Furthermore, they target EBITDA margins of 25% and free cash flow margins of around 20% at scale.
