Interview with Multichoice Kenya General Manager Stephen Isaboke – Says Dstv is far ahead and their pricing is fair.

After i wrote the post Dstv vs Zuku Tv- Why Zuku is about to become number one Pay Tv in Kenya , there ware strong reactions from people on social media about Multichoice and Dstv. So i got a chance to sit down with the General Manager of Multichoice Kenya Mr. Stephen Isaboke to get his views on a number of issues:

Kachwanya: Let us talk about numbers, what is the number of your subscribers in Kenya. Earlier on, you had mentioned to me that the numbers being floated around are not true, especially the much talked about 100,000

Stephen:  Absolutely that number is not true. As a listed company, we don’t give numbers per each country we operate in. Our numbers are quoted for the whole Africa. And that number is public, you can get it online. So the 100,000 people are talking about is not true and I have no idea where it came from.  But we are all very happy with our performance.

Kachwanya: So does it mean that your numbers are much better than that and can you give me the estimates?

Stephen:  We don’t give the numbers for the country, and I can’t give for Kenya, but our numbers are much better by far.

Kachwanya: Why do you peg the prices on dollar and I think most people have a problem with this judging from comments and reactions on Social Media?

Stephen: Look, I think there is a bit of misunderstanding around the whole pricing thing. We have inputs which are dollar denominated and I am going to give you other examples of companies in the same situation and may be you never realize in the case of the others but probably our position makes us stick out.  The content you see and the satellite transponder hire, all are dollar denominated. So what the Group has done and this swing both ways; to denominate our pricing in dollars but you do not need to pay us in dollars, you can pay  in Kenya Shillings equivalent in dollars.

Kachwanya: The point is, Kenya Shilling Vs Dollar is never a constant thing and the problem people have is that, the rates keep on changing. So at one point it is 7k, next time it is 8k and the other time it was almost 10k.

Stephen:  What has happened is that, the group has pegged our price on dollar to ensure that there is a match between our revenue and the cost of the inputs.  We allow, if you can get a cheaper exchange rate, for example when the exchange rate was 102 and you can get 98 or 95 or 92, then just come and pay us in dollars.  Our objective is not to make gain on Forex.  Let me give you a typical example,  Kenya Airways, if you inquire about ticket to UK today, they tell you that the ticket is costing 90k for example. You don’t pay for it and you go back two days later, they tell you it is 95k because the exchange rate has changed.

What is happening is that most industries including airlines, oil and many others denominate their pricing based on inputs and they do peg that on dollar.  Actually that is why oil prices go up and down.  People picked us because we are the only ones who sort of have denominated our prices on dollar and put that on our communications. If you look keenly, others do the same but on their communication they are in Kenya Shillings.

Kachwanya: Your competitor is doing it in Kenya shilling and their prices are fairly constant, what do you say about that?

Stephen:  Look, I cannot comment on our competition. I cannot comment because I do not know what their strategies are. But we have been in this market for 15 years. People can judge us on what we have been able to deliver , we have been consistent, sustainable and we can guarantee the services into next month, next year and many years to come. Really I am not a position to talk about the competitor’s strategy and what they have done. I mean I leave it to your own self to see what happened with company like GTV for example.

Kachwanya: Talking about GTV, when they were around you kind of relaxed your prices on a number of things but then they folded and since then you went back to what people consider as monopoly?

Stephen:  As a philosophy Kachwanya we say competition is good, Kenya is an open market, all sectors are open, and anybody can establish a business and compete. And so we embrace competition as philosophy and as Multichoice we actually support the whole notion of competition because it gives viewers and customers choices. As a business over time we have always been trying to make our services as affordable as much as we can. I can tell you that decoders have come down to KES.6,000 and we did not do that because of competition. We are doing it because we believe there is a bigger and broader market. Basically we are responding to our customers need and expectations.

Kachwanya:  Decoder, that is now a bit better but still expensive, considering that there are still other costs.  Why are you not making the entry point easier, I mean take the example of mobile network operators, at the beginning, the sim cards were very expensive but with time they realized that if you sell the sim cards cheaply, you get more people on the platform and you make more money in the end through people buying air time?  And  even with air time they had sort of reduce cost  of topping up, like now you can do it for as low as KES.5. So why don’t you follow the same route?

Stephen:  There are two elements that you have brought out and thank you for doing that. We are basically in the same page in terms of removing barriers to entry and I think I want to address it in two respects. There is initial acquisition cost, especially for the decoder. The decoder is proprietary, because of the format for pay TV; you have to get a decoder that encrypts the service.  But what we have seen over time is that the decoder price has actually been coming down rapidly.

Kachwanya: Can you mention the figure, what it was 5 years ago?

Stephen:  Today we are selling to you a decoder at only KES.6000. When I joined, 4 years ago, a decoder was about KES.13, 000-14,000, at the time the full set up cost was about KES 25,000.  So you can see how rapidly the prices have gone down. This is due to a number of factors; number one, we have economies of scale, as we get increased usage and users;   the quantities are going up and so the unit costs are going down.

