CHAPTER FOUR: Effects of Digitalization on Consumption of Media Services
4.1 Cross-media Ownership
Digital technologies have had significant effects on market structures, value chains, business strategies, structure and operations . The media marketplace has become increasingly competitive and media organizations have had devise various strategies in order to survive and thrive in the digital era. For example, the NMG, SG, RMS, RAG and Mediamax Networks all have a number of media platforms in their fold. Except RMS whose main concentration is electronic media, the other organizations run television, radio and print media as well as websites. Such concentration is expected to produce greater added value than separate activities. As Kung et al. (2008) observe, cross-media strategies will benefit the media organizations because systematic effects from co-ordination and fusion of activities will reduce costs and increase avenues, and that shared resources and knowledge and competence transfer among operations will produce additional benefits.
Additionally, the economic advantages of cross-media ownership are enormous. These include additional use of existing content and reduction of costs due to acquisition of content. This approach, referred to as ‘value chain’ means that companies are able to create products and services with more value than the combined resources invested in the process. This can be achieved both online and offline. In this case, media products whether print, audio, or television content are offered both through traditional and social media to reach diverse audiences. Therefore, by bringing together different media platforms, media organizations are able to benefit from reduced investments. Besides, media organizations have taken advantage of mobile technologies to address changing audience needs and demands. For example, RMS, SG and NMG send regular news updates or breaking news via mobile phone to those who have subscribed to the service. The ‘instant’ and constant delivery of news and other media products via mobile telephony has been the focus of many media businesses keen on finding new modes of delivering ‘tailor-made’ content to consumers who subscribe and pay a premium for such material. These new revenue streams are inevitable in a competitive media environment.
Coopetition is a phenomenon described as ‘business arrangements and strategies in which rival companies that normally compete establish cooperative activities through alliances, partnerships, sharing arrangements and networks’ . The philosophy behind coopetition is that it ‘stabilizes competition by differentiation and niche recognition, by seeking organizational effectiveness through flexibility, adaptation and limiting expenditures, by seeking to improve the position of co-operators against a common threat or in exploring a risky opportunity’ . The motive behind such activities is that synergy, cooperation and resource maximization will generate benefits and growth for everyone involved, and that cooperation rather than competition may be the key to future success.
For example, in the recent past the SG and RAG decided to work together to advance common interests. In February 2016, the SG signed a deal worth 300 million Kenya shillings with RAG for a fifty percent stake in Bamba TV. The partnership allows KTN Home and KTN News channels owned by SG to air on Bamba TV, a free to air multiple international channel service with countrywide distribution. The deal was aimed at enhancing consumer experience by delivering a variety of channels while ensuring a higher return on investment with audiences to advertisers who are targeted and specific. Bamba TV has diverse channels for different audiences such as cartoons, movies, fashion, sports and news . This approach is consistent with the fact that digitalization has led to an increase in channels, hence increased diversity in content.
4.3 Digital Migration
The International Telecommunications Union (ITU) is a United Nations agency that regulates international telecommunication and communication practices globally and is also mandated with sharing radio spectrum. In 2004 and later in 2006, the ITU held Regional Radio Communication Conferences out of which came an agreement to make a transition from analogue to digital terrestrial broadcasting.
As earlier discussed, Kenya’s digital migration process was marred with challenges but still managed to beat the analogue switch-off (ASO) deadline which ended on 17th June 2015. Digital broadcasting has numerous benefits for the government, the media as well as consumers.
4.4 Benefits of digital broadcasting
4.4.1 Spectrum efficiency and increased transmission capacity
Digital broadcasting standards increase the capacity of transmission networks by improving spectrum efficiency. This means that more data can be transmitted in a single bandwidth. The increase in transmission capacity can be utilized to deliver additional TV channels, radio or data services.
4.4.2 Improved signal quality and robustness
Better sound quality helps in reducing noise and interference hence reducing visual distortion often experienced in analogue transmission.
4.4.3 Lower energy consumption and maintenance costs
Digital terrestrial transmission reduces energy usage hence broadcasters benefit from lower maintenance costs leading to lower operational costs.
4.4.4 Wider choice of programming and services
This includes additional channels, high definition provisions, radio and data services.
Digital broadcasting offers a range of interactive applications
Video on demand/catch-up services allow viewers to watch programs at their convenience
4.4.7 Parental lock setting
This facility gives parents and/or guardians control of what their children watch on television via classification of programs.
4.5 Challenges of digital broadcasting
Similar to other countries, Kenya’s digital migration process was faced with numerous challenges as outlined below.
