We have watched and listened with utter amusement the various and varied interpretations of the Federal Government’s assertion and implementation of a provision that has been part and parcel of the Nigeria’s Broadcasting Code for many editions of its amendments – the NON-EXCLUSIVITY of contents especially International Sporting content.
Article 6.2.5 provides ‘ To ensure fair and effective competition to all platforms at an agreed fee, right owner, operators or exclusive licensee to Live Foreign Sporting Events shall offer the rights to broadcasters on the different platforms inclusive but not restricted to the platforms stated below:
a. Satellite (DTH)
b. Multipoint Microwave Distribution System (MMDS)
c. Cable (Fibre Optics)
d. DTT (Terrestrial)
g. Internet Protocol Television (IPTV)
Article 6.2.6 further provides that where a right holder has taken advantage of the available platforms stated in 6.2.5, the right shall be made available to Broadcasters on other platforms at commercially agreeable terms.
What is Exclusivity?
For the sake of simplicity and for those not familiar with how exclusivity works in the pay TV industry, it is premised on the highest bidder concept.
The operator with the most money offers to pay a lot more than any other operator in that same territory can afford to pay.
Simply put, Multichoice EXCLUSIVELY makes a commitment on behalf of the general viewers as pay TV consumers in Nigeria for a particular TV content and at a particular cost it considers high enough to discourage anyone else in the marketplace, both local and foreign to compete.
Whatever that cost comes to, given the unfair advantage of EXCLUSIVITY, Multichoice will adjust their monthly subscription charges accordingly so as to pass on the cost of their profligacy to ordinary Nigerian viewers – the consumer. It is a case of shaving your hair without your permission and in your absence.
The Absurdity of the Nigerian/African Situation: It is rather absurd and instructive to note that the same content acquired in territories that do not allow Exclusivity (and that is practically all Pay TV territories, apart from Africa), can be up to twenty times cheaper than in a territory that allows Exclusivity, with a comparative per capital GDP. This Exclusivity Rights therefore opens the longsuffering citizens to exploitation by an insouciant, parasitic and arrogant neo-colonialist entity who believes it can practically buy its way.
Exclusivity, when abused as in the case of Africa, leads to monopoly which is illegal in most countries. This is because it destroys competition and is also against the interest of the citizens.
It is so extensively used in Africa by the “dominant” broadcasting organization from South Africa.
Ending exclusivity in the purchase of content rights is in the best interest of the consumers. The interest of consumers is always paramount. It will open many doors, create many jobs and bring competition to the pay-tv market.
How Exclusivity/Monopoly is bad for consumers and why it is not allowed in most countries:
To show the damaging effect of Exclusivity/Monopoly Rights on the individual consumers and by inference, on the larger economy, let us consider the following scenarios: Assuming that there are three pay-tv platforms in Nigeria – DSTV, Startimes and Any cable TV and Nigeria is participating in the world cup finals.
If the exclusive right is acquired by DSTV, any Nigerian that wants to watch the Nigerian team in the comfort of his living room must go and buy DSTV decoder. Even if this Nigerian is already using Startimes with their decoder installed. If he buys DSTV because of World Cup final, he will have two decoders in his house. He would have spent money on the second decoder that he did not have to.
Let us further assume that the following year, Nigeria is participating in the African Nations Cup and any cable Tv is the exclusive right owner for the tournament. This same consumer that has already purchased and installed DSTV and Startimes decoder will have to purchase a third decoder to be able to watch the Nations cup.
If there is no exclusivity, this consumer would purchase and install one decoder instead of three which is unnecessary.
In other places, if a channel acquires a particular right exclusively, it does not have any impact on the consumer since the channel is available in all platforms. Paytv platforms do not acquire contents exclusively.
In the U.S. for example, Channel providers like Discovery, CNN and ESPN are separate from pay-tv platforms like Time Warner, Comcast and Direct TV.
So, all channel providers sell their contents to any PayTV platform that wants them.
That is the reason why the same channels are available on all the Paytv platforms in the US. Paytv is nothing other than a platform to distribute contents produced by the channel owners to the consumers.
All channels are distributed to the consumers irrespective of the paytv platform you are using.
In a situation like CNN/Time Warner cable where the parent companies are the same, the anti-competition agency – Federal Trade Commission (FTC) gets involved to make sure that Time Warner did not take advantage of the competitors with respect to licensing of CNN.
In the U.S. and most other countries, all important channels are available on all pay-tv platforms.
A Time Warner cable customer will not run out and buy Direct TV decoder because a boxing match will air on HBO and HBO is only available on Direct TV. This is not the case in the US and will not be allowed in most countries of the world. It is only in Nigeria and sub-Saharan Africa where Multichoice operates that you see this problem.
