NIGERIA: BOOMING SATELLITE TV MARKET SHOWS GROWING

UNCLAS SECTION 01 OF 02 LAGOS 000252

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E.O. 12958: N/A
TAGS: ECON EFIN ECPC EINV ETRD PGOV NI
SUBJECT: NIGERIA: BOOMING SATELLITE TV MARKET SHOWS GROWING
CONSUMERISM


1. (U) Summary: Nigeria's direct-to-home satellite television
industry has grown many fold over the past several years as
providers tapped the country's expanding middle class and feed
consumers' demand for homegrown entertainment. Executives from both
the South Africa-based Multichoice and Nigerian firm HiTV
independently told EconOff they forecast continued expansion in this
still relatively untapped market, despite raising costs due to
exchange rate fluctuations. HiTV lamented that US media penetration
of Nigeria remains comparatively low and is exploring ways to
introduce the popular programming to the country's vast audience.
While this market is very young, it looks promising for American
distributors who can deliver popular programming. End Summary.

Nigerians Increasingly Tuning In
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2. (U) Multichoice Nigeria Managing Director Joseph Hundah on May 21
told EconOff that Multichoice subscriptions had grown 300 percent
over the last three years and now total some 370,000 prepaid
accounts. The South African firm entered Nigeria 15 years ago and,
after ten years of lean growth when the firm only targeted the upper
end of the market and broadcasted primarily South African and
Western content, Hundah noted the firm entered a growth phase in the
early 2000s. Deregulation and the growth of local start ups have
helped to expand the market to increasing numbers of Nigerian
households. There were no some 18 licensed pay television companies
in Nigeria and piracy was rife. Hundah said Multichoice would
continue to depend on the top end of the market, but he acknowledged
that less expensive competitors had exposed a new layer in the
consumer market that his firm was eager to target.


3. (U) Probably the most successful of the Nigerian start ups is
HiTV, whose Managing Director Toyin Subair on June 1 told EconOff
the two-year old company had some 220,000 subscribers, of which on
average half were paid up at any one time. Subair attributed this
high rate of "churning" to the firm's biggest selling point in
Nigeria - HiTV this year wrestled exclusive broadcast rights for
English Premier League soccer away from Multichoice Nigeria and many
subscribers suspend their accounts during the off season. To lock
in subscribers, HiTV is expanded the number of channels offered -
now at 30, up from 16 ten months ago - and offering a wide selection
of Nollywood films and Nigerian pop music, which Subair said was
popular with the country's expanding middle class.


4. (U) The two executives forecasted continued rapid expansion in
Nigeria's direct-to-home television market over the near term.
Moreover, Hundah and Subair both acknowledged their respective
firms' difficulty in keeping pace with demand and noted that their
core preoccupations these days were expanding their service
departments simply to cope. Subair estimated that in Lagos alone
some 900,000 could afford a HiTV subscription, which costs the
equivalent of USD 32 per month. Both executives also noted plans to
expand service throughout northern Nigeria, an area where they
admitted penetration to date had been weak.

Global Economic Slowdown Pinching Margins
--------------


5. (U) Hundah and Subair both brushed aside concerns that the
slowdown in the Nigerian economy would slow their industry's growth.
The executives added that they had yet to see a noticeable impact
on subscriptions. The depreciation of the naira since last year,
however, had impact their respective bottom lines. Some 85 percent
of Multichoice's costs were in US dollars and, unabl to pass along
higher costs to Nigerian consumers due to stiff competition, the
firm's USD-denominated profits had fallen 33 percent. Similarly,
HiTV's costs have jumped 40 percent due to the depreciation.
Hundah, however, noted that Multichoice's experience across Africa
was that viewers, once hooked on satellite television, rarely cancel
their subscription in response to an economic slowdown, suggesting

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that entertainment is seen as more than simply a luxury good.

"I Want My French MTV"
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6. (SBU) Subair said Nigerians had an affinity for American
television programs but noted that the decision years ago by
American media firms to sign exclusive pan-African distribution
rights with Multichoice South Africa precluded HiTV and other
Nigeria satellite companies from broadcasting popular programs.
Subair noted these contracts were signed at a time when Multichoice
was virtually the only satellite provider in Africa. Accordingly,
HiTV, in addition to producing its own Nigerian content, was
sourcing content from other countries. Instead of MTV and CNN, for
instance, HiTV offered French music channel TRACE and Al Jazeera's
English channel. Sympathetic to the significance of promoting
American culture abroad, Subair said Nigerian youths today for
instance often did not know who Mickey Mouse was due to exclusive
rights for Disney products given to the up market Multichoice. By
comparison, Subair reported that Chinese distributors were
aggressively promoting among the country's more affordable satellite
companies less popular Chinese programming, spearheaded by kung-fu
movies. Subair said the Discovery Channel had created a separate
content line to distribute to HiTV and other channels on a
nonexclusive basis while still complying with its Multichoice
contract, a model that the he was encouraging other American firms
to adopt.


7. (U) Comment: HiTV's Subair noted the growth of the satellite
television market is a function of content more than price, and
Nigeria's experience appears to follow that pattern. The industry
only boomed when satellite firms began to offer the wildly popular
Nollywood and Nigeria pop music content. The success of Multichoice
Nigeria and HiTV, as well as the numerous regional cable television
providers, is yet another indicator of growing disposable incomes
enjoyed by middle class Nigerians, who appear to increasingly view
entertainment as a necessity as opposed to a luxury good. This
market is very young and looks promising for US distributors, who
can deliver popular programming. End comment.


8. (U) This cable has been cleared by Embassy Abuja.

Blair