Here is Why Jason Njoku’s iROKOtv Will Stop Investing in Nigeria, to Layoff 150 Staff
Africa’s leading online movie streaming company, irokoTV is set to cut 150 jobs as the impact of the Covid-19 pandemic amongst other factors bleed the business.
irokoTV founder, Jason Njoku said the business is doing well on the international front as the market accounts for 80 percent of its revenue but its African market is suffering from a cocktail of problems – the Covid-19 fallout, rapid currency devaluation and a hostile regulatory environment.
Dubbed Africa’s ‘Netflix’, IrokoTV provides paid-for Nigerian films on-demand, giving instant access to over 5,000 Nollywood movies. Nollywood, also known as the Nigerian Film Industry, is the world’s second-largest film industry, behind India’s Bollywood, according to a 2009 UNESCO report.
But the effect of the naira devaluation would force irokoTV out of the market to focus on its lucrative international business.
In a recent blogpost, Njoku said the company has been struggling with the currency devaluation since 2016, which slashed its subscription cost by half. With the naira now at 477/$, irokoTV subscription cost is now $6.3 while the average revenue per user in the west is between $25 and $30.
“We went through the brutal 2016-17 devaluations and ended up N3,000 = $8.33 (360/$). A nightmare by all means, as we just lost real value. Like, tangible pay some bills costs. Today N3,000 = $6.3 (477/$),” he wrote.
“All indications are that the naira devaluation hasn’t really finished. Some are saying it’s just starting and will end up at 550-600/$ before year’s end.
“What we are seeing now is distorted as the access to FX has been cut off for almost 6 months. A lot of our costs are in dollars – AWS, tech tools, etc,” Njoku said
In 2017, IrokoTV was said to have recorded over 950,000 hours viewership in 178 countries around the world – it is believed that the platform gave Nigerian movies a global reach.
According to Njoku, during the global lockdown, irokoTV’s international subscription grew daily by 200 percent but in Africa, where huge investments have been made in the last five years, only recorded short-lived growth.
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The CEO said the business experienced its highest subscription growth in Africa in April and it went downhill from thereon as it declined by 70 percent from April to July and all efforts to salvage the situation was futile.
irokoTV’s decision to discontinue investing in Nigeria was cemented by the recent amendment to the broadcasting code by the National Broadcasting Commission (NBC), which many stakeholders had criticized.
The sixth edition of Nigeria’s broadcasting code (PDF) mandates sub-licensing of exclusive content. The code also states that “rights owner to live foreign sporting events shall offer the rights to Broadcasters on the different platforms stated.” This means that companies that spend millions to acquire exclusive content will have to share it with other media platforms that did not buy the rights.
Apart from irokoTV, other Pay-TV and streaming companies in Nigeria including Multichoice, NetFlix, EbonylifeTV will also feel the heat of the code.
“It’s time to hunker down and see what the next 18 months bring. Over the next week, IROKO will be defocusing our Africa growth efforts and we will revert to focusing on higher ARPU customers in North America and Western Europe”, Njoku stated.
“Even after pushing incredibly hard in Africa for the last 5 years, our international business represents 80% of our revenue today, so by taking out Africa growth-related costs, we cut our $300k/month burn to <$50k/month.
“This will, unfortunately, lead to a pretty dramatic change in the size of our Africa teams. There will be around 150 job losses”, he added.
The CEO also noted that the company is in talks with other businesses that may be interested in absorbing the affected employees as a soft-landing measure for them.
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