“Gateway Broadcast Services announced today that its Board of Directors has unanimously approved a plan to liquidate the Company.
The current financial and global crisis has severely interrupted the company’s ability to secure further funding for the continued operation of the business.
Gateway Broadcast Services, suppliers of the GTV service to subscribers across Africa has over the last 2 years invested a total of US$200 million and created jobs and competition in 22 markets. The economic crisis that has emerged globally over the last few months has caused excessive demands on the business.
With immediate effect the service will be withdrawn.”
GTV Website (30 January 2009)
The excerpt above is from the website notice that is still ringing in the ears of football lovers across Africa. GTV, the new pay-TV kid on the block, unceremoniously and suddenly went under. Staff were still taking in subscription payments when they were told that the company was kaput. Just like that.
GTV’s liquidation left much anger in its wake. Customers paid in advance, and many paid for several months or even a year. Football junkies did not know where their next fix would come from, since GTV owned the rights to screen the bulk of the matches from the insanely popular English Premier League (EPL) in sub-Saharan Africa. GTV suppliers, dealers and staff were left ruing their involvement with the company.
So what went wrong? As the GTV statement suggests, frantic efforts were underway to secure new funding for the venture. The “current financial and global crisis” is blamed for the rookie company’s demise, choking off much-needed capital. But is that the whole story?
GTV faced an uphill task from the outset, and made some early mistakes. It was facing a dominant incumbent, Naspers, and its DStv pay-TV network. Its master stroke was to secure the EPL rights, thereby ensuring it immediately got a large and fanatical customer base. It built its programming around this core, but struggled to show that it was anything other than a one-trick pony – the rest of the channels offered were never terribly exciting. Securing the EPL games also set it up for future problems: it was forced to bid a huge amount to steal the rights from DStv.
In the early days of GTV, I noticed another problem: its customer service sucked. The company oddly never seemed to issue invoices – you were merely connected by a reseller and disconnected every month if you failed to pay on time. Later, it began issuing SMS reminders, but even these were inconsistently despatched. Payments could only initially be done through a partner bank – and errors were common. Calling their customer-care number was frustrating: you would immediately find yourself discussing matters with someone with a heavy foreign accent, with little knowledge of the local situation in Kenya. These things are not in themselves problematic – talking to call-centre operators based in Kenya can be equally annoying – but the point is that GTV seemed to launch in a hurry (to coincide with the football season) and seemed to build up its delivery infrastructure as it went along.
It was also too ambitious, too quickly. Rather than take on its huge rival in a few selected markets, it rolled out across 22 very diverse countries in a rush. It invested big sums in sponsoring local content, trying to build an edge. Its business model was far from proven, but it began punching above its weight. The result? We are all back in the arms of DStv, which is thrilled.
Lessons for new competitors taking on big monopolies: get your business model right, not just your strategic intent. Don’t ever forget the service element – it’s what gets you the loyalty. And choose your battlegrounds and target markets carefully – you can’t do it everywhere at the same time to a high standard.
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In 2006 there were 11.9 Color TVs per 100 households in Kenya that means a total of 880K of the total 7.4 Million households could even think getting the service. For every $100 a US consumer spends, a Kenyan spends $2.7. If we were to draw a generous parity then about 24K households in Kenya can really afford the service, factor in competition and that number diminishes some. Given the capital investments I am surprised that they ever expected to make any serious money.
This failure in my opinion is problematic of a trend that I see many foreign companies and Kenyans in the Diaspora make when they go about planning to start business in Kenya. They project their values and the lifestyle aspirations on a population that has little chance of ever supporting a service that they want. To me the subscription model was flawed as the primary driver for revenue. They need to come up with a model that allows most of the 12% of households to access the service and drive some kind of other revenue derived from access to these households. Or don’t spend money on a venture that has little hope of being more that a very exclusive service. Not unless one is doing it for market share with the hope that the 60% of the population that is bellow 20 years will eventually be able to afford the service.
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Mlevi:
Your point about small customer base is valid. This is presumably why GTV felt compelled to roll out in 22 countries simultaneously and gather critical subscriber numbers. Always a high-risk strategy, particularly when your product and service aren’t up to scratch.
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