It should not come as a surprise to anyone: selling video streaming products in Africa is a hard business. It is a double whammy for most potential customers: pay subscription fees and then cover the broadband costs. So, it was not entirely unexpected when iROTOtv announced that it was refocusing out of Africa: “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. Even after pushing incredibly hard in Africa for the last 5 years, our international business represents 80% of our revenue today…” This is really a smart move as now the company can focus where it can earn U.S. dollars; I made that case a few days ago when I explained how Nollywood producers are focusing on international markets.

Between the COVID-19 fallout, rapidly devaluing currency and hostile regulatory environment, it’s time to pause the burn. It’s time to hunker down and see what the next 18 months brings. 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. 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. Still high, but once things normalise we should have a clear path to free cash flow + profits in 2021. This will unfortunately lead to a pretty dramatic change in the size of our Africa teams. There will be around 150 job losses. We are still working on the numbers, and in order to soften the blow we are speaking with a number of companies who have taken an interest in our highly trained telesales agents. The ambition in this terrible jobs market is to try and give our departing teams the best odds of success in what is unfortunately one of the worst job markets in decades. We wish them well on their adventures, it is no fault of their own. They definitely tried their best. We all did.

We still believe in Nigeria, We still believe Ghana, We still believe in Africa. It’s a strange thing to realise that even after almost 9 years with IROKOtv, 5 exclusively focused in Africa, we still may be too early for Africa. That in itself says so much about the current Internet opportunity in Africa. Many models have attempted to crack the consumer economy in Africa. Classifieds didn’t work. Lead generation didn’t work. E-commerce didn’t work. Free didn’t work. If we only had the Africa market (like so many before us who failed) then this post would be RIP IROKOtv. Thankfully we have an international business to fall back upon. For Africa, we are currently compelled in the short term to find a more efficient model to growing our paid membership here. We are introducing new products which we hope to move us up the ARPU chain and broaden our services beyond just entertainment. It’s still super early and we are veterans of experimental building of consumer Internet in Africa. For now we can only focus on cash flow. We will be waiting patiently, keenly, for the key signals to jump right back in to growth mode. We are still on ground.

You may decide to read that piece by Jason Njoku, the CEO of IROKO. He dropped some lines, “Many models have attempted to crack the consumer economy in Africa. Classifieds didn’t work. Lead generation didn’t work. E-commerce didn’t work. Free didn’t work. If we only had the Africa market (like so many before us who failed) then this post would be RIP IROKOtv. Thankfully we have an international business to fall back upon.”

Yes, one of the hardest things to do in business is to extract revenue from people that do not have money; Africa does not have purchasing power for broad entertainment. And as I have noted, Nigeria has only about 30 million people that earn income. Just about 5 million of those earn decent income to get into paid entertainment of any kind.

With this strategic refocusing, the National Broadcasting Commission which just introduced a new broadcasting code will have one less company to worry about on enforcement and compliance!

It is what it is: your playbook must NOT be 100% localized in this age of falling currency, in Africa, if any part of your raw materials is imported. And because all digital startups have foreign raw materials (Amazon AWS, Microsoft Azure, etc), your revenue must extend beyond Africa these days if you want to thrive.

https://www.tekedia.com/irokotv-gives-up-on-nigeria-and-africa/

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So Nigeria does not present enabling environment for these guys