Threat of New Entrants
The threat of new entrants in the South African Pay TV market is low for reasons discussed below: Capital Requirements: The case study clearly states that Top TV spent in the region of R1 billion to become operational which shows that the capital needed to do business in this industry is steep. The case also highlight other licensees such as WOWtv and Telkom Media (later sold to become Super 5 Media) struggling to launch and pay debts respectively. Further proving that the capital needed to operate in this environment is very huge requiring investors with a strong financial muscle. Product Differentiation: There is brand identification and loyalty to DStv for the simple reason that it has been the only player (monopoly) in this industry for more than 15 years and has built huge fences around it to couple brand loyalty by entering into long exclusive deals with some of the biggest channels and studios in the US. Cost Disadvantages: DStv has benefitted from the learning and experience curve and being that it has been the only player in the market for a long time it has exploited this by entering into long exclusive deals, putting proper technology infrastructure to avoid technical glitches that for instance Top TV experienced. These cost advantages positions DStv well ahead of new entrants or discourages new entrants. The threat of new entrants is also low because of the fighting muscle DStv has in fighting off new entrants as it demonstrated to Top TV, by coming up with a new range of packages that also targeted the lower LSM groups which Top TV had targeted. This repositioning of DStv had huge repel effects on Top TV to a point that Top TV is fighting to stay in business. Last but not least DStv has gained economies of scale in research, marketing and financing over the years they have been operating as a monopoly.
Please join StudyMode to read the full document