HUSTLE & FLOW #3: Data centers investment, telco growth strategies, mobile video for the mass market, and more

Dear colleagues and friends,

As international events such as the Africa CEO Forum, the Basketball Africa League kick off, MIP TV or SXSW get cancelled, companies ban all non-essential travel, and stores run out of toilet paper, it seems like the long-dreaded zombie apocalypse may be upon us. (One shouldn’t let a good disaster go to waste though - time to play the market). 

In Africa, if fake news is spreading much faster than the virus, stumbling oil prices resulting from lower Chinese and global demand are beginning to spell doom for oil-producers Nigeria and Angola. In any case, the show must go on, so welcome to the 3rd edition of HUSTLE & FLOW.

This week we are going to get a bit technical as we take a closer look at opportunities in data centers, telecommunications and mobile video. 

I've enjoyed chatting about African Entertainment in person with several of you last week in Los Angeles. Interest for African talents and stories is rising in Hollywood, and hopefully some of the exciting collaborations I’m hearing about will come to fruition soon. In the meantime, please keep your great comments, questions and referrals coming by emailing me at marie@restless.global.

Happy reading to all,

Marie

INVESTMENT NEWS

Emerging markets PE firm Actis has acquired a majority stake in Rack Centre, Nigeria’s leading provider of data center colocation and cloud services. Rack Centre hosts the Internet Exchange Point of Nigeria and has the largest installed capacity in West Africa servicing over 35 carriers, Internet Service Providers, and Mobile Network Operators. This news follows the recent announcements of Berkshire Partners’ acquisition of South Africa’s Teraco, the Africa launches of cloud data centers by Microsoft Azure and Amazon Web Services, and European data center giant Interxion's move into East Africa.

The development of local hosting capacity is a key ingredient of the growth of digital entertainment in Africa. At the moment most content consumed by African internet users is still hosted abroad, leading to long lag times and high costs. As the continent carries on its digital transition and demand for hosting capacity rises, data center trading is shaping up to be one of the largest investment trends in the coming years. If you have a few million (or dozen million) lying around, you might want to get in on this.

ARCHITECTURE

Nigerien architect Mariam Kamara, founder of Atelier Masomi, is set to begin construction on her sustainably-designed arts center in Niamey this summer. Like her previous projects in the city, the building will be built using compressed earth bricks.

And while we’re on the topic, here are more great examples of African architecture to feast your eyes on.

VISUAL ARTS

The new Yemisi Shyllon Museum, which opened last October in Lekki, Nigeria, would be a worthy addition to the above list. The museum is named after Prince Yemisi Shyllon, one of Nigeria’s biggest art collectors, who financed the construction of the building and its future maintenance to the tune of $1.7 million. 

BROADCAST

Multichoice’s VOD service Showmax has announced that more than 50% of its catalogue is now local content. Although Showmax is available across Africa, its investments in original content have so far been limited to South Africa.

Chinese pay-TV broadcaster StarTimes has added ESPN to its linear offering, making the sports channel available across Africa for the first time since a carriage dispute ended its deal with MultiChoice in 2013. Since then, fans in sub-Saharan Africa had been watching ESPN content on the ESPN Player subscription OTT service. The deal between Disney (which owns ESPN) and StarTimes was no doubt motivated by ESPN’s acquisition of the Africa broadcast rights for the NBA, which include rights for the new Basketball Africa League (BAL). 

SPORTS

Five-time boxing world champion Floyd Mayweather has announced its intention to expand its Money Team franchise in Africa, starting with South Africa, Nigeria, Kenya and Egypt. The Money Team offers specialized boxing programming based on Mayweather’s own training regimens, as well as virtual reality and personal training. The TMT franchise currently operates 44 outlets across the United States. 

The health and fitness sector has been growing alongside the westernization of urban lifestyles across Africa, with gyms, spas and healthy food options popping up everywhere. I believe there is an opportunity here for entrepreneurs who will manage to create strong, fun, scalable regional brands.

TELECOMMUNICATIONS

Telcos are Africa’s overlords. They run the continent and own the customers. Any business with a digital component will sooner or later have to deal with them. That is why it is crucial to understand the main forces at play in the African telco space.

