MultiChoice has announced a significant commitment of US$385 million over seven years to pay Peacock for its content streaming software and services to support Showmax. This information was revealed in MultiChoice’s recent annual financial results, which highlighted the platform fees as part of its commitments and contingent liabilities.
The financial documents clarify that these commitments represent amounts under the contract that have yet to be recognized as formal obligations. MultiChoice has indicated that this figure may evolve, with the US$385 million amount reflecting the status as of March 31, 2024. An update is anticipated with MultiChoice’s next financial report.
According to MultiChoice, the agreement includes using a Showmax-branded version of the Peacock streaming platform. Additionally, Peacock will deliver managed services to help Showmax optimize the platform’s usage. The contract solidifies a seven-year partnership.
In April 2023, MultiChoice also finalized a deal with Comcast subsidiary NBCUniversal Media (NBCU) and Sky to sell a 30% stake in Showmax. This transaction led to a comprehensive overhaul of Showmax, allowing it to transition from its in-house platform to Peacock’s services.
MultiChoice is pinning considerable expectations on Showmax, aiming for it to be a primary driver of growth in the African streaming market. The collaboration with NBCU and MultiChoice has resulted in an investment of $284 million (R5 billion) into Showmax, separate from the platform deal with Peacock.
Last year, MultiChoice projected Showmax would achieve US$1 billion in net revenue over five years. The company targets breakeven by the end of the 2027 financial year, with goals of a 25% EBITDA margin and 20% free cash flow margins as the service scales.
Having achieved R1 billion in revenue last year, up significantly from previous figures, MultiChoice anticipates a substantial increase in user uptake and revenue to reach US$1 billion by 2028. The strategy to establish Showmax as the leading streaming platform in Africa includes focusing on local content acquisition, production, and a mix of premium international content and sports.
Recently, Showmax unveiled a mobile-only Premier League football offering, leveraging MultiChoice’s proficiency in live sports broadcasting. The company’s comprehensive understanding of various payment systems across the continent is another significant advantage, contrasted with many international streaming services that typically support fewer payment options.
In response to inquiries about the significant investment in Peacock, MultiChoice emphasized that selecting the optimal platform involved considering competitive dynamics from larger global players with substantial engineering resources. Instead of building an internal solution amid talent shortages, MultiChoice collaborated with Peacock, enabling access to a vast pool of specialized engineers.
MultiChoice stated that although costs are relative, partnering with Peacock ensures scalability and a world-class user experience. For comparison, platforms like Netflix and Peacock reportedly employ around 2,000 to 2,500 engineers.
Peacock’s proven ability to deliver live sports at scale is essential to the Showmax strategy. Highlighting its capability, they referenced the record-breaking NFL Wild Card game in January 2024, which became the biggest live-streamed event in U.S. history, garnering nearly 28 million viewers and significant portions of internet traffic.
Regarding the seven-year agreement, MultiChoice described it as standard commercial practice, indicating that renegotiation would occur as the contract neared its end. The company reassured stakeholders that the payment structure for the Peacock platform and other contractual terms would evolve over time.
