Editor’s Note: Jason Chukwuma Njoku is the founder of iROKO, one of Africa’s thriving internet companies. The University of Manchester Chemistry graduate in the article below reacts to Netflix’s arrival in Nigeria. Njoku titled this post ‘The Death of an industry’ on his website:
By JASON NJOKU
In July 2011, as part of our series A due diligence, Tiger Global had McKinsey & Co conduct a study of Nollywood. The remit was:
1. Nollywood content popularity across Africa
2. Nollywood Industry Structure and Dynamics
– market size, growth, concentration and key trends
– content creator economics
3. Internet, broadband, payments and advertising trends across Africa.
They spoke with over a thousand people in Nigeria, Kenya and South Africa.
Over the weekend, I re-read elements of the study, just to refresh my memory on all that had happened over the last 4.5 years. Let me go ahead and share some of those slides with you.
1. Preference for Nollywood films skews heavily to the lower income population, though a significant portion of upper income consumers also enjoy Nollywood films, 35% of the top income decile of Nigerians prefer Nigerian films to Hollywood/Bollywood films vs. 70-75% of the rest of the Nigerian population.
The income skew in South Africa is more pronounced: <5%% of interviewees in the top 2 income deciles prefer Nollywood films vs. ~43% of the rest of the South African population
From the report:
Nollywood is significantly smaller and more fragmented than Bollywood and Hollywood.
– 95+% Nollywood revenue comes from VCDs/DVDs
– Cheapest distribution medium for quick production and release
– Limited financing and distribution infrastructure restricts alternatives
– Near term outlook for alternative distribution is limited
– Lack of theatre infrastructure, with high crime in few existing theatres; government has indicated interest in investing in theatres but effort has been limited to date. Existing “high end” theatres are expensive ($5-8 ticket price) and cater primarily to upper income Nigerians, with most releases coming from Hollywood
– Film rights and distribution agreements less developed / professional, making
alternative distribution difficult
– Pay TV channels pay very low prices and only take the best Nollywood films
Why did I resurrect a 4.5 year old document when I surely had better things to do with my time? Because from recent, quite startling chats from my content suppliers (producers) in Ghana and Nigeria, it appears that the VCD/DVD market has collapsed. Just to triple check, I reached out to a number of my close producer friends who I know from way back when. In Alaba, it appears to be an absolute rout. Defined below.
A rout is a chaotic and disorderly retreat or withdrawal of troops from a battlefield, resulting in the victory of the opposing party, or following defeat, a collapse of discipline, or poor morale. A routed army often disintegrates into “every man for himself”, or sauve qui peut, as the survivors flee for safety
And collapse it had. Something I had always expected. But this wasn’t some visionary musing from me. It was the most patently obvious thing back in 2010. It was happening in the West. That’s why I tried so quickly and aggressively to build alternative distribution platforms. Some succeeded. Others failed. But the core Internet TV, Linear/PayTV and cinema were well placed enough to be the future. I saw in 2011-2013 the total obliteration of the US Nollywood DVD market. One of the biggest distributors in the US [name withheld] now drives Uber for a living. I begged the Alaba marketers to not distil the quality and work with me, to build a better future. One grounded in economic fundamentals. They listened, and enthusiastically agreed, collected my inflated licensing fees, then turned around to try and screw me. I guess they saw me as ‘the final maga’. And you know. Maga must pay.
Yet the macro economics remained. VCD/DVD was evidentially going to die. They forced me to embrace others. Find elsewhere. Confidently declared the death of iROKO. I went from acquiring 95% Alaba Nollywood content to about 5-10% today. All in about 2 years. I started financing my own creations back in 2012 and never looked back. The ambition in 2016 is for 50% of my entire content budget to go to financed and owned content. The days of licensing are finally behind us. It was ever supposed to be. I never wanted to compete with my suppliers. I tried to respect and lift up Nollywood for the economic miracle it was. In fact, the biggest mistake in my life was not being aggressive enough in the beginning. My wife thinks I am a fool. I had the opportunity to buy internet rights in perpetuity in 2010/11 for the first 4k titles. For, like, $1k a movie. My logic at the time was quaint in retrospect. I didn’t want to use my 100% information arbitrage to take advantage of them. It didn’t feel fair. I could’ve owned 4k 2005 – 2011 hits for $4m. Legally. And nothing could have been done about it. I passed. At higher costs I went for licensing. Started inflating the numbers. To be good to Nollywood. Stupid me. Now I have to spend almost $4m year on buying, licensing content for my internet, mobile and linear tv business. iROKO single handedly ignited a near x10 increase in PayTV, Internet TV and other ancillary rights in Nollywood.
This fundamentally changed Nollywood forever. It’s only in retrospect I realise how we have fundamentally changed so much in Nollywood. We are primarily responsible for the creation of and financing of New Nollywood. We acquired pretty much all of it over the last 3 years. This hastened the chasm between old and new. The economics changed. Africa Magic followed suit. New Nollywood had cinema, PayTV and Internet TV. Old Nollywood just had YouTube. So they suffered. Even when I told them to not embrace that platform 100%. They ignored me. And now 90% of the producers I started buying content from originally are no longer producing or marketing movies. They have moved on. Alaba committed commercial suicide.
But some still say I am bad for Nollywood.