A flurry of recent activity is giving us some interesting insights. Ethiopia is set to open the bidding process for the awarding of two telecoms licenses which have attracted the interest of Orange SA, MTN Group, Safaricom, Econet Global and Etisalat. In Angola, US-backed group Africell Holdings found itself the only bidder for the country’s fourth licence to run infrastructure-based mobile, internet, fixed telephony and pay-TV services. Meanwhile, South Africa’s Telkom is preparing to auction off some real estate assets to finance the modernization of its network while loss-making Cell C is considering acquisition offers; and Zimbabwe’s struggling state-owned telco NetOne has failed to attract an investor to take over its majority shareholding.

Although a couple “fresh” markets (such as Ethiopia) may remain, what we are witnessing overall is the maturation of the $60 billion Sub-Saharan African mobile market, which is now facing the same headwinds that have hit operators around the globe: saturated markets, evolving consumer preferences, slower subscriber growth and falling ARPUs (average revenue per user). Bain & Company sees two strategies for African telcos to survive this next phase: either focus on becoming a world-class network operator (as quality of service is still an issue on the continent), or choose to own the customer rather than the network by developing innovative lifestyle platforms that include content streaming, financial services, gaming, but also e-commerce or logistics. Kenya’s Safaricom is a proponent of this second strategy. Both approaches mean lots of opportunities for companies that can work with the telcos to achieve their goals.

MOBILE VIDEO

That takes us in a roundabout way to an interesting question I received last week from a HUSTLE & FLOW reader about Quibi, Jeffrey Katzenberg’s highly anticipated short form content start-up, and whether its model could be relevant for Africa. First of all, let’s stop a minute to acknowledge Katzenberg’s and CEO Meg Whitman’s tremendous fundraising abilities, as Quibi just added $750 million to its war chest ahead of its April 6 launch, after an initial round of $1 BILLION. Other than that, I must admit that I am a Quibi skeptic. Do we (or even Millennials) really need “one more thing to do with our phones instead of ever being bored”? In any case, it is not a solution built for the African market: too expensive, too premium, too heavy. Quibi’s most innovative feature is its proprietary Turnstyle technology, which allows users to switch seamlessly between landscape and portrait, actually bringing up different points of view on the same story. But Turnstyle videos use 20% more data than standard mobile videos - and that simple fact would make the service dead on arrival in Africa, where the price of data is already the biggest hurdle to the mass adoption of mobile video.

To expand on what I said last week, the opportunities I see in mobile video in Africa are for hyper-local, cheap content (such as local celebrities lifestyle, music videos, soaps or comedy in vernacular languages) distributed to the mass market through partnerships with telcos pursuing the “innovators” strategy described above. This is not actually anything new: in recent years all telcos have launched their own mobile music or video stores, with some turning out to be quite successful (MTN Music+/MusicTime!, MTN Comedy+) while others have bombed. Indeed, the transition from “dumb pipe” to content platform is anything but easy (just ask AT&T how its merger with Warner Media is going), that’s why none of the telco-owned services has managed to scale past a few countries and why none of them has expanded into original content yet. I believe that the bottom-of-the-pyramid mobile video market is still up for the taking and that a (well-funded) start-up with strong telco links has a better chance at this than any in-house service the telcos can come up with. 

Of course, the higher segments of the market will go to Netflix, which is already on track to adapt its offer to local specs. After implementing payments in local currency for South Africa, Nigeria and Kenya, it is now considering expanding the lower-priced, mobile-only option it piloted in India to Africa.

EVENTS

The events below may or may not happen. Who knows anymore!

FIHA, Abidjan, March 23-25

ARES Fighting Championship, Brussels, April 3rd

Cannes Film Festival, Cannes, May 12-23

Africa-France Summit on Sustainable Cities, Bordeaux, June 4th-6th

HUSTLE & FLOW #2: Netflix takes Africa, tourism deals in Ivory Coast, the "historical breakthrough of African fashion", and more

Dear colleagues and friends,

First of all, thanks to those of you who wrote back with words of encouragement after the first edition of HUSTLE & FLOW. Your enthusiastic feedback strongly validates the need for more actionable, business-focused information on the African Entertainment space, so here we go with episode 2: 

The big news this week is Netflix’s one-two punch entry into Africa, with the official launch of Netflix Nigeria, and the release of South Africa-made “Queen Sono”, the platform’s first African original series. Netflix’s intent for Africa is bold and ambitious -- I’ll talk more about what this means for African content and for the VOD space below.

