Showmax, the MultiChoice Group-owned pan-African streaming service that was revamped and relaunched earlier this year, has reported trading losses of $141.3 million for the year ended 31 March 2024.
Subscriber growth on the platform is looking positive, though, with most of the Showmax 1.0 subscribers moving across to the new platform. Despite this, start-up costs relating to Showmax 2.0 put a dent in the group’s cash reserves, also reducing profitability for the year.
“The commencement of the Showmax investment cycle reduced the group’s trading profit by R1.4-billion (US$76 million),” MultiChoice said in its annual results released on Wednesday.
“Despite taking significant steps to control costs and protect cash flows, the increased cash-flow investment in Showmax, notably through US$76 million in additional trading losses and US$92.3 million in platform technology advances…resulted in the group’s free cash flow declining by 79% to about US$32 million,” it said.
MultiChoice said Showmax-related trading losses were better than it had expected at US$141 million, with the group’s “guided range” forecasting round US$163 million to US$217.3 million in losses.
The “platform technology advances” relate to MultiChoice’s partnership with US-based Comcast in the effort to relaunch Showmax. Comcast supplied the platform capabilities of its Peacock streaming platform to ensure Showmax is ready for 4K/HDR and Dolby Atmos. Showmax was further customised for localised requirements, including support for low-bandwidth devices and functionality to offer data-saving streaming options to viewers.
Showmax revenues grew by 22% to R1-billion, and the group expects “to see incremental losses in the 2025 financial year given a full year of operational costs”.
MultiChoice expects the effects of moving all content creation into its Content Hub, which pools resources across the continent and saves costs, to have a positive impact on its balance sheet in the coming year. Comcast owns 30% of Showmax and provides an equivalent portion of its funding requirements.
“During the 2024 financial year, in order to fund the working capital requirements of Showmax, Showmax Africa Holdings Limited received a pro rata US$36 million in equity funding from NBCUniversal. This funding is recognised in non-controlling interests in the summary consolidated statement of changes in equity,” said MultiChoice.
Comcast has a put option on its 30% stake in Showmax. According to Meloy Horn, head of investor relations at MultiChoice Group, the contract gives Comcast the option to sell its 30% stake in Showmax back to MultiChoice on the seventh anniversary of the Showmax 2.0 launch date.
“Even though this date is in the future, accounting rules (IFRS) require us to value this 30% stake every year and to then recognise it in our books as a put option liability and an adjustment in equity. It does not factor in the probability of the put being exercised; it is just an automatic accounting requirement,” Horn said in response to a query by TechCentral.
“At the end of March, this 30% stake was valued at R2.7-billion, which means the value of 100% of Showmax was R9-billion.”
Showmax was launched in February across 44 markets in sub-Saharan Africa, initially focusing marketing efforts on South Africa and Nigeria. Markets such as Kenya and Ethiopia will follow in the 2025 financial year, said MultiChoice.
As part of the launch, Showmax 1.0 and Showmax Pro were deprecated along with the “diaspora” package, meaning viewers outside Africa can no longer access Showmax content.
Unique to Showmax 2.0 is the English Premier League mobile-only package, which aims to capture the estimated 250 million Premier League fans in Africa. Pricing for the streaming platform is localised in nine core markets including South Africa and Nigeria.
