Billions wasted, well over R10bn in trading losses – how Showmax failed

This entire business case was ill-considered, with subscription growth failing to meet lofty expectations

In the year to April 2025, for every R99 in subscription fees a Showmax subscriber paid for the service, the venture with NBCUniversal (a division of Comcast) was losing R650.

MultiChoice pinned its hopes on the streaming service being a competitor to global platforms such as Netflix and Disney+, but this effort has come to an inglorious end.

Showmax discontinued

Canal+, the new owner of MultiChoice, announced on Thursday that “following a comprehensive review of its streaming activities” Showmax would be “phase[d] out”.

This is a remarkable, but not unexpected, call from the new owner. The end of the standalone Showmax streaming service has been a long time coming, with Canal+ Group CEO Maxime Saada saying shortly after the acquisition that, while everything was under review, he did not believe that MultiChoice’s multi-brand plan would work. Later, he admitted that Showmax was “not a commercial success”.

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Basically, nothing that MultiChoice planned regarding Showmax panned out.

In the most recent financial year where MultiChoice was still listed (to April 2025), Showmax reported revenue of R753 million, with a trading loss of R4.947 billion. Practically all of this was subscription revenue (with only R3 million coming from advertising and other revenue). That year was Showmax’s “peak investment year” according to MultiChoice.

It has literally wasted billions on content to get to this point.

‘Everything – and the kitchen sink’

Until this, it had endured trading losses of R8.8 billion from the new venture, where – since April 2023 – Comcast via NBCUniversal acquired 30% of the streaming unit.

The trading losses read thus:

R1.2 billion for FY23
R2.6 billion for FY24
R4.5 billion for FY25.

It is a hop, skip and a jump to imagine that the trading losses for the current year aren’t exactly much lower than the last year.

Even though this protracted takeover took a while, it is not obvious that MultiChoice would’ve closed the taps. It has thrown everything – and the kitchen sink – at Showmax with not much success.

Its subscription revenue from Showmax in FY23, the base year, was R839 million. Following the relaunch in early 2024, it managed to boost this to R1 billion – an increase of 22%. The real test came the following year, where revenue declined 27% to R753 million (it booked R3 million in advertising and other revenue in that year).

This was clearly not the launch MultiChoice had been hoping for.

Until that point, NBCUniversal ploughed in: in two tranches, a total of R2.24 billion in working capital contributions in 24 months. This was for its 30% share of the business. Presumably, MultiChoice funded its share of the requirements.

The grand irony is that in May 2023, MultiChoice said at its capital markets day that “aggressive growth targets over time” would see net revenue of $1 billion (at that point R18 billion) over five years. That would be in 2028, which is not far away, but there are reasons to believe that the Showmax business has barely surpassed R1 billion in revenue.

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This entire business case was ill-considered. Subscription growth, apparently, was fairly okay but it clearly didn’t meet its expectations.

Added to this is the fact that MultiChoice was on the hook for annual payments to NBCUniversal/Comcast for a platform fee. Over the seven-year agreement, MultiChoice would have to pay the US giant R6.9 billion. By April 2025, following payments (or as the group described as “due to the underlying obligations being fulfilled”), this had decreased to R5.8 billion.

It probably wasn’t a good idea to “hedge” its technology costs in dollars.

Quite how Canal+ extricates itself from this situation remains to be seen, but a hypothetical R1 billion break-fee would easily be worth it, considering the current losses.

Far-flung projections

MultiChoice’s business case saw Showmax breaking even on a trading profit basis by FY27 (which would be this current year), with Ebitda (earnings before interest, tax, depreciation and amortisation) margins of 25% “at scale”. The thesis was that MultiChoice’s investment J-curve “should therefore be somewhat shorter (two to three years)” and “frontloaded in FY24 (and part of FY25) due to platform costs”.

This didn’t come to pass.

The capital markets day also shared some fantastical forecasts that projected that the number of Showmax Originals would increase 10-fold over the next decade (to 2033). Its original subscriber business case for the “new” Showmax was three times that of the “historic” estimates. After all, says the deck, “Africa is the final frontier for SVOD [subscription video on demand] expansion”.

At least the Americans bought that story. The French most certainly didn’t.

This article was republished from Moneyweb. Read the original here.