Nollywood, Nigeria’s film industry, is Africa’s largest movie hub by volume. In 2021 and 2022, Nigeria accounted for 97% of box office revenue generated in Anglophone West Africa. Recently, The Black Book, a Nigerian movie released in September, became the most-watched African film on Netflix. Yet, Netflix, the world’s top streaming platform, still has a loose grip on this market.
According to Omdia, a London-based research firm, Nigeria accounts for only 10.5% of Netflix subscribers in Africa. Most of Netflix’s customers are in South Africa, where 73.3% of its African subscribers reside. However, the picture is not any less bleak on a continental level. Netflix had only 1.6 million subscriptions from Africa after six years in the market, Omdia’s report says. The company is expected to grow to 2.2 million subscribers in another five years.
Netflix formally entered the Nigerian film industry in 2020, four years after entering the Sub-Saharan African market. This brings the first nuance: Netflix has spent more time and money in South Africa than any other African country. According to its socio-economic impact report, it injected $175 million into sub-Saharan Africa between 2016 and 2022. $125 million (71%) went to South Africa. Out of these productions, over 170 were licensed, while 16 were Netflix originals. Nigeria got $23 million (13%), with 283 licenced titles and just three commissioned titles.
Several factors would have influenced Netflix’s decision to start with South Africa. Firstly, South Africa has the most profitable film industry on the continent. No Nigerian film has made up to $2 million at the box office. But the highest-grossing African film, The Gods Must Be Crazy, grossed over $200 million. Also, internet adoption in South Africa was better than anywhere else in Sub-Saharan Africa. At the end of 2015, 28% of South Africans subscribed to mobile broadband, and that was SSA’s highest, according to GSMA. Cote d’Ivoire and Ghana came second with 16%, while only 12% of Nigerians were internet adopters.
Today, internet adoption has improved in most Sub-Saharan markets, including Nigeria. However, Nigeria’s Subscription Video on Demand (SVOD) market is still much smaller than South Africa’s. The first reason is that there’s better wealth distribution in South Africa than in Nigeria. According to McKinsey, South Africa houses 40% of all the billion-dollar revenue companies in Sub-Saharan Africa. South Africa also has the highest number of millionaires in Africa. The second reason is that the local SVOD market is more active in South Africa than in Nigeria. Omdia’s report shows that Showmax, a South African streaming platform, has overtaken Netflix by market share.
Meanwhile, Nigeria’s most famous indigenous SVOD platform, Iroko TV, has pivoted toward serving the diaspora because it made too little money from its home country. “Our international business boomed. Our local business evaporated,” Jason Njoku, CEO of IrokoTV, said in a recent blog post. The pool of Nigerian disposable income is still too small for SVODs to target. Nigeria has 133 million multidimensional poor people —more than 66% of the entire population— and various reports say residents spend between 59% to 97% of their earnings on food.
Also, Netflix has a two-edged concern about Nigeria’s dollar scarcity. Over the last few years, Netflix has had to worry about receiving payments from Nigerian subscribers via debit cards. Last year, several banks cut down dollar payments via debit cards to as low as $20 monthly. The second side is that Nigeria’s volatile exchange rates make it difficult to project how much international companies like Netflix can make from the Nigerian market. This year alone, the naira has lost over 40% of its value against the dollar.
It will take more than commissioning titles to have a deep-rooted presence in the Nigerian market and many other SSA countries. Adoption cycles don’t happen the same way in this region as in Netflix’s biggest markets. For instance, digital payments only took off when providers focused on leveraging USSD and agency banking. But Netflix seems to know this and just isn’t chasing hypergrowth anymore. That’s why it recently ended its freemium model in Kenya after two years. Instead, it dropped prices in many African markets by 37%. Netflix is prioritising getting a small but growing pool of paid subscribers over a drove of non-paying users. And to achieve that, it will play the long game.