It should not come as a surprise to anyone: selling video streaming products in Africa is a hard business. It is a double whammy for most potential customers: pay subscription fees and then cover the broadband costs. So, it was not entirely unexpected when iROTOtv announced that it was refocusing out of Africa: “Over the next week, IROKO will be defocusing our Africa growth efforts and we will revert to focusing on higher ARPU customers in North America and Western Europe. Even after pushing incredibly hard in Africa for the last 5 years, our international business represents 80% of our revenue today…” This is really a smart move as now the company can focus where it can earn U.S. dollars; I made that case a few days ago when I explained how Nollywood producers are focusing on international markets.
Between the COVID-19 fallout, rapidly devaluing currency and hostile regulatory environment, it’s time to pause the burn. It’s time to hunker down and see what the next 18 months brings. Over the next week, IROKO will be defocusing our Africa growth efforts and we will revert to focusing on higher ARPU customers in North America and Western Europe. Even after pushing incredibly hard in Africa for the last 5 years, our international business represents 80% of our revenue today, so by taking out Africa growth-related costs, we cut our $300k/month burn to <$50k/month. Still high, but once things normalise we should have a clear path to free cash flow + profits in 2021. This will unfortunately lead to a pretty dramatic change in the size of our Africa teams. There will be around 150 job losses. We are still working on the numbers, and in order to soften the blow we are speaking with a number of companies who have taken an interest in our highly trained telesales agents. The ambition in this terrible jobs market is to try and give our departing teams the best odds of success in what is unfortunately one of the worst job markets in decades. We wish them well on their adventures, it is no fault of their own. They definitely tried their best. We all did.
We still believe in Nigeria, We still believe Ghana, We still believe in Africa. It’s a strange thing to realise that even after almost 9 years with IROKOtv, 5 exclusively focused in Africa, we still may be too early for Africa. That in itself says so much about the current Internet opportunity in Africa. Many models have attempted to crack the consumer economy in Africa. Classifieds didn’t work. Lead generation didn’t work. E-commerce didn’t work. Free didn’t work. If we only had the Africa market (like so many before us who failed) then this post would be RIP IROKOtv. Thankfully we have an international business to fall back upon. For Africa, we are currently compelled in the short term to find a more efficient model to growing our paid membership here. We are introducing new products which we hope to move us up the ARPU chain and broaden our services beyond just entertainment. It’s still super early and we are veterans of experimental building of consumer Internet in Africa. For now we can only focus on cash flow. We will be waiting patiently, keenly, for the key signals to jump right back in to growth mode. We are still on ground.
You may decide to read that piece by Jason Njoku, the CEO of IROKO. He dropped some lines, “Many models have attempted to crack the consumer economy in Africa. Classifieds didn’t work. Lead generation didn’t work. E-commerce didn’t work. Free didn’t work. If we only had the Africa market (like so many before us who failed) then this post would be RIP IROKOtv. Thankfully we have an international business to fall back upon.”
Yes, one of the hardest things to do in business is to extract revenue from people that do not have money; Africa does not have purchasing power for broad entertainment. And as I have noted, Nigeria has only about 30 million people that earn income. Just about 5 million of those earn decent income to get into paid entertainment of any kind.
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With this strategic refocusing, the National Broadcasting Commission which just introduced a new broadcasting code will have one less company to worry about on enforcement and compliance!
It is what it is: your playbook must NOT be 100% localized in this age of falling currency, in Africa, if any part of your raw materials is imported. And because all digital startups have foreign raw materials (Amazon AWS, Microsoft Azure, etc), your revenue must extend beyond Africa these days if you want to thrive.
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There are many ways to respond to Jason Njoku’s lamentations, but before conflict of interests set in, I will keep it simple.
The only tangible thing he said was internet penetration and its cost, but can that really be blamed on why iRokoTv never flown here? I do not think so, the devil is in the details…
Who has the numbers on the cumulative data bundle Nigerians burn by watching videos across Facebook, YouTube, Instagram, and the latest sensation – TikTok? That would give you some insights into whether people stream online here, or just that those who run businesses still can’t deliver what the consumers want. The other week, it was reported that the BBN was the most streamed content on ShowMax, all of them didn’t come from the other side of the Atlantic, more digging is needed.
