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17.12.2008 Business & Finance

How Media Businesses can match 'Internet Explosion,'

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Gary Alfonso, chief operating officer of the CNBC Africa, the latest derivative of the CNBC global brand, was at the Alumni Session of the School of Media and Communications (SMC), Pan African University, Lagos, after which he spoke to MARCEL MBAMALU on the expanding opportunities in media and Internet businesses in Africa. Excerpts:

CNBC is viewed as a business programme in some local television stations in Africa, including Nigeria. How do you really make your money?

We don't earn revenue from subscriptions anywhere in Africa. CNBC Africa is a free-to-air channel; it is free to any participant, any platform but obviously subject to our approval. So, we form alliances with distributors everywhere in Africa. We form alliances with companies like AIT, in Nigeria; we form alliances with Net2 TV in Ghana. We have formed alliances with Mobi TV in Zambia; we have formed alliances with DSTV across Africa; and primarily in southern Africa. We are on the Multi-choice decoders. But in sub Saharan Africa, we are primarily on the VIVID decoder but, you know as Mutichoice is increasing their capacity, we will probably be on there in the next quarter or the end of quarter one in 2009.

So, we, as a model, distribute our signals free-to-air; we do not charge any subscriptions. So we do not charge any channel or any company that puts CNBC Africa on its distribution network any money.

What we do is leverage that audience as an attraction for advertisers. So, we are purely reliant on advertising, and on sponsorship of TV programmes.

We create excellent product on air that sponsors want to associate with; we create opportunities and platforms for financial institutions to share knowledge, for financial institutions to show their expertise with the rest of the continent in a business environment and international investors, visiting Africa. So, that is the basis of our revenue model. It's partnerships of financial institutions but also advertising and sponsorship of TV programmes.

I guess you are less than two years old in Africa and I keep wondering how you cope with your role as COO?

We launched on June 1, 2007. So, we are effectively 18 months old and we have about 20 per cent of cash flow breakeven - which is phenomenal in the world of television production.

So we will be profitable within the first quarter, or second quarter of 2009, and to breakeven as a television channel in two years, I think, will be a world record. Even though we launched on the first of June 2007, CNBC has been a global brand for decades and, as part of CNBC universal (CNBC in the US and CNBC in Europe put our programme 24 hours a day. So, CNBC Africa is the latest derivative of the global CNBC brand.

What we do from Johannesburg is that we basically delve into the international field and start reporting on African markets. Internationally, they sometimes take hints from us in Johannesburg; they (CNBC organs) take reports and they want to know what's happening in Kenya, what's happening in Nigeria and South Africa, as the three largest markets in Africa.

In that triangle, we report to the world about Africa's growth, its investment opportunities and advertise the continent as a place that will probably not be as badly affected by the global slowdown as the rest of the globe.

So, investors are looking at Africa. Banks are coming here, and that's the reason the CNBC Africa was launched.

As far as my role as the chief operating officer is concerned, I'm in charge of operations across Africa. I visit Nigeria once a month; I visit Kenya once a month, am in South Africa for most of the month. But I ensure that there are opportunities created for revenue growth, I make sure that our cost are maintained, I make sure that the staff remain motivated and that we create excellent programming.

So, the quality of the content is very much my job because quality of content helps you sell advertising, and advertising helps you create revenue, which obviously, once again, is a circle that helps you create better programming. The more revenue you make, the better programme you can make as well.

Are you thinking of creating a bureau in West Africa and probably use Nigeria and its enormous viewing population as a launch pad?

Yes. Nigeria was very much part of our strategy to launch CNBC Africa in West Africa. In Ghana, for instance, we will certainly look at a presence but we tag that presence to economic growth in GDP in countries. So, there is a point of inflection, where you know that it's time to invest, and that's when GDP, Foreign Direct Investment and also the general National Income per capita is at a certain percentage. So, it's a science; it's not that you decide today and you start somewhere in a country.

Does that suggest that Nigeria is not yet conducive for CNBC Africa?

Well, it is, and that's why we basically established two bureaus -one in Lagos and one in Abuja, and the next one will be in Ghana.

Cameroun is already very actively pursuing it. We have already held constructive discussions with the media players there to establish CNBC Africa in that market.

We are also forming partnerships with local investors with people that want to invest in that local media in those territories and to help grow CNBC Africa's presence in those markets.

How would you assess the African media market in 2008 and 2009?

