MultiChoice’s Showmax bet collapses amid soaring losses and stalled growth

Key topics:Showmax fails to meet MultiChoice’s ambitious growth and revenue goalsTrading losses soar to R4.9bn; revenue drops despite NBCUniversal supportFuture uncertain as Canal+ evaluates Showmax amid high investment costs.Sign up for your early morning brew of the BizNews Insider to keep you up to speed with the content that matters. The newsletter will land in your inbox at 5:30am weekdays. Register here.Support South Africa’s bastion of independent journalism, offering balanced insights on investments, business, and the political economy, by joining BizNews Premium. Register here.If you prefer WhatsApp for updates, sign up to the BizNews channel here..By Jan Vermeulen.Nearly three years ago, MultiChoice revealed that its strategy was to transform its video streaming service Showmax into its growth engine, a gambit which has spectacularly failed.With the company’s linear pay-TV subscriber base at DStv and GOtv in decline and facing an existential threat from global players like Netflix and Amazon Prime Video, it went for broke.In May 2023, former MultiChoice executive Yolisa Phahle told investors that they projected Showmax would generate $1 billion (then R18 billion) in revenue within five years by amassing 16 million subscribers.She added that they expected to achieve an earnings before interest, taxes, depreciation, and amortisation (EBITDA) margin of 25%.MultiChoice said Africa was the final frontier for subscription video-on-demand (SVOD) growth, which is why many international players are targeting the continent.Despite increased competition, Phahle was confident that Showmax could become the leading streaming service in Africa..Read more:.Resilient growth amid challenges: MultiChoice Group’s FY24 performance.Although Showmax was well behind Netflix in subscribers, Phahle argued they have a competitive edge over their international rivals.MultiChoice was so bullish that it said Showmax would help it reach a combined subscriber base of 50 million users by 2028.To achieve this turnaround, MultiChoice entered into a partnership agreement and sold 30% of Showmax to Comcast subsidiary NBCUniversal.The transaction closed and became effective on 4 April 2023. MultiChoice confirmed in its latest annual results that it still owns a 70% controlling stake in Showmax.“The total subscription price for the sale of 30% of the existing Showmax business was an amount of USD29m (ZAR536m), which was received on 4 April 2023 and contributed to Showmax on this date.”While MultiChoice’s initial projections accounted for Showmax making trading losses, it predicted that the losses would begin decreasing by its 2025 financial year. However, the opposite happened..Reality sets in for MultiChoice and ShowmaxIn its last financial results, MultiChoice reported that Showmax’s trading loss worsened by 88% from R2.6 billion to R4.9 billion. Revenue also declined from R1.027 billion to R753 million.“The increased trading losses reflect the start-up nature of the business, with a step-change in content costs and increased platform costs,” MultiChoice stated.“Its results were also impacted by discontinuation of the Showmax Pro and diaspora packages in 2H FY24, prior to re-launch.”Showmax Pro was a package that offered some SuperSport content, particularly live soccer and athletics. MultiChoice also stopped offering Showmax outside Africa.As part of its agreement with NBCUniversal, Showmax was rebuilt to use its American partner’s Peacock streaming platform.This comes at an annual cost. For the 2025 financial year, MultiChoice reported that its Peacock platform fees decreased from R6.825 billion to R5.819 billion.“The decrease was due to the underlying obligations being fulfilled in relation to the Peacock platform licence,” it stated.“During FY25 and FY24, in order to fund the working capital requirements of the Showmax group, it received equity funding from NBCUniversal,” MultiChoice stated.Showmax received $85 million (R1.552 billion) from NBCUniversal during the 2025 financial year, up from $36 million (R687 million) the year before.“This funding is recognised in non-controlling interests in the summary consolidated statement of changes in equity.”MultiChoice also recognised a R1.5 billion net loss from Showmax to its bottom line for its last financial year. Since it owns 70% of Showmax, that suggests its overall net loss was R2.15 billion..Questions about Showmax’s futureMany investors raised concerns about the substantial investment required to relaunch the Showmax business..Read more:.Showmax tops SA streaming charts, beating Netflix and Amazon Prime Video.They referred to MultiChoice’s R12 billion multi-party term loan facility to fund its working capital and to support the re-launched Showmax business.“Lenders are concerned about the impact of the Showmax funding requirements on our loan covenants,” MultiChoice said.The company promised to scale the business while managing costs and funding requirements to navigate the investment curve and reach breakeven.However, the MultiChoice management team missed its Showmax targets by a country mile. “Subscriber growth and revenues were well short of the 2025 targets,” it said.Given this failure, it raised questions about Showmax’s future after French media giant Groupe Canal+ acquired MultiChoice last year.Canal+ previously declined to comment on its plan for Showmax, saying that it needed time to become familiar with MultiChoice’s internal operations before making a decision.However, Bloomberg reported last year that Canal+ was considering buying Comcast’s 30% stake in Showmax..This article was first published by MyBroadband and is republished with permission

MultiChoice’s Showmax bet collapses amid soaring losses and stalled growth

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