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Lessons in competition from the demise of GTV

Feb 23, 2009 Business Daily, Strategy

“Gateway Broadcast Services announced today that its Board of Directors has unanimously approved a plan to liquidate the Company.
The current financial and global crisis has severely interrupted the company’s ability to secure further funding for the continued operation of the business.
Gateway Broadcast Services, suppliers of the GTV service to subscribers across Africa has over the last 2 years invested a total of US$200 million and created jobs and competition in 22 markets. The economic crisis that has emerged globally over the last few months has caused excessive demands on the business. 
With immediate effect the service will be withdrawn.”

GTV Website (30 January 2009)

The excerpt above is from the website notice that is still ringing in the ears of football lovers across Africa. GTV, the new pay-TV kid on the block, unceremoniously and suddenly went under. Staff were still taking in subscription payments when they were told that the company was kaput. Just like that.

GTV’s liquidation left much anger in its wake. Customers paid in advance, and many paid for several months or even a year. Football junkies did not know where their next fix would come from, since GTV owned the rights to screen the bulk of the matches from the insanely popular English Premier League (EPL) in sub-Saharan Africa. GTV suppliers, dealers and staff were left ruing their involvement with the company.

So what went wrong? As the GTV statement suggests, frantic efforts were underway to secure new funding for the venture. The “current financial and global crisis” is blamed for the rookie company’s demise, choking off much-needed capital. But is that the whole story?

GTV faced an uphill task from the outset, and made some early mistakes. It was facing a dominant incumbent, Naspers, and its DStv pay-TV network. Its master stroke was to secure the EPL rights, thereby ensuring it immediately got a large and fanatical customer base. It built its programming around this core, but struggled to show that it was anything other than a one-trick pony – the rest of the channels offered were never terribly exciting. Securing the EPL games also set it up for future problems: it was forced to bid a huge amount to steal the rights from DStv.

In the early days of GTV, I noticed another problem: its customer service sucked. The company oddly never seemed to issue invoices – you were merely connected by a reseller and disconnected every month if you failed to pay on time. Later, it began issuing SMS reminders, but even these were inconsistently despatched. Payments could only initially be done through a partner bank – and errors were common. Calling their customer-care number was frustrating: you would immediately find yourself discussing matters with someone with a heavy foreign accent, with little knowledge of the local situation in Kenya. These things are not in themselves problematic – talking to call-centre operators based in Kenya can be equally annoying – but the point is that GTV seemed to launch in a hurry (to coincide with the football season) and seemed to build up its delivery infrastructure as it went along.

It was also too ambitious, too quickly. Rather than take on its huge rival in a few selected markets, it rolled out across 22 very diverse countries in a rush. It invested big sums in sponsoring local content, trying to build an edge. Its business model was far from proven, but it began punching above its weight. The result? We are all back in the arms of DStv, which is thrilled.

Lessons for new competitors taking on big monopolies: get your business model right, not just your strategic intent. Don’t ever forget the service element – it’s what gets you the loyalty. And choose your battlegrounds and target markets carefully – you can’t do it everywhere at the same time to a high standard.

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