MultiChoice’s Diversification Gamble: The Future of Entertainment & Betting?

Right at the beginning of the year, MultiChoice Group announced the launch of SuperSport Bet – a partnership between MultiChoice and KingMakers to launch a sport and casino betting platform in South Africa. To most it seemed random – perhaps an opportunity to hop on and capitalise on the betting industry’s current momentum.  The keen-eyed…

Right at the beginning of the year, MultiChoice Group announced the launch of SuperSport Bet – a partnership between MultiChoice and KingMakers to launch a sport and casino betting platform in South Africa. To most it seemed random – perhaps an opportunity to hop on and capitalise on the betting industry’s current momentum. 

The keen-eyed among you will know that this has been sometime in the making actually. About half a decade if we’re being exact. Over that course of time – MultiChoice has been informing their shareholders about their plans around betting and we’re going to go through years of communications to establish a clearer picture of what’s going on. Our intent is to establish why the group is moving into the lucrative but controversial betting aka gaming industry and how they are going about doing it.

The first time MultiChoice spoke to their investors regarding their betting intentions was in their *2021 half-year interim results when they announced a 20% investment in KingMakers (known as BetKing at the time). The investment would go into effect from October 2020 and an initial investment of US$81mn would be put into KingMakers.

*MultiChoice’s financial year runs from April to March in the following year and their half-year ends on 30 September

The rational…

The reasoning for the deal was presented as follows. KingMakers was an entity in an “exciting, high growth industry”. The platform was only two years into its existence but MultiChoice believed there were elements that made the investment worth it.

First was that KingMakers had a “unique, scalable platform business with its own proprietary technology.” Beyond this, MultiChoice told their shareholders that the betting company had a high-growth model that “can easily be replicated in new markets.” They saw potential for scale which suggests that SuperSport Bet is likely to become a product offering we see across all the markets MultiChoice operates in – regulation permitting. Lastly, KingMakers was highlighted as having an online and retail (agency) distribution.

Beyond this, MultiChoice further justified the deal’s strategic soundness noting that acquiring KingMakers would promote engagement on their platforms in future. Whilst they didn’t expand on this point – my assumption is that owning a betting platform they labelled a “top 10 most visited sport bet website globally” presents an opportunity to advertise MultiChoice products/services. Perhaps this explains why investors were informed of a potentially “mutually beneficial Mutually beneficial fit with pay TV, to promote retention and viewership for MCG (MultiChoice Group).” We also know that since the acquisition – Multichoice has received around R46mn (R10mn in 2023 & R36mn the year before) in advertising and sponsorship revenue from KingMakers so perhaps this is what they were alluding to by “mutually beneficial”.

Lastly, the broadcasting group feels that the acquisition is enhanced by two elements; first their subscriber reach (an estimated 20+mn viewers) along with the trust that comes with being part of the MultiChoice Group.

Although entering an established and competitive sports betting market, the expertise of the KingMakers team combined with the strength of the SuperSportBet brand and exclusive partnerships uniquely positions the group to succeed and gain market share in a large and growing addressable market.

MultiChoice 1H2024 results

It’s no surprise then that MultiChoice wanted to be a part of the global sports betting industry that market researchers were projecting to reach US$155bn in value by 2024. Their conviction in this acquisition was so concrete, they raised their stake to 49% the following year for US$282mn. 

Considering that Multichoice has made it clear that they want to shift from solely being a “traditional pay-TV business to a broader consumer platform business” moves such as the KingMakers acquisition, the recent Showmax rebranding and aggressive investment along with payment infrastructure interests launched as Moment – perhaps we’re witnessing a historic shift and failing to pay attention…

What else do we know about the deal?

MultiChoice intended to inject R1.3bn over the 6 months following the announcement of the deal. This was a statement of intent as that was a sizable portion (17.8%) of their cash reserves which stood at R7.3bn at that time. Part of the funds used to acquire additional stock and invest in KingMakers was obtained from a 5-year R1.4bn loan with a 5-year repayment term. The loan was taken in 2021 (“financial year ending 2022”) and repayment on the loan was completed by March 2023.