Nobody is asking a streaming platform to be predominantly local, but there is a way to play and remain relevant, without plenty lamentations.
Anyone who’s in doubt should shift a million dollars our way, and contents will be ready in five months; we are well advanced into what we are developing. No more whining, if you don’t know how to win here, just shift, then wait until the environment becomes easy for all comers.
Well said. Also, the consumer base that really really watches African movies cannot pay for both subscriptions and data cost hence their question “so I will now subscribe and still pay for data?”. Plus advertisers will not pay so much for this consumer base if they were to take the free route. ? sad but reality. Let’s talk share these in Foundrs.club there are people willing to learn there as well.
Well said. Also, the consumer base that really really watches African movies cannot pay for both subscriptions and data cost hence their question “so I will now subscribe and still pay for data?”. Plus advertisers will not pay so much for this consumer base if they were to take the free route. ? sad but reality. Let’s talk share these in Foundrs.club there are people willing to learn there as well.
Try and reach out to Jason or Irokotv, if you know you can make the difference and turn their operations around in a positive manner. You can do this through proposals that will include details of your previous jobs.
There is too much at stake to let them pull out of Nigeria just like that.
Truth is Jason is leaving because tje government of Nigeria is too selfish to think about helping companies grow in Nigeria. They are stiffling any business they co sider thriving and it is out of mere greed for money and ignorance on their part and maybe deliberate wickedness too. Reason is, how do you explain not caring about the loss of job that will happen as a result of making unnecessary laws that affect business that cater for Nigerians even more than the government does? Imagine how many families will be affectes. How many children and other dependent parents and grand parents that will be affected with someone they depend on losing a job. The Nigerian governm is simply wicked and don’t care about their citizens welfare because if they do, they will have a round table with Iroko tv and find out how to help the compamy thrive rather than chase them away woth unscrupulous demands using NBC, but they simply don’t care. Jason is leaving primarily because of Nigerian government unfriendly policies towards pay tv business.
You forgot that FBk, Tik Tik etc videos are short videos and are compressed. So, they have less pixels. Only 1 out of ten of those who can stream Social media videos can afford to stream IROKOTV videos.
We underestimate the level of poverty in Nigeria and Africa as a whole. More companies will fold. Telecoms are a necessity, so they will survive. Many other e-based business will find it hard to survive for now. Many will have to eat before spending thousands on data subscription.
True talk Sir Francis. The internet penetration is steadily growing especially with mobile phones growth.
I have been following the Big Brother Naija Streaming performances on the internet. On Sunday Live eviction show when GOTV went offline, on a particular Facebook Live Stream, there were over a million members on that group and over 1,000 watching live.
There is a lady Vlogger, Glory Elijah who host a Live review of BBNaija on Saturdays, her Youtube page grew from 30,000 to 70,000 subscribers in less than 2 weeks and you have over 3,000 watching her Live Stream.
I agree with you that it boils down to content. DSTV/Multichoice is the master of the game in knowing content that sway the market in their favour.
Nigeria is the capital of the Entertainment Industry in Africa and when you invest in great content, they will pay.
Honestly, the question you asked, who tracks the volume of data consumed on Facebook, Youtube, etc? deserves some strong analysis.
From my own consumer’s perspective, Iroko didn’t double Down on internet ads; instead they tried making kiosk outlet where they employed staffs which costs more money . Look at Netflix , you can’t be on any social without seeing their ads ; whereas I haven’t recall when last I saw iroko tv ads.
Interestingly true
Africa doesn’t need penetration, it’s needs building up.
A lot goes on behind the curtain when a business springs up – Government regulations and influence.
Creating a suitable environment for businesses will take decades with the way Nigerian govt is going. Blame the leaders anyway.
He said it clearly and we must not forget: Irokotv came to harvest from Africa what they didn’t plant. Then came the drought reality and they retreat, hoping to come again when Africans have gathered enough for them to convert to dollars and syphon out. We should learn recognize fair-weather friends when we see them. Please, Irokotv, don’t ever bother to come again. We won’t miss you. We will receive our free “Tales By Moonlight.”