Another topic that is top of mind right now is how the coronavirus pandemic will affect Africa. At the time of writing, only 3 official cases had been reported on the continent (in Algeria, Egypt and Nigeria) and Kenya had suspended all flights from China. China is an important player and investor in the African tech and media space (through companies such as Huawei or StarTimes). Besides concerns over African countries’ preparedness to handle the virus, the longer term issue is how the current Chinese lockdown will impact African economies (Spoiler alert: it’s not looking good, but also temporary and nothing we haven’t seen before). 

Do continue to refer more people to this newsletter as you’ve been doing this past week. For the moment I am keeping HUSTLE & FLOW confidential so I haven’t activated a subscription link. To be added to the list just drop me a quick line directly at marie@restless.global.

And finally, please don’t hesitate to send me questions or topics that you’d like to see covered in future editions of HUSTLE & FLOW, as well as suggestions for improvement.

Happy reading to all,

Marie

INVESTMENT NEWS

International football star Didier Drogba recently concluded a roadshow that has helped his birthplace, Côte d’Ivoire, collect MOUs for a total of $15 billion in commitments to back a variety of tourism projects, including hotels, exhibition centers, waterparks, seafronts, resorts, tourist routes, retail centers and eco-tourism developments. Tourism is Ivory Coast’s third economic pillar after agriculture and energy, and the country forecasts 4 million tourists arrivals (up from 2 million today) bringing in more than $1.5 billion by 2025. Many other countries in Africa could benefit from similarly aggressive tourism development strategies.

BROADCAST

Ivorian public broadcaster RTI has launched its new television channel, RTI 3, dedicated to young fans of sports and music. RTI 3 will be available on the Canal+ and StarTimes bundles as well as on DTT (Digital Terrestrial Television / TNT en francais). 

Africa’s on-going (and fraught) transition to DTT has been one area of strong interest for global operators such as StarTimes, DSTV, Canal+, but also the very French M6, which acquired a 33% stake in Ivorian channel Life TV in 2017. However, the initial excitement of some investors over Africa’s DTT potential was based on the flawed assumption that more spectrum = more cheap channels = more content = more viewers = more revenue. That equation was false because it forgot to take into account the fact that in most African countries the pool of TV advertisers is still very small. So in reality what we’re seeing is simply more channels that end up competing over the same advertising budgets from a limited number of brands. My view is that investing in DTT is necessary and interesting for existing operators but very risky for new entrants. More on the (very complex) topic of Broadcast and what can be done in the space in Africa in future editions of HUSTLE & FLOW.

FASHION

Last week I mentioned the buzz created by Cameroonian designer Imane Ayissi at Paris Haute Couture Fashion Week. Well, turns out there were not one, but three African designers hogging the spotlight on the Parisian catwalk this year, as Ayissi was followed by Austrian-Nigerian 2019 LVMH Prize finalist Kenneth Ize and South African 2019 LVMH Prize winner Thebe Magugu, whose separate collections also garnered rave reviews. While Le Monde talks about “the historical breakthrough of African Fashion”, we might very well be witnessing the birth of the next global fashion brands. 

VISUAL ARTS

Not to be outdone, the Visual Arts also shone last week as collectors flocked to the 1-54 Art Fair in Marrakesh. While some fear foreign speculators will snap up major works cheaply leading to a masterwork exodus out of Africa, others point to the growing number of African collectors and their private museums. In any case, contemporary African art is becoming both an asset class in itself, and a new sector in need of structure and expertise. 

SPORTS

Here is a lovely profile of Sarah Chan, the Sudanese-born Africa talent scout for the Toronto Raptors, which would make a great film or TV series. I’m too busy to snap it up for myself so I’m offering it to you here :-)

I have Mark Kaigwa to thank for the link - and actually I highly recommend Mark’s awesome newsletter The Letter N and his company Nendo if you’re interested in smart African social media trends and analysis.

FILM & TV

Before we get to the big chunky piece of G.O.A.T. meat that is Netflix, let’s acknowledge the good performance of African filmmakers at the recently concluded festivals in Sundance (“Farewell Amor”, “Softie”, “Cuties”, “This is not a burial, it’s a resurrection”) and Berlin (several films including “This is My Desire”, the first Nigerian film to be selected). These are all talents to track.

