ANALYSIS: The Unstreamed Potential: Challenges facing Nigeria’s streaming market

Nigeria, with its vibrant entertainment industry and vast consumer base, seems like the perfect market for streaming platforms.

However, recent discussions have centred on the retreat of some international players, who are scaling back operations or exiting the market altogether.

These challenges are deeply rooted in Nigeria’s economic realities and infrastructural limitations, rendering the current streaming business model largely unsustainable.

Key Challenges for Streaming Businesses in Nigeria

Economic Pressures and Market Realities: Streaming platforms operate within the broader media industry, which is not immune to Nigeria’s economic challenges. Persistent currency devaluation has increased business costs, while inflation has eroded consumers’ purchasing power. International companies often find that their financial projections don’t align with the harsh realities of the Nigerian market. For example, a Netflix Mobile subscription in 2020 priced at $3 was equivalent to ₦1,200. Today, that same $3 subscription generates just $1.3 due to currency devaluation, while the Naira equivalent has risen to ₦2,200

High Data Costs: Streaming depends on affordable and accessible internet, yet data remains expensive in Nigeria. For a population that largely relies on pay-as-you-go mobile data plans, streaming video is a luxury many cannot afford. This severely limits the addressable market for streaming services.

Limited Payment Options: Most streaming platforms rely on card payments, which are not widely used in Nigeria. The card payment infrastructure has struggled to gain widespread adoption, similar to the challenges of e-commerce platforms. While some businesses have resorted to cash-on-delivery to address this issue, streaming platforms lack comparable workarounds, leaving many potential customers unserved.

Unsustainable Revenue Models – Global Content vs. Local Realities: The economics of streaming in Nigeria are unfavourable compared to the cost of producing and distributing high-quality local content. While some African content has performed well globally, streaming platforms measure success by local investment versus local subscriber numbers. This metric makes sense – content produced for a local market must generate sufficient local revenue to justify its cost. Unfortunately, Nigeria’s economic constraints often make this equation unworkable.

Consider the cost of commissioning a significant production: Producing + Promotion (Advertising) an A-list movie or series can cost up to $0.5million (₦0.8billion), and the local subscriber base, even for platforms like Netflix or Showmax is not large enough to recover these costs through subscriptions alone. Additionally, platforms must spend heavily to promote local content to gain traction, further straining budgets.

Despite some African titles gaining global attention, the challenge lies in balancing local relevance with financial sustainability.

What’s Next for Streaming in Nigeria?

Despite the challenges, the Nigerian market remains viable. The fintech industry offers a blueprint for overcoming local barriers. Platforms like Kenya’s M-Pesa and the widespread use of USSD technology demonstrate that tailored solutions can succeed in Africa.

Proffered solutions include:

Telco Partnerships for Zero-Rated Content: Telcos like MTN can be pivotal in expanding access to streaming platforms. If content were zero-rated – meaning users don’t incur data costs -streaming could become accessible to a much larger audience. By integrating subscription payments into telco billing systems or mobile wallets, platforms could also bypass the limitations of card payments.

Localised Content Strategies: Platforms should focus on producing content that resonates with Nigerian audiences at a cost that aligns with the market’s realities. While these productions may not have global appeal, they could generate consistent revenue locally.

Scaling for Global Audiences: Content producers can aim for globally competitive productions that attract international subscribers. However, this approach requires significant investment and carries higher risks.

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Conclusion

The challenges faced by streaming platforms in Nigeria highlight the importance of localised strategies. Significant barriers include high data costs, limited payment infrastructure, and unfavourable revenue models. However, streaming businesses can unlock Nigeria’s potential by leveraging telco partnerships and tailoring content and pricing to local realities. The future lies in innovation, collaboration, and a willingness to adapt to the unique dynamics of the Nigerian market.

Opeoluwa Filani, former General Manager of Showmax Nigeria and a seasoned start-up builder and growth driver is based in Lagos.