How Innovative Billing Brought Netflix to Africa

Living in developed economies, we don't always consider the challenges faced by companies operating in developing markets, where technologies and services seen as standard here are hard to come by. Operators in these countries have to rewrite the rule book when launching new services, but this can result in new, innovative solutions.

For example, monthly billing relationships are standard in countries like the US, where an OTT service simply takes your credit card information and bills you regularly. But what if the majority of your market didn't have a bank account, much less a credit card? How would you launch an OTT service then?

Econet Media CEO and head of the Kwesé TV service, Joseph Hundah, explained the unique challenges of billing and charging in Africa to Telco Transformation, and how his company created a new approach in this area which eventually brought Netflix Inc. (Nasdaq: NFLX) to the continent. (For Part 1 of our interview with Hundah, see Reinventing African TV: Econet's Hundah.)

Telco Transformation: How did your relationship with Netflix come about?

Joseph Hundah: Initially our intent was launching our own VoD [video on demand] service. But after some investigation, talking to suppliers in the market, we felt that over the next few years, only two to three VoD services would dominate. I didn't think we could compete without a global business, or it didn't make sense to compete. So, why not partner?

In Africa today, access to VoD at home is missing. Most people can't get Netflix. Why is that? There are four reasons. Firstly, penetration of unlimited broadband is low. It's growing, but it's low. Secondly, the cost is still very high, for most African homes. Thirdly, how do you bill? You need an international credit card and most Africans are largely unbanked -- they don't have bank accounts much less credit cards. And lastly, it's difficult to buy a device to get service at home. Apple TV, Chromecast, PlayStation, Xbox -- these cost $200 to $400 to buy, most people can't afford them.

So we looked around for an internationally recognized device that let us do this, and we were able to get it from Roku. It's under $100, maybe under $80 in some cases. This increases the number of homes we can reach, and creates a "shopping mall" of video services for users. So it's not just high-profile services like Netflix, but niche services as well.

But Netflix is their biggest partner, so we went to Netflix as well. For them, they needed credit cards, etc., to launch, and the billing/payment issues for them made [an African service] not really feasible. But we have our own billing system, plus billing integration with partners. We have integrated with most mobile operators for this, and mobile operators are the biggest billing platform in Africa.

[Econet has developed its own mobile payments service, Ecocash, and Cassava, a platform which supports multiple mobile payment systems and is integrated with a wide range of mobile operators serving customers in multiple African countries. See Kwesé Takes New Approach to African TV.]

So it became much easier to convince Netflix, otherwise Africa would be tough for them. They are now our anchor tenant on the Roku device.

In addition, we have the largest fiber infrastructure in Africa. And while we have been mainly B2B, we are now changing, adding a B2C model. This offers cheaper access to broadband for consumers. And we are also talking to other ISPs for cheaper access to Netflix across Africa.

TT: Are there other challenges in serving Africa with a TV/video service, stemming from lower discretionary income than the western world?

JH: Well, pay-TV penetration is lower, but we are seeing 15-20% growth in Africa overall. But the big barriers to adoption are electricity and monthly payment.

If you imagine a consumer, maybe Nigerian consumer, in a remote area, middle-class or lower middle-class. They don't have electricity maybe 70% of the time. So they will use generators, but what will they use that power for? Essentials -- the fridge, cooking, light. Maybe a fan, or if they are wealthier, an air-conditioner -- Nigeria can get hot, you know. But they won't pay monthly fees for TV service if they don't know whether they will have electricity or not.

Current incumbents probably only have 5 million set-top boxes that are active. That's a fraction of the boxes deployed in the field. The rest aren't coming back because they don't know when they'll have power.

The wealthier customers for sure will have the ability to pay monthly, and will have power, or can afford to run generators for long stretches. But for others, it's not really going to work.

So we offer three-day or seven-day packages. They come at a slight premium obviously (over the monthly rates) but it's not that significant. But some of those set-top boxes that are idle can come in when they have power. As people move up in income or power situation improves, they can switch to seven-day packages or even monthly.

We really see this approach as being very important. We are hoping this does for pay-TV in Africa what pre-paid models did for mobile adoption.

— Aditya Kishore, Practice Leader, Video Transformation, Telco Transformation