Now on to our main story. Netflix began its careful exploration of the African market a few years ago, starting with a few acquisitions in South Africa and Nigeria. Last year, it announced the commission of its first 2 original South African TV series, and went on a buying spree in Nigeria, snatching up basically all the top Nollywood titles (it also acquired “Lionheart” before its release to brand it its first Nigerian original film). The success of these films on the platform, and especially of “King of Boys” and “Moms at War”, emboldened the streamer to push forward. Last week, Netflix Nigeria officially launched with a clever Twitter campaign and a star-studded event attended by Ted Sarandos himself, during which its first Nigerian original TV project, a 6-part sci fi series by Akin Omotoso, was revealed. Just a few days later, Netflix’s first ever African original TV series, the South African-produced “Queen Sono”, premiered on the platform. I binged-watched it of course.

Why is this a big deal? Netflix has solid plans for Africa, and this is only the beginning. Their presence and their approach in Nigeria specifically will lead to an increase in content quality (more than in quantity as Nollywood already produces prodigious amounts of content), and in demand for professional studio space, equipment, crew, and development expertise. It will also educate the global market about Nigerian content, and de-risk investment in the country’s film industry for other international players. So, thanks Netflix.

VOD

A question I often get asked is: is there still anything to do in the VOD space in Africa? Well, the short answer is no. The battle over streaming in Africa is over before it even started and Netflix has won (I don’t trust Digital TV Research numbers but the order of magnitude feels correct).

I know some people have a hard time believing this as it’s still early for African VOD. Yes, eventually the other global platforms will make their way to the continent as well. As the only deep-pocketed local player, Showmax might survive for a while, limping and sickly, but I’m not even sure about that. I also have great respect for Jason Njoku and what he has achieved with Iroko. His wife Mary Njoku, Founder and CEO of ROK Studios, which sold to Canal+ last year, is responsible for one of the very few exits of the sector. Jason has announced his plans to take Iroko public in 2021, but I do not see this happening neither do I see another path forward, especially now that Netflix is stepping up its Naija game. 

Here’s the thing: When it comes to Netflix’s play in Africa, it is not even about the money they’re bringing or the kind of deals they’re doing. For an industry and a continent that has struggled to be seen and appreciated for, truly, hundreds of years, the fact that a prestigious global brand now says “We’ve seen you, we’ve noticed your talent, we appreciate your stories and the way you tell them” is extremely powerful and will buy Netflix decades of goodwill (just like it did for Black Panther’s Ryan Coogler). And with this, they can go anywhere they want. 

A caveat though to my earlier statement: I do see opportunities in online video for local players or new entrants targeting the mass market with simple, basic, gamified, mobile-only solutions. Stay tuned for more in future editions of HUSTLE & FLOW.

EVENTS

FIHA, the premier hotel investment conference in Francophone Africa will take place at the Sofitel Abidjan Hotel Ivoire on March 23-25.

And finally, there are some concerns that the following events might get cancelled or postponed for corona-reasons, but at the moment they’re still happening:

MiP TV, Cannes, March 30th-April 1st

ARES Fighting Championship, Brussels, April 3rd

Africa-France Summit on Sustainable Cities, Bordeaux, June 4th-6th

HUSTLE & FLOW: a Newsletter about Investing in African Entertainment

Dear colleagues and friends,

I’m excited to launch HUSTLE & FLOW, my newsletter about business and investment opportunities in the African Entertainment sector. 

Why HUSTLE & FLOW? Well, partly as an homage to the iconic 2005 Sundance Audience Award winning film directed by Craig Brewer and produced by John Singleton. The press junket with star Terrence Howard for the release of the film was one of my very first interviews as a budding 23-year-old journalist at CNN in New York (he said he liked my outfit - I kept the tape). 

But HUSTLE & FLOW is also a reference to the entrepreneur’s hustle and the investor’s deal flow in the Entertainment sector, which are the core of what this newsletter will be about. Here I will be using the term Entertainment to encompass what is often referred to as the Cultural and Creative Industries (film, TV, animation, video games, music, fashion, visual arts, architecture and publishing), but also Sports and Hospitality, as all these sectors are related and intertwined, and present numerous synergies. 