But fundamentally if I to address your issue between what have happened to the decoders and the mobile sets, we need to compare like for like for example, the blackberry and the decoder.  The country made a deliberate decision to zero rate mobile handsets.  There is actually no import duty on mobile handsets to allow as many Kenyans as possible to have access. And you know that the import duty builds up the costs and when you remove it ,the prices go down.  Literally the mobiles don’t attract duty but the decoders do.  I have been on the media the last couple of days urging the government to review this and luckily the Minister and the P.S  have been in the same wavelength saying let us review the import duty. At the moment, import duty adds up to about to anything between 25% to 33% of the costs of the decoders.  So if you were to let off, for example 25% of the price, you will be knocking over another KES. 1500 off the price. The best thing to happen now is for the duty to be reviewed to allow many Kenyans to access our product and particularly in this period of digital migration.

It is no longer going to be an elitist service; the generic TV access will be in a set of box because of digital migration. So you have 2.5 million Kenyan households who have TVs , who need to be facilitated. From the beginning not everyone can afford that sort of expense.  The best thing now,  is for the duty to be reviewed, to allow Kenyans to afford the set of boxes, which will convert the analog signals to digital signals.   The migration has to happen by 2015 by ITU deadline but I think Kenya set the deadline of 2012. So I think that is why the Ministry is responding by saying there is a problem.

Then I come to affordability, previously we had only premium package up until 2007, but now we have segmented the market. It is stratified from 900 packages access all the way up and it allows the subscribers to sort of switch in between.  That allows flexibility as you can upgrade and downgrade. We cater for all sorts of people so the people who need the basic set up can buy the GO-TV decoder at only KES.3500, it’s much cheaper and maybe later they can upgrade if they wish, subscription is about 585 for 20 channels.

Then more recently we launched Drifta. With Drifta you can link your account, for example if you are premium account subscriber,  we link your account with  Drifta then you watch through a second device for free.  You can use tablet, mobile phone or even laptop as the second device. You don’t need to pay a new subscription; we give you that as a value adds but you need to buy the Drifta. By the way you can move around with Drifta provided there is connection, you can do that in Nairobi and Mombasa.

You may also wish to access Dstv on Drifta without being a Premium subscriber or buying the decoder. That is why we have allowed friendly subscriptions, KES.300, KES.500, and KES.800.  So what is happening people like you or teenagers who don’t want to sit in traditional setup to watch TV are able to link and say I am gone.

We are the pioneers in terms of technology, first to bring HD decoder that you can use to record, rewind, and even review. For example when you are watching EPL match, an Arseanl match for example, you did not see how they scored, then you can rewind. That cannot happen when you are watching linear TV at home, you can’t pause, you can’t review, and you can’t record.

Then recently we launched HDPVR, which is High Definition. You are able to see channels in greater clarity, than your ordinary single view over standard definition environment.  You might find out that, watching for example sport on High Definition, is probably better than being in the stadium unless you are so close. The naked eyes are not as good as those cameras.

We also launched mobile TV. So literally you can watch 14 or so channels on mobile phone.  We are doing it to enable greater control, greater access, and greater flexibility in terms of when you can access the services.

Last week we launched Walker TV.  With Walker TV unlike the others you don’t need to link the devices. Walker TV is a TV in itself, it is miniature TV. You get terrestrial signal on itself.

Kachwanya:  I know Dstv is about many things, but at the same time I know quite a number of people, men especially, who would like to have sport separated from other content, like package it on its own.

Stephen:  I noted your observation about men, particularly people like your profile, preferring supersport3 and sport types of content. But we as Dstv, has always  been positioned as home of the family entertainment. So we are not only entertaining men, we are entertaining ladies, we are entertaining teenagers, we are entertaining kids. If you look at the profile of our packages which is in front of you, you will actually see that it’s a whole mix.  If you look at premium for example, which contains everything within our m-net, which is really movies entertainment,   we have deepened it to bring in African Magic.

Dstv was actually the one platform that took the risk and started taking on African content in the platform.  Previously as you remember the drive was western movies, it was Hollywood and that sort of stuff.  We then decided to start championing and promoting local content, and so African magic was born. At the time people said how can you run these Nigerian movies on Dstv, how can you run these Nigerian movies on m-net, m-net is a premium, premium is Hollywood, we said no. Now I think there’s a whole shift to local content.  Besides that,  we have actually taken out for example Kenyan film producers to Nigeria . Our aim was to show them practically what others have done to succeed, and they saw for themselves that what they do is not complex. And now we have Riverhood as well in Kenya

Then we have Supersport and it is also deepened. We have international content.  It is acquired by the group through the normal sort of contracting, and then we have our own Supersport content. You will notice in Kenya that for the last six years, this company has invested heavily in Kenya Premier League. The soccer lovers will tell you that, if it was not for Supersport standing by the Kenya Premier League and continue with the league when there ware wrangles between all those factions, soccer would have gone.   We saw the gold in the chaos. At that moment we said look ,we really don’t care about this so called wrangling leaders, what matters for us are the clubs and the broader base of the owners of the clubs and the fans. We then went in and put in huge sums of money in the league, at a time when people would have said it is very risky, there is a lot of noise, there is wrangling, there is no one in charge.