Well, I see greater convergences. I basically see a greater interplay, as bandwidth becomes more readily available. I see more convergence between the Internet, televisions, and mobile services. I see the mobile handset, in everybody's hand, being the ultimate communication tool, because that's a direct number; it's like an ID number for a person. You can start doing direct marketing. If that person likes to do certain kinds of programming, you can direct that programming to that person.

Convergence will tell us more about the customer; the customers' needs will tell us more about the programming we need to make, so, that it is not based on assumptions; and it will also tell you that, ultimately, it's the quality of a content that will make a difference in that consumer's life; that consumer would not buy poor quality, so you will have to start improving the quality of the content.

The old adage that content is king has never ever been more important than right now in the world of media. Africa -West Africa, East Africa - is not going to be an exception.

The Internet phenomenon appears to be rubbing off negatively on the print media, leading to loss in market share. How can proprietors maintain good readership, even in the face of stiffer competition from Internet services?

I think it is a phenomenon that all media organisations are facing. I come from a generation, where I like to buy my newspaper and sit down with my cup of coffee on a Sunday morning and read the paper at my leisure; I might have little kids running around etcetera.

But the 14 year-old, in our society, do not have that culture. The 14 year-old go to the Internet to find information; the 14 year-old find information that is relevant only to them. They only read gossip columns. So, newspapers, television and radio will have to change. We will have to change to what the consumers want, not what we think we should give them, and that is where convergence comes in because that is where the direct customer relationship will tend to force you to become interactive with that customer.

I am saying that because newspapers should not see the Internet as a threat.

What newspapers should do is to reinvent themselves digitally, because people are still using the Internet to read; they are reading these papers digitally. So, newspapers should not think that it is a decline of their business model. The only thing is that they are going to print less paper. What a newspaper does for a consumer could be significantly different from what the Internet does for a consumer, and that's where newspapers and journalists and editors can still make the information compelling but the day of somebody actually paying for a newspaper that they need to buy next to the road for something they can get free on the Internet is changing.

To re-invent themselves digitally is a very important thing for the print media in the world. Even as we talk, libraries, for instance, are digitalising themselves, because they have to; people are not going to libraries anymore.

As I said, 14 year-olds do not have any relationship with paper, and we need to understand that in relation to the way people will consume information in the future.

Whether it's TV or newspaper, you need to re-invent yourselves in the digital space and, if not re-invent, you need to reposition yourself, in order to add value to your core product.

Already, people are buying a newspaper because they want something from it; they are not buying those newspapers because they have to, and that's the fundamental difference. When people buy newspapers, they are buying them because there is something in the papers - it might be a career section; it might be a good job-advertising supplement; it might be good news headlines.

So, that relationship will not change in a new customer. They will take your product, if they trust your information. They will take your product, if they believe it, and they will take your product digitally on their mobile phones, on the Internet, and they will even pay for it if they believe there is added value.

The way in which we interplay and use our information (and the information that we have access to) and assimilate it and put it out to viewers and (or) listeners and (or) readers, becomes the relationship you have with your customer directly. They will still pay for it but they won't pay for it at the side of the road leaning out of the car window buying a newspaper because the guy is selling it there.

There has been an explosion in Internet business and the regulation has been somewhat loose. How can things be streamlined in this sector?

I think what happened is that there has been an absolute explosion on the number of Internet players that offer the same services, though the differentiator, in the end, will be the quality of the content because, ultimately, the quality of the content will determine whether or not somebody buys your product or somebody reads your product.

So, somebody does not necessarily need to buy your product but if they read your product and enough people read your product, you can sell it to an advertiser. Then, you have to create a relationship on how much 'invasion' does the customer want? So, you don't want that person half way to reading an article on the Internet to have an advert of cell phone pop up and stop him reading.

So, respect for the customer and understanding your customer, but also knowing that they are a cell phone user, or that they are a driver of a luxury German car allows you to 'unsell' that content and help you sell that space to an advertiser.

The loss in market share is only because of behaviour changes in consumers. That consumer is still reading somewhere; he is just gone to the Internet. He is not buying the newspaper maybe because, maybe, he does not have enough time in the morning anymore, but when he gets home at night, he wants to read what happened in the day, or he watches TV.

So, the concept of morning paper, midday paper, evening paper, and (or) weekend paper might become obsolete, because people want information when they want it. And I think that's one of the most important things - you've got to give a customer something that they want when they want, not when you determine that it's time to roll out in the morning or in the afternoon.

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