Nigeria is suffering in all aspects. Businesses are crumbling and the government’s answer to economic revival is to stifle the remaining companies buoyant enough to weather the post-covid crisis. By the time the international borders open again to Nigeria, we would suffer one of the worst brain-drains the world has ever seen. A lot of foreign companies have identified the best guys here and are plucking them like ripe grapes. We might say iRokoTV was a fair-weather friend but it’s still a business that needs to be run as a business. Nigeria & Africa needs to stop awaiting miracle businesses that would run charity by helping develop them. All our policies are stifling businesses, both small and medium. The faster that stops, the faster our growth. Brazil’s economy is a good template to look at and I’m sure they didn’t stifle life out of their businesses to reach where they are right now!!!
There is absolutely nothing at stake in Nigetia and there is nothing iroko tv can do to break even in Nigetian market, I dont know of Gnana
I understand Nigeria economy inside out so let’s start with disposable income of which the average Nigetian who enjoys Iroko tv content is highly squeezed in recent years with more and more of such going into essential such as food, accommodation, medicals, energy, minimal internet subscription for communication because one needs unlimited to enjoy entertainment such as Iroko TV. We have not added entertainment of any shape not to talk of unlimited data to accommodate video streaming in the name of entertainment.
It’s not about internet penetration now rather cost of data subscription.
Let me attempt to put numbers to it.
In America where min wage is about $20/hr unlimited mobile phone data is as low as $40 plus unlimited local calls. Meaning with 2 hrs wage one can pay for u limited mobile data and have so much left for other things including subscribing for video streaming (entertainment) provided he worked for a whole month. Most of these set of people on this their minimum wage are not paying school fees of any kind, and also covered by work place health insurance. Hence they can afford to spend the chunk of their disposable income on entertainment. However in Nigeria with minimum wage of #40k / month, one need nearly half of it to secure unlimited mobile data so who would do that in the face of other essential needs of the family such as food, healthcare accommodation, transportation to that very job that brings the pay, the very little that they apportion for mobile telephony is for essential communication not to stream entertainment. So noth enough for data and probably nothing at all for video streaming entertainment even if they have access to free wifi data at work or somewhere else. I can go on and on but of what use. When Jason and co started off with international market, I thought they already did their homework to know there’s no way in Nigeria market of then and now. Suddenly when he started putting together some marketers some of which were people I knew from banking and broadcast industry. I was waiting to see the magic even though I thought he was using his international 80 to defend African 20.
The other categories of Nigerian workers who are well paid are so over used at work that they dont have a min for such video streaming entertainment
So it’s what it’s. Africa or should I say Nigeria is not ripe for 4th industrial revolution. Let’s focus on manufacturing of food FMCG and achieve backward integration on most first. Feed ourselves, grow our sports industry(its people who work in these sectors that have time for video streaming) and other sectors that will compete for labour and drive up the cost of labour and other things will gradually fall into place.
Brilliant perspective Onyebuchi. The U.S. example is very strong.
Well said.
Good cost/service insight, Onybuchi.
Let those blaming IrokoTv logically analyse your points here.
Broadband internet penetration is still low
Cost of broadband is still too high
Though Nigeria is currently and effectively using 10% of our broadband capacity according to CNN and Bloomberg reports
Average Nigerians are poorly paid
Most consumers of Nollywood streaming do not really subscribe to the so called 4G broadband internet modem because of costs and unstable quality.
Very poor regulatory oversight
At N386/400? to the dollar
With virtually all our businesses requiring FX inputs directly and indirectly
It is a scary and bleak proposition for success
Business Growth and Poverty don’t go the same route
How can you subscribe and still buy data at a very high cost… data is still a big deal in country like nigeria so anyone planning for a streaming tv should put that into a serious consideration..
How can you subscribe and still buy data at a very high cost… data is still a big deal in country like nigeria so anyone planning for a streaming tv should put that into a serious consideration.. many like me are not ready to burn our data on streaming. ..
How can you subscribe to online tv and still buy data at a very high cost… data is still a big deal in country like nigeria so anyone planning for a streaming tv should put that into a serious consideration.. many like me are not ready to burn our data on streaming. ..
To be sincere, I do not see the point of blaming Iroko tv and I support samuel’s point.
So sad, but there tried giving Africa a try at least. This continent is not yet ready for a streaming network mostly all if not all countries are still under development and the economy hmm
I understand Nigeria economy inside out so let’s start with disposable income of which the average Nigetian who enjoys Iroko tv content is highly squeezed in recent years.
I understand about Nigeria economy.