Believe me we have given the League a shape.  So what you see, which is very competitive according to many and heavily quoted in the media, is all because of Super sport.  We saw the opportunity and we also had a lot of confidence in Kenya.  We said, even in the mid of these chaos we think it will stabilize, let actually go and work with clubs, forget about the leaders, forget about  these guys who are wrangling. So we are on, that contract has been renewed for the next five years. We have seen the league pick standards and at the same time we have seen the crowds come back to the stadiums. Besides, we also work with channels like KBC, to actually broaden, the reach to the viewers.

Kachwanya: When you say you work with KBC, how do you do that?  I know Kiss TV show one live match per week and that is English Premier League, although I am not sure if it is exactly per week, do you work with them too?

Stephen:  We do have arrangements with people like KBC that in fact we give them delayed games.  So if the match happened for example at the Nyayo stadium, Gor vs. AFC, say 3pm.  At 5 or 6pm you can see the match and you can watch the game on KBC for free and one live match a week. We have seen people like the Prime Minister come back and say I have seen the quality of soccer rise on Supersport.   As for Kiss TV, no, they get free to air package. But let me break it to you that Kiss TV will be on Dstv soon

Kachwanya: In terms of Investment, how much does it take to relay the live matches in a place like Kenya?

Stephen:  Supersport has invested about 2.5million dollars to relay live matches in the stadiums. Because we believe in Kenyan market, a second van is coming.  So literally, Supersport is putting  in 5 million dollars in equipment and infrastructure to be able to relay more Kenyan sports.   We will be doing soccer, on top of soccer; you get rugby, athletics, cricket and all the other sports we can get.

Kenya among other things is known as sports power house. The soya awards that happened the other day are a confirmation of what Kenya is actually capable of doing.  Look at the commonwealth games, look at the international championships, all these marathons, you will always find a totally new young Kenyan talent emerging.  So for us, among all other things that Kenya stands for, if you mention Kenya anywhere in the world, they will say that is a country for the runners.  We are actually investing to showcase our very best.

Besides, Supersport before used to use South Africa camera men.  We have been challenged and say, sustainable development entails investing in our own local people. We took a couple of camera men (may 10 to 12) to south Africa so that they can be trained. So now if you go to the stadiums check who is actually recording, it is our own Kenyans 100%.  This is meant to bring back the skills, capacity and ownership

If I take your challenge of ooh we don’t show Premier League in the lower packages, indeed there is now what we launched, which is called Super sport Select.  The package shows EPL live matches at only KES.900.

Kachwanya: All of them?

Stephen: Selected games, one live a week.  And it is not only EPL there are leagues like Bundesliga and many more.  And then there is another new package called Compaq Plus (70 Channels) at about KES.4400 where  you get all the EPL live matches.  Supersport 3 is actually there.

Kachwanya:  But I can only see Supersport 7 and 10 on it?

Stephen:   Yes it is 7 and 10, but we created a new channel,  Super sport 10 which replicates Super sport 3.

Kachwanya:  Your service has been for the elites, especially pricing of your packages. That leaves out the big number of people who live in Eastlands and rural areas to access your services through the bars and restaurant.  That especially because they love sports, particularly soccer, English Premier League

Stephen: If you take for example Access for KES.900.  It simply targets people in Eastleigh, Umoja,   your teachers, and people living in upcountry.   We have seen high demands for the Access package in upcountry and even in sections of Nairobi. Basically that addresses that segment depending on your lifestyle, income and what you prefer.

Kachwanya:  That sounds good but I still don’t understand your strategy for areas outside Nairobi, I mean rural areas?

Stephen:  We totally recognized that the larger populations of Kenyans live in rural areas. In the last several years we have refocused our selling and distribution into rural areas.  For example we have sales offices in Kisumu, with sales people in addition to agents and dealers; we have a sales office in Eldoret ; we have a sales team in Mombasa; we have sales team in Nyeri covering Central province.  On top of that we have hundreds and hundreds of installers over the country, Kitale, Gilgil, Nanyuki, Isiolo, name it.

Our business is to go to our customers, so we are actually more of rural based company than Nairobi based.

Kachwanya: Final Word

Stephen:  For us the business continues to be committed, through Kenya and Afrca market. We are all over Africa, we are African business. In Kenya for example the business is managed 100% by Kenyans.  So it is always unfair when some journalists writes and say South African company. I am not a South African, I am a Kenyan and if you check, the entire management team is all Kenyans.  So it is actually a Kenyan managed, Kenyan owned business. Owned in the sense that 40% of the shares of the company is Kenyan.  The philosophy of Multichoice going forward, as you have seen is to be the leading entertainment destination any time anywhere.