From the investor reports we’ve also been able to establish that two MCG directors were placed on the KingMakers board of directors following the acquisition. Their role as told by MCG is to “assist with insights into operational areas” as KingMakers scales. The board members are supposed to help the betting company contend with taxation, localisation in markets KingMakers are unfamiliar with along with insights on treasury. 

What do we know about KingMakers?

In the 2022 reports, MultiChoice revealed some details around KingMakers structure. We managed to discover that the betting company had 400 employees and was operational in 4 markets – Nigeria, Kenya, Ethiopia and Ghana at the time.

Revenue has been growing – from US$11mn in 2018 to US$198mn in 2022. The business is still losing money though as it posted an after tax loss of US$28mn. MultiChoice revealed that by June 2023 this loss had narrowed to US$8.6mn.

MCG also revealed the cash flow position of KingMakers and how it has been evolving. At the end of 2023 financial year – KingMakers was holding US$166mn in cash, though this fell slightly to US$134mn by the halfway point of the group’s 2024 financial year.

In regards to product performance we’ve only been given a glimpse of one offering – SuperPicks. That’s the free-to-play predictor platform gives consumers the opportunity to win a jackpot by predicting the correct scores from six football fixtures. This has been mentioned across two investor reports. In their 2022 reports – MultiChoice revealed that the offering had raced to half a million users in seven months. The following year the group revealed that in South Africa the game had “350,000 active users.”

Broader market insights

TGM Research conducted a survey in 2022 that included 44 countries and nearly 29000 football fans and some of the insights from this report give important context around the gambling market in Africa, particularly in South Africa where SuperSport Bet is initially offering its products/services. TGM managed to establish a few interesting insights around the state of betting on our continent. 

  • First, just about all of the sports betting categories are experiencing high levels of interest in Africa, with online betting accounting for the lion’s share (34%).
  • 23% of the Africans being surveyed indicated that they were interested in wagering between friends,making it the second most popular form of betting among Africans.
  • According to the survey, Africa has the highest rate of sports betting, with approximately 52% claiming to wager at least once a week and 24% claiming to wager at least once a month.
  • 34% used online betting apps whilst 14% visited offline sportsbooks/casino.

When zooming into South Africa particularly, the frequency of sports betting broken down by demographics was represented as follows in the survey:

TotalMaleFemale18-24 yo25-34 yo35-44 yo45-54 yo55-64 yo
Every day7%10%3%7%8%9%1%2%
A few times a week25%26%23%26%28%26%19%13%
Once a week14%15%12%11%17%12%14%9%
A few times a month22%21%22%25%23%24%14%15%
Once a month6%6%6%8%5%6%4%9%
A few times a year11%8%14%11%9%11%15%7%
Once a year4%4%4%2%4%3%7%9%
Less than once a year13%9%16%10%6%9%26%35%

When it comes to reasons for betting its no surprise that most do it with the intent to win money but there is nowhere where this is clearer than in Africa (visual below), where 68% of players share this motivation. Michael Jordan’s infamous gambling interview response, “it’s a hobby” was also represented in this survey though not many in Africa think of it as such (17%).

From a competition perspective, SuperSport Bet will have to compete with the following:

Key to remember in this section is that this is survey data, representing the behaviours of 4169 respondents and not necessarily the market as a whole. These are good indicators for where the industry was in 2022 when the survey was conducted but it doesn’t factor in what might have changed between then and now.

What’s next?

Going forward, MultiChoice says the priority for KingMakers is two-fold. One is optimising the profitability of the agency business whilst the second will be “growing its higher-margin online business”along with penetrating the South African betting market. 

All things considered, it’s clear that MCG is placing a lot of investment and focus into their bet on betting – pun intended. Post South Africa – it won’t be surprising if over time SuperSport Bet is rolled out into all the other markets where DStv is offered. Over the long term though – KingMakers and MultiChoice will have to contend with the ethical questions hanging over the gambling industry. 

Whilst there is obviously a lot of money to be made and there is a current rising momentum – the consequences of gambling and subsequent addictions that may arise from it will only become more prominent as the industry grows. Presently shareholders and regulators have largely looked the other way but it’s hard to know how long that will be the case given how gambling has historically been viewed.

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