Legacy media is a tough gig. The way content is delivered has changed fundamentally, creating a competitive arena that even the ancient Romans would be shocked by.
The battle for eyeballs is being fought across screens of all shapes and sizes, with consumer behaviour in the living room changing as broadband internet access improves. For context, YouTube has the leading market share of living room viewing in the US.
Once upon a time, eMedia’s main competitor was the hapless SABC. This wasn’t exactly the mightiest foe to beat, so times were good for the purveyors of Friday Action Night on e.tv and Anaconda reruns. But these days, eMedia faces a world in which the scariest competitor is YouTube, followed closely by Netflix, Disney+ and other streaming options. These are far more terrifying serpents than anything J.Lo had to face.
With Amazon now moving from soft launch to hard launch in South Africa, Amazon Prime will become more of a threat as well. Let’s not forget DStv, under new ownership by Canal+ and needing to make changes to improve the economics.
Despite this wildly competitive backdrop, eMedia is still a R3bn revenue business on an annual basis. The group generates an annual profit of roughly R300m and, more importantly, converts revenue into cash and pays dividends. There’s a good business here, albeit one that faces an uphill battle to find any growth.
Disruption comes to all, as companies such as Telkom concede. The narrative in the latest eMedia earnings announcement is worryingly defeatist in tone, referring to a “more than satisfactory achievement” despite revenue declining by 5.2% and profit dipping by 1.2%.
Management notes that it is a “pleasure to report” that the group outperformed the TV advertising sales market on a yearly basis, with that market suffering a decline of 8.7% for the year. Getting a better slice of an ever-decreasing pie isn’t a strategy that creates long-term value for investors. It also shouldn’t feel pleasurable.
To be fair, a management team that simply tells it how it is should be applauded for doing so. It would be far worse to use smoke and mirrors (or a Nimrod Nkosi cameo appearance) to try to convince us that eMedia is a growth asset.
But an honest approach still doesn’t address the major issue here: how will it avoid a terminal decline in the business?
eMedia’s market share is already the highest among its direct competitors (prime-time share of 32.2%), so there isn’t much upside there. The problem is that this share is an inappropriate measure of consumer behaviour, as it ignores the streaming platforms that everyone is watching. The Broadcast Research Council has appointed a new agency to address this gap in the stats. When those results come out, it may give people a real shock.
eMedia faces a real risk of an Ernest Hemingway moment, where it collapses ‘gradually, then suddenly’
Like all regional broadcasters in the world, the only defence that eMedia has against the US-based streamers is the extent of local programming. Storytelling in familiar accents and languages still attracts a market.
But is that market big enough to appeal to advertisers? The decline in TV advertising suggests otherwise. And even the parts of eMedia that are designed to futureproof the business (like Openview) are reliant on advertising revenue. eMedia’s subscription-based offerings will be extremely difficult to scale into meaningful profitability. The discontinuation of Showmax on DStv is a cautionary tale.
There are some other underlying growth engines, such as radio assets and Cape Town Film Studios. eMedia has invested in a visual effects studio in Hyde Park. It also took a 30% stake in Pristine World Holdings in 2025. All of this is aimed at moving further up the value chain into content production rather than just distribution. Netflix has shown the world just how important that is.
But with advertising contributing R2.17bn of the total revenue base of nearly R3bn, management is a long way off from truly diversifying the group. This is why the earnings multiple is just 5.2, as the market believes that growth will be zero or even slightly negative. The theory is that the dividend yield of 12.8% makes up for it.
But with a five-year total return of just 5.6%, it clearly doesn’t make up for it. And as digital adoption increases, eMedia faces a real risk of an Ernest Hemingway moment, where it collapses “gradually, then suddenly”. In such a scenario, the trailing dividend yield doesn’t save investors.
At this stage, eMedia looks more like a value trap than anything else. The squeeze of the anaconda is tough to escape, so IM is avoiding this risk entirely.