The global Creative Industry generates $2.25 trillion annually (more than global telecommunications), is a major provider of jobs (30 million globally), and is particularly resilient to economic downturns, while the global Sports market in itself is set to reach $614 billion in 2022. But despite Africa’s undeniable wealth of raw talents, these sectors are very much under-funded and under-developed on the continent. That is the textbook definition of an untapped opportunity. 

For most traditional investors however, Entertainment is also a new, mysterious and slightly esoteric field which they perceive as very risky (“Artists don’t know how to run a business”, “There is no way to predict if a film is going to be successful or not”, “Piracy sucks out all the profit from content production”, “All football clubs lose money”, “Africans don’t have enough disposable income to spend on non-essential items”).

And yet they may have also noticed that every bar, club or festival they go to from Los Angeles to Tokyo now plays Afrobeats, that Zimbabwean-American “Walking Dead” star Danai Gurira just signed a juicy overall deal with ABC Studios, that Cameroonian designer Imane Ayissi was the talk of the latest Paris Fashion Week, or that Nigerian fighters squarely dominate the UFC.

What does this all mean? And really, where is the money? I have survived 15 years of being 15 years too early as a creative entrepreneur in Africa, during which I have launched several companies, closed down a few, advised many, and successfully exited one. These experiences have taught me what works, and what doesn’t.

In the meantime, the world has also changed and very crucially, entertainment consumption has gone truly global thanks to the explosion of content, social media and e-commerce platforms such as Netflix, Amazon, Spotify, YouTube, Facebook, Instagram or ESPN that are now connecting African talents to the world. That is a true game changer and the reason why you should be paying attention.

In this newsletter I will attempt to demystify the African Entertainment space and help you identify investment opportunities by sharing news, trends and key figures, as well as calls for projects and relevant events. Although I will link to existing articles or reports, I will also include exclusive market insights that I typically do not share widely or publicly. 

If you are receiving this email it is because our recent interactions have made me think that you might have an interest in these topics. If you know of anyone in your network who would benefit from some HUSTLE & FLOW, please have them email me. And if you would like to stop receiving these emails, just let me know ;-)

I am looking forward to your feedback, comments and questions as I work through the kinks of this new format.

Happy reading to all,

Marie 

INVESTMENT NEWS

Afreximbank makes a statement with the launch of a $500M fund to support the production and trade of African cultural and creative products over the next two years. The funds will be accessible as lines of credit to banks, direct financing to operators and as guarantees. The fund’s first investment is a $190-million facility to Kojo Annan’s Made In Africa Inc. (MIA) for the acquisition of Vlisco, the leading producer of African wax fabric whose Dutch ownership had been a source of controversy in Africa. An interesting move which can be seen as re-appropriating cultural appropriation.

Emerging Capital Partners acquires Burger King South Africa from Grand Parade. ECP, the investment firm that’s been quite successful at developing the Java and Artcaffe franchises in Kenya, believes that it can bring growth where GPI has failed.

Et ici en français dans le texte pour encore plus de details.

South African Pay TV operator Multichoice launches its Innovation Fund to invest in South African black-owned SMEs in the Video Entertainment and Technology space.

FILM

“Americanah” author Chimamanda Adichie hosted Kenyan Hollywood actress Lupita Nyong’o last weekend at Mo Abudu’s new EbonyLife Place in Lagos at a diner attended by heavyweights of the Nigerian Creative sector. Nyong’o is producing and starring in the TV series adaptation of “Americanah” for HBO which is set to start shooting soon.

FilmOne Entertainment, the leading Nigerian distributor and production company, has gone into production on the first movie of the $1 million film fund it launched with China’s Huahua Media and South Africa’s Empire Entertainment in December. FilmOne plans to eventually finance 8-10 films as part of this first slate.

The poster for 'Namaste Wahala', the Nollywood Meets Bollywood crossover movie which promises exciting images of an over-the-top Nigerian-Indian wedding, goes viral on social media. Let’s see if the film can live up to the hype when it comes out in Nigerian theaters on April 24th.

Grammy-award winning director Melina Matsoukas and British-Ugandan 'Get Out' star Daniel Kaluuya hit the red carpets of Lagos and Johannesburg for the release of their film ‘Queen & Slim’. This might look like your normal promotional tour except that it is not: US studios typically don’t bother sending their stars to promote the African releases of their films as these markets are considered insignificant. But in the past couple of years several Black Hollywood stars such as John Boyega or David Oyelowo (and Lupita Nyong’o - see above) have made the trip, pointing (just like the “Americanah” project) to growing links between Hollywood and Nollywood.

