What is already obvious for the newspaper business in Kenya will happen for linear TV as well: ‘Digital’ to drive declines.
The truth is simple and painful. The same news that readers used to get from their printed newspapers is now freely available online and mainly consumed via mobile devices. The Kenyan National Bureau of Statistics (KNBS) shows that over one and half million people now read news online on a daily basis, a sharp increase by more than 50 per cent compared to 2014.
More than 40 per cent of all internet users already read news in a digital format, with social media platforms like Twitter and Facebook substituting the newspapers as the single source of information for many Kenyans, as the World Press Trend Report shows. Official KNBS numbers show the total daily circulation of newspapers in the country has been declining steadily over the last three years. Ironically, the only print newspaper that is on the rise in terms of circulation is given to readers for free. On the other hand, the TV-business, as we currently know it, looks more stable and favorable than newspapers, but that might be the calm before the storm.
Media executives might find comfort in the fact that the number of TVs in Kenya has grown threefold over the last 10 years driven by the expansion of the middle-class. However, Deloitte research shows less than 50 per cent of Kenyan families own a TV. The television set will thus continue to gain ground, which should drive the fast-growing advertising market to dedicating more and more of its investment to TV stations. Compared to newspapers, the TV captures a much wider, younger and more feminine audience which is often the target of large consumer businesses. However, the stillness may soon be upset. TV is already in a troublesome chicken-and- egg situation: revenues from TV advertising are disproportionately low in the country because the market favors print media, even though it is on the decline. So the advertising revenues are too low to finance the production of local high-quality content.
Moreover, the TV sector is in a vicious circle due to lack of accurate measurement of TV audiences hindering the willingness of advertisers to invest in TV at levels that are comparable to international markets. The US TV market, for example, is cushioned by its ability to push advertising prices up. The secret of US TV stations is monetizing unique content of immense popularity like sports with the Super Bowl or live-programs like The Voice. In Kenya, TV stations struggle to defend their rate cards. To make matters worse, as internet access at home becomes more affordable, Kenyan TV channels are at risk of an accelerated decline.
In this context, connected viewers will increasingly favour the high-quality of international content from services like YouTube, Netflix or often illegal websites offering the best American movies or series for download. In highly-connected wealthy urban areas like Nairobi, the wind is already turning. The city concentrates 70 oer cent of Kenyan Facebook users and its large network of connected offices and WiFi-hotpots offers opportunity for wide-spread WiFi services. The expansion of fixed networks by players like Zuku, Liquid or Safaricom, as well as new technologies like 5G network will bring affordable connectivity to a large number of Kenyan homes within the next years.
Media consumption in Western markets shows the younger generations are undeniably shifting towards online content. Therefore, unless the TV industry is able to foster and monetize attractive content soon, such as quality live shows, local series, attractive news or sports programs, there is little doubt that the connected generations will embrace the viewing habits emerging around the world.
Erik van der Dussen is Deloitte’s TMT Industry Leader for East Africa.