In Nigeria, only one company carries CNN, EPL, Champions League, Discovery channel, Cartoon network etc because of exclusive licensing. If you ask Dominant Players about it, they will tell you to go and create your own CNN or get other news channels like Press TV on your platform. They will also condescendingly tell you that Greek League is available. The same applies to most premium contents that are needed for a successful pay-tv operation.
There are other ways the exclusive channel acquisition can be anti-competitive and harmful to the interest of the consumer and the host economy. If you are acquiring rights exclusively, you will not mind paying so much to ensure that they are exclusive to you. After all, you are the only one with those contents.
You can ask the consumers to pay any amount you demand and they will pay because there are no other alternatives. It creates a captive, monopolistic market for the dominant player.
As a result, a company can bid Two Hundred million dollars for a sporting rights that could have been acquired for Ten million dollars if there were there is no exclusivity Rights.
This 200 million dollar payment is ultimately transferred to the hapless subscribers in the form of higher fee increases. So, this is not good for an average consumer and for the larger economy. The only winners are the sporting right owners and the exclusive licensees. The consumers are left to pay the expensive bills.
There is also the issue of Content Warehousing. This occurs when a broadcaster buys a content on an exclusive basis when they do not really need it. The purpose is to prevent another company from acquiring the content and building a viable pay-tv platform with it.
As an example, if Turner Broadcasting launches a new movie channel
called Movies Now, even though the dominant player already has enough movies and cannot add another one, they will still acquire the content exclusively.
With this no Nigerian company can acquire this content and it will not be shown in Nigeria. The dominant player has warehoused it. Multichoice has done many of these in Nigeria to ensure that competition is suppressed.
All the premium contents needed to run a paytv platform in Nigeria are acquired exclusively. The dominant player goes to all the premium content owners and tells them to name their price provided no other Nigerian company will have access to the contents. It is the reason why no Nigerian company is successful in this industry. It is not because they do not have the expertise. It is because the market has been foreclosed. No other Nigerian is allowed to enter. People that have tried have lost all their capital.
Monopoly/Exclusivity as practised by the dominant player extends beyond content acquisition. Even hardware and software used in running broadcast businesses are also acquired exclusively.
A Nigerian operator negotiated with the most popular Paytv software provider Irdeto to buy their software. This software is used in managing subscribers. Before the deal is closed, Irdeto called the operator and informed him that since he is from Nigeria, they cannot sell to him. Only Multichoice can use their software in Nigeria, they said based on the exclusive licensing.
Even though the popular software is sold to every paytv platform in the world, only the dominant player can use it in Nigeria.
In their home base in South Africa, Multichoice invests in hospitality industry and manufacturing of decoders and accessories.
It also owns its sprawling head office building in Ferndale Randburg, an exclusive neighborhood of Johannesburg.
In Nigeria and other African countries where they operate, they rent offices, maintain a lean staff structure, pay their agents and installers poorly and practically own no fixed assets.
With Exclusivity/Monopoly removed, the broadcast landscape will become more competitive. More players will emerge.
Many jobs will be created. Innovation will finally begin in earnest and Nigeria will finally take its rightful place in African broadcasting.
With monopoly and market dominance come other issues like money laundering. Multichoice Africa based in Mauritius, a known tax heaven, will acquire contents like Cartoon network from Turner Broadcasting for the whole of Africa at 0.05 USD per subscriber per month.
They will turn around and sell it to Multichoice Nigeria at the cost of 0.1 USD per month.
This is a 100% profit without any value added. This 100% profit goes out from Nigeria to Mauritius as cost of content instead of profit. As a result, no taxes are paid in Nigeria for all the money made.
Why Mauritius? The corporate tax rate for these kind of companies in Mauritius is only 3%. So, instead of paying our corporate tax rate in Nigeria for all the profits which is more than 20%, only 3% is paid to the government of Mauritius.
In essence while the New Code has reinforced and strengthened the pre-existing provisions of the National Broadcast Code especially as it relates to non-exclusivity, it must be emphasized that non exclusivity will ultimately create a level playing ground, grant access to a wider spectrum of audience, boost the standing of the local players (with its attendant multiplier effect) and Nigerians will be liberated from the shackles of economic neo colonialism!
So, Nigerians, we owe President Muhammadu Buhari and his government for taking the bull by the horn to liberate Nigeria and indeed Africa in general, from the strangle-hold of the monopoly exponents who have milked Nigerians for far too long.
We stand for Non-Exclusivity of Broadcast Content in Nigeria.
*Sir Kunle Osisanya-Afolabi is Chairman, Association of Cable Operators of Nigeria.