If this feels like a lot of Nollywood news it’s because A LOT is going on. I am very bullish (as you may already know) about the Nigerian film industry. I’ll have more opportunities to explain why in future editions of HUSTLE & FLOW. 

VISUAL ARTS

British-Nigerian artist Yinka Shonibare is building project spaces and artists residencies in Lekki in Lagos and on a farm in Ijebu to support what he sees as “an African renaissance”, citing the positive influence of Tokini Peterside’s Art X Lagos fair in growing the African visual art market. Less than a year ago, Nigerian-American artist Kehinde Wiley had opened his own Black Rock residency in Dakar, Senegal. Both are art world superstars who are financing their projects mostly through their own funds, but they will need financial and institutional partners to ensure their sustainability. 

SPORTS

The Basketball Africa League (BAL) announced the 12 teams (Angola, Egypt, Morocco, Nigeria, Senegal, Tunisia, Algeria, Cameroon, Madagascar, Mali, Mozambique and Rwanda) that will be competing in the inaugural season set to tip off in Senegal on March 13th. The launch of BAL shows the NBA’s commitment to growing the game on the continent. At the moment, African broadcast rights for NBA matches are still pretty cheap and basketball is clearly nowhere as popular as football, but the potential for mass adoption is real.

French development agency AFD and Paris 2024 announced a partnership to support 24 athletes to deliver social and environmental projects, both in France and in Africa. AFD is also currently building an online platform whose aim will be to promote and raise financing for sports development projects in Africa. The platform, dubbed “Sport en Commun” (Sports together), will be launched in June during the Africa-France Summit in Bordeaux.

The ‘Match in Africa’ opposing Roger Federer and Rafael Nadal in Cape Town on February 7th raised over $3.5m to support early childhood development initiatives in schools all over Southern Africa. It also hit a Guinness World Record for the highest number of people in attendance at a single tennis match – over 51,000.  

CALLS FOR PROPOSALS (ANIMATION)

The Africa Digital Media Foundation (ADMF), in association with Heva Fund, Rubika, ADMI, and the Association of Animation Artists will be supporting select East African animators to attend The Annecy International Animation Film Festival and Market, which has a special focus on Africa this year. Interested animators should apply here. 

The 4th edition of Digital Lab Africa, the platform dedicated to digital creative content, is calling all African creatives to submit their projects in animation, video game, digital art, immersive realities and music before March 1st, 2020.

See a trend here? Yes, French development agencies are very much interested in supporting the growth of the animation and gaming sector in Africa. Animation production requires big teams and the sector has the potential to create a large amount of jobs for the youth through outsourcing or original content creation. However the market for African animation is still basically non-existent, with only a couple buyers willing to pay ridiculously low prices per episode. There is a way to game the system (no quick fixes though, TIA) - hit me up if you want to hear more.

EVENTS

AfDB will be holding its Fashionomics Masterclass in Nairobi on February 26 and 27. The class will engage local creative entrepreneurs operating in the textile, apparel and accessories industries to equip them with the know-how to establish successful fashion brands from concept to execution. This Masterclass sold out very quickly - demand is very strong for this type of hands-on business training dedicated to the creative industries. There’s an opportunity here to standardize and scale - who will take it?

I will be at MIP TV in Cannes on March 30th, 31st, and April 1st, where I will be facilitating the MiP CLINIC - DRAMA on How to Producing in and with Africa, TV Drama’s Last Frontier:

With the steady rise of global platforms, the next hit TV drama can now come from anywhere. In this context, content from Africa is not only the last frontier, it also presents potential crossover appeal to audiences in Europe and America. What are the right strategies, opportunities and partners to produce the future top dramas from Africa?

Also keep an eye on the 2nd meet of the ARES Fighting Championship, the Afro-European MMA League launched by Vivendi Sports, taking place on April 3rd in Brussels. I think they are onto something - come see it for yourself if you are nearby.

And finally, mark the Africa-France Summit on Sustainable Cities in your agendas. It will take place in Bordeaux, France from June 4-6 and will feature several sessions on Sports and Creative Industries development and investment. I will be there!