Pay TV: How competition will break ‘monopoly’

Currently, Multichoice the operators of Dstv is under ‘attack’. Surprisingly many Nigerians want to dictate how the private pay TV service provider should operate. While this is ironical in a free market economy, it underscores obvious lack of knowledge by many subscribers about the operation of the sector.

The operators of pay TV anywhere in the world buy content right from anywhere around the world and make the content either films, football or documentary available to subscribers. Their operation is not totally different from the operation of banks or manufacturers. For banks, they take funds from depositors and lend to borrowers at a cost after other variables are considered. For manufacturers, they buy raw materials for product and fix their product price. Pay TV buy content and broadcast same for a price.

Sometimes, a firm can price itself out of the market with excessive charges. Some smart phones manufacturers have left Nigerian market either for lack of patronage based on high prices or low quality products. Their places have been filled by other companies.

In a free market where there is monopoly or dominant player with excessive charges, what is required therefore is encouragement of competition which will provide alternatives to force price down.

It will be recalled that the earlier entrants into Nigeria’s GSM market in 2001/2002 sold SIM card for about N50,000. Today, the same product is almost free following the entrants of other competitors which have also forced the call rate down.

But for pay TV, Nigerians are asking for reduction of prices/fees by fiat, a dictate not extended to other sectors such as telecom, beer industry, banking or auto industry. This is understandable as many Nigerians have seen the services of pay TV market, dominated by Multichoice as significant and reliever in a depressed society where some terrestrial TV stations are not living up to expectation.

In such society, some viewers perhaps see Dstv as extension of government agency to provide services with subsidy. Over the years, Nigerians have enjoyed life with some subsidy on roads, petroleum products and electricity that it is almost becoming a culture. That is why Ojota in Lagos boiled in 2012 when government attempted to remove subsidy on fuel. Removal of subsidy on electricity is also being resisted.

It is clear that government understands the operation of free market enterprise where many private sectors operate. To buttress this point, the Minister of Aviation, Senator Hadi Sirika, on July 3, this year in a report said he was not in a position to regulate the airfares for airlines operators.

He stated this when he appeared before the Senate Committee on Aviation to brief the senators on the level of the sector’s preparedness to begin flight operations on July 8. According to the report, he said, “Price is not in my hand”

The question then is why is the same government bending backwards to dictate and fix prices for Multichoice, the 27- year old company that is operating under the same free market like airlines. According to reports, Multichoice was recently directed by the government to suspend the implementation of its 2.5% VAT increase effective June 1, 2020.

Clearly, determining of market prices through the dynamic interaction of supply and demand is the basic building block of economics, according to Fiona M. Scott Morton, associate professor of economics and strategy at Yale University. This dynamic interaction produces an equilibrium market price.

Therefore, “when prices are held below natural levels, resources such as talent and investor capital leave an industry to seek a better return elsewhere. This means that there will be less discovery and innovation”. A country with high unemployment rate will naturally not allow this to happen.

On the other hand, when price is too high, there is an excessive amount of the product for sale compared to what consumers want, says Morton. This equally has its economic consequences.

According to the economist, consumerpreferencesforaproduct or service determine how much of it they will buy at any given price. “Consumers will purchase more of a product as its price declines... in general, if consumers appear willing to pay higher prices for a product, then more manufacturers will try to produce the product, will increase their production capacity”

Following public outcry, MultiChoice is also being forced to implement pay-per-view options for their subscribers in the country. While it is anti-free market enterprise to fix prices for any operator, asking Multichoice to implement pay per view may not be in the interest of subscribers.

Ordinarily, pay per view does not work like the electricity pre-paid meter which is pay per use. Pay per view is a situation where a subscriber pays to watch for a particular content, such as match between Manchester City Vs Liverpool or boxing match between Joshua and Kenneth. This sometimes can come with a higher cost.

Pay per view is not a system where a subscriber pays for a TV bouquet or electricity under prepaid arrangement, travels and comes back to continue watching. It is simply paying to watch a specific programme. Again, pay per view or whole sale depends on how the content owner wants to sell the right for such content.

Buttressing this point recently, Babatunde Irukera, chief executive of Federal Competition and Consumer Protection Commission (FCCPC), “explained that what obtains in telecoms is not necessarily applicable in pay television, as broadcast content must have been paid for and customers only pay for access unlike in telecommunications where the subscriber only pays when the timer starts”. He spoke when he appeared on Sunrise Daily, Channels Television’s flagship public affairs programme last Friday.

Nigerians who are demanding for Pay as you go may have been confused with the pay as you go model in telecommunication or pay- per-view model in pay TV which is different from pay as you go.

“Pay-per-view is not that you pay for what you view from the point of when you turn your television on. It is primarily that there are certain programmes, maybe a boxing match, a soccer match or some movies that are still in the cinemas that some of the pay TV operators have bought and you can literally request instead of going to a stadium or going to a cinema to watch, you can watch it in your home and pay for that view. That is pay-per-view, but we confuse it with pay-as-yougo”, Irukere who said his agency has investigated different pay TV models around the world, said.

For the sporting channels on Dstv, it is not sure how government wants to break the monopoly as the managers of EPL in England take bidding periodically for the right. The content market is an open international market open to competitive bidding. HITV once won the content right for EPL over Multichoice. Perhaps the best option to encourage breaking of monopoly in EPL right is joint bidding for the right and some other programmes.

However, while government is encouraged to wear kid gloves in handling issues around pay TVS, without subjecting itself to public pressure, it is important to underline the fact that competition in any market is solution to excessiveness of any dominant player.