Introduction
This report analyses the strategic elements related to TopTV in South Africa.
Figure 1: Porter’s 5 Competitive Forces that Shape Strategy Analyse the PayTV market in SA using the Five Forces framework
Threat of New Entrants:
With Mulitchoice (incumbent) enjoying a monopoly for two decades, ICASA’s move to extend four additional licences to new pay-TV operators did pose a threat of new entrants for the established Mulitchoice. This was an existing barrier to entry that was removed through legislation with a move to improve competition in the sector.
With Mulitchoice having proven over many years that there was not only a market for pay-TV services but that this market was profitable, made the sector attractive enough for new entrants to consider entering the industry to capitalise on demand.
The attraction of new entrants was also strengthened by the fact that they could not necessarily compete directly with a powerful incumbent but instead they could act as either supplier to the incumbent or act to serve a different niche in the market.
The threat though, was stifled somewhat by the longer term contracts that was negotiated by the incumbent for content preventing new entrants from gaining access to major sports events that held major appeal with customers.
Supply-side economies of scale: With DStv being a well-established incumbent with Naspers financial backing; diversified media expertise and a customer base of 4 million coupled with strong content rights leverage and relationships means a lower spread of fixed costs and bigger buying power when it comes to securing content. For both Multichoice and SABC having been established decades ago, it had the opportunity to develop both infrastructure and customer base without major threats. This means that TopTV has to endure a higher fixed cost base during customer acquisition phase when