4.5.1 Legal Challenges
With only SIGNET and PANG as broadcast signal distributors (BSD) licensees, local broadcasters felt unfairly excluded from the signal distribution market and challenged the BSD licensing process in court. Ultimately, the Supreme Court determined that while the migration process was legal, the broadcasters were entitled to obtain BSD licenses. In 2015, the first self-provisioning license was issued to the African Digital Network (ADN), a consortium of NMG, SG and RMS. These licenses are more limited than standard BSD licenses as the licensees can only transmit their own content over their infrastructure and not that of third parties.
4.5.2 Technical Challenges
Initially, in 2009 Kenya adopted the first-generation Digital Video Broadcasting Television (DVB-T) transmission standard and MPEG 4 video compression standard but soon after switched to the second-generation DVB-T2 standard in 2010 due to it greater channel capacity. The change in standards reduced the number of compliant STBs, prompting the government to institute certain measures to address the resulting challenges. To mitigate this, the government established new minimum STB specifications for DVB-T2, fast-tracked vendor authorization to expand the STB supplier pool, reduced taxes on digital television receivers to make them more affordable, removed import duties and reduced type approval fees.
4.5.3 Funding Challenges
Funding a digital migration process is a challenge in any country and particularly so in emerging markets with limited resources. The initial approach of using SIGNET which is a public entity as the BSD limited this entity to public funding. Despite the Digital Television Commission recommending that SIGNET receive funding to support the provision of BSD services during the simulcast period, the entity did not receive sufficient public funding. The lack of funding, as well as the five-year process to incorporate SIGNET and obtain its license, delayed its infrastructure deployment.
4.5.4 Consumer Challenges
The government, recognizing that STBs needed to be affordable and well marketed, launched consumer awareness campaigns in 2006. Despite the government putting some notable effort into these campaigns, a significant number of consumers were still left in the dark or even opposed the migration. Additionally, since public funds were limited, the government encouraged media owners to assist with consumer awareness. However, the private media entities ran advertisements that were considered ‘misleading’, aimed at derailing the migration process and discouraging consumers from buying STBs. Some consumers believed certain media reports that PANG, being a Chinese-owned company, would be prone to censoring content if the Kenyan government asked them to.
4.5.5 Availability of Set-top Boxes
The unavailability of STBs for consumers to receive digital broadcasts hampered the digital migration process. In 2007, as recommended by the Migration Task Force, Kenya adopted the Digital Video Broadcasting Terrestrial (DVB-T) standard for digital terrestrial television broadcasting (DTTB), using MPEG 4 compression, as per ITU’s standard. The pilot phase was launched in Nairobi and its environs in December 2009 . However, in 2010, the second-generation DVB-T2 standard was launched. In order to bring greater spectrum efficiency and other benefits, the DTC decided that it would be more beneficial for Kenya to adopt the DVB-T2 standard. It did not anticipate that this change would disrupt the migration process, since DVB-T deployment at that time was still limited, with only one transmitter in operation and about 10,000 DVB-T STBs sold. In December 2010, the government adopted the DVB-T2 standard for further infrastructure rollout to fully benefit from the spectrum efficiency gain and service flexibility . Consumers were encouraged to note the new DVB-T2 standard and purchase STBs that were compatible with the new platform. The government however did not reimburse the consumers that had already bought DVB-T STBs that would soon become obsolete. As a transitional measure, SIGNET deployed a DVB-T2 transmitter in Nairobi to simulcast the same content as that on its DVB-T transmitter. Transmissions using DVB-T transmitter were terminated in September 2012, leaving only the DVB-T2 transmitter operational.
4.5.6 Affordability of Set-top Boxes
In addition to the issues surrounding the availability of appropriate STBs, the penetration of digital television services was also hampered by prohibitive STB costs. Digital receivers, mainly imported from Europe and Asia, were unaffordable for average users. A considerable proportion of the cost was attributed to the required import duty. In addition, the uncertainty created by the various delays in the ASO, due to the inability of SIGNET to deploy its network as well as the litigation, discouraged STB vendors from investing in large quantities of STBs . This also contributed to the shortage and the resulting high cost to end users. In an effort to eliminate device cost as a barrier to consumer uptake, the government took some steps to improve affordability; the import duty for the devices was eliminated, CAK waived vendor registration fees and reduced type approval fees for digital receiving devices from Kenya Shillings 20,000 to 4,000. It further relaxed the minimum device specifications by making the conditional access feature optional for FTA STBs, reducing the price more. The importation, distribution and supply of set-top boxes was fully liberalised and opened to any registered vendor who obtained type approval from the regulator. This approach effectively left the supply of STBs in the hands of the private sector with competition driving prices down.
There are two types of STBs in use in Kenya- FTA only and a combination of Pay TV/FTA- with consumers being able to decide on the receivers that best suit their needs. The above -outlined measures, which liberalised the STB market supply, worked. The Kenya case shows that reducing taxes and fees and allowing market forces to drive the supply of STBs stimulates the production and import of STBs and significantly reduces the production and import of STBs and significantly reduces the cost of STBs to end users .