Naija ‘Netflix’ adopts paywall, snubs Kenya for Kigali

What you need to know:

Broadband restrictions and high data costs have previously restricted iROKOtv from targeting Africans in the diaspora.
Chief Executive says switch to subscription only model could see as much as 95 per cent of the site’s traffic lost.

The founders of a popular Nigerian video-on-demand service have opted to set up their East African operation in Rwanda, scrapping initial plans for Nairobi.

The decision comes as the company abandons its ‘freemium’ business model and switches to being a purely subscription-only service. This change could see as much as 95 per cent of the site’s traffic disappear, making the decision to expand to East Africa critical to its survival.

Mr Jason Njoku, co-founder of online broadcaster iROKOtv, says he and his partner Sabastian Gotter chose not to set up a regional office in the Kenyan capital, which he has visited twice, after recent market study visits to Rwanda, Uganda and Tanzania.

“In order to have a fresh perspective on East Africa, iROKOtv will sit in Kigali, Rwanda,” Njoku announced in a blog post last week. “I have a deeper post about why but that will be (published) later when I set up the team.”

He, however, cited Rwanda’s cheap data rates and “perfect location” between Uganda, Kenya, Burundi and Tanzania. “Also, the local market is too small to enable us to get lazy and attempt to build for that market alone.”

Dubbed Africa’s Netflix, iROKOtv.com began online streaming of free and paid-for Nigerian and Ghanaian movies in December 2011. By mid-2012, the company had raised more than $10 million (KShs870 million) in capital funding and now boasts “more than 500,000 registered users”. The site has since diversified to offer Hollywood fare and promises to add Korean and Indian content.

Broadband restrictions and high data costs have previously restricted iROKOtv to targeting Africans in diaspora. A CNN report named its main markets as the United States, the United Kingdom, Canada, Italy and Germany.

Njoku, however, says he is eyeing audiences of more than 30 million people on the continent as data rates, payment options and other factors improve. He says the firm has now switched to having all its content behind a paywall.

“I am really excited about 2014 as it’s a massively transitional year for the company,” Njoku says in his blog post. “We finally have settled on the hard way ahead (charging for content)… Now we just need to execute.” He adds: “We are (now) a subscription-only service… We expect to lose something like 95 per cent of our traffic before the year is out.”

The site has been charging a flat monthly fee of $5 (about KShs440) for iROKOtv+ and making most of its money from advertisements served with their videos. This is known as a ‘freemium’ model where the core service is free but a premium is charged for access to certain content, in this case the latest movies. Contacted by BDAfrica.com, the firm confirmed that the subscription rate -- which now covers all content -- has risen to $7.99 a month (KShs700), with various discounts for paying three, six or 12 months in advance.

Explaining his view of the East African market, Njoku says: “The art of the start-up is, at the very beginning, to narrow your efforts to afford the most likely path to survival. That’s it. Survive or die. Once you move beyond survival you need to grow. And quickly. Less rambunctious climates (than what you find in Lagos) are more favoured to this type of SME growth.”

iROKOtv has offices in London, New York and Lagos with some 100 staff.