The Alaba Market, in Nigeria’s commercial capital of Lagos, is a chaotic mass of noise, vehicles and electronics shops; open air stalls selling software and movies of dubious provenance and tiny dark rooms housing the country’s ruthlessly profiteering film producers.
Financed at Alaba and filmed in houses-turned-sets, ‘Nollywood’ has become a $500 million-a year business, the second largest film industry in the world by volume and Africa’s biggest by some distance. Its video CDs and DVDs—some legitimate copies, many not—play in households and businesses throughout Africa and African communities worldwide, where its settings and universal stories of redemption, lust and greed resonate.
Jason Njoku, a British-Nigerian serial entrepreneur, has built a world leader in Nollywood distribution online—a Netflix NFLX -1.44% for the African Diaspora. His company, Iroko, took a globally-consumed but little understood product and built a business model around ease of access, solving many of the problems of intellectual property along the way. The company has six million viewers in 178 countries
Through Tiger Global and his new company, Rise Capital, Nazar Yasin has twice invested in Iroko, most recently in December 2013. He is one of a growing group of international investors awake to the potential of African content businesses.
‘When you look at what’s going on in Africa, there’s obviously a large population there—about a billion people. Up to 70 percent of the content that those people consume is African origin content,” Yasin says.
Iroko, which has expanded into music, post-production and licensing of movies for inflight entertainment, and sits in a pivotal point in the industry, able to identify and guide trends, according to Yasin.
For the time being, the company’s biggest audience is online and outside of Africa. CEO Njoku has said several times that the real growth will come once the continent itself opens up. For content providers, domestic and international, access remains a huge problem.
“There are fewer than 50 movie theaters in sub-Saharan Africa,” Yasin says. “There are only 6-7 million pay TV households in all of Africa. There’s not a lot of broadcast TV. There’s not a lot of ways to actually access content,” Yasin says. “Then consider the fact that most people… do have a mobile phone.”
The answer, then, will be online, and more likely than not, it will be mobile.
The mobile telecommunications boom in sub-Saharan Africa was one of the loudest signifiers of the region’s economic development over the last decade. Without hard-wired telephone networks, cellphones spread rapidly, with penetration in some countries now approaching saturation point.
As well as launching multi-billion dollar investments into African telecoms businesses, the arrival of near-ubiquitous cellphones drove a wave of innovation by local entrepreneurs. On the back of a breakthrough in mobile payments, the Kenyan capital Nairobi has become a haven for risk-taking venture capitalists searching for the next big thing in frontier markets tech. Lagos could soon follow, backed by local and international financiers.
The same infrastructure gap that held back fixed-line telephones has curtailed the growth of sub-Saharan Africa’s adoption of the internet. While urban areas have had access, either through satellites or one of the few fibre optic cables that served the continent, in many cases bandwidth has been prohibitively expensive.
Data from the International Telecommunications Union of the UN puts internet penetration in Africa at around 16 percent, although there is wild variation between countries. One percent of Ethiopians are online, compared with 28 percent of Kenyans.
That environment is changing. In the past five years, several large cables have made landfall into West and East Africa, serving the economic hubs of Lagos and Nairobi. At the same time, the cost of data-enabled phones and tablets has come down considerably, bringing them into the price range of the continent’s emerging middle class. As well as being one of the few global bright spots for Blackberry, Africa is an emerging center of growth for smartphone makers.
A November 2013 report by the McKinsey Global Institute predicts that between now and 2025, the number of internet-enabled phones used on the continent will rise from 67 million to 360 million, with internet penetration exploding to around 50 percent. In absolute terms, that means more than 450 million people could come online in the next decade and a half.
Penetration of cellphones in Nigeria is 68 percent; internet penetration is 28 percent. With a growing, urbanising population of nearly 170 million people and GDP growth predicted at more than 6.5 percent per annum for the next four years, the potential commercial opportunity is huge.
While African consumers are used to using the internet through a small screen, poor speeds and mobile platforms have meant that much of Africa’s traffic has been related to browsing and communication. As bandwidth becomes available and affordable, streaming content is likely to be more popular. Right now, only around 6 percent of African traffic is video, according to the Sandvine Global Internet Phenomena Report, a biannual rundown of global web use. Sandvine predicts that the continent will be the fastest new adopter of video applications in the world.
Like every other market, they will expect content that speaks to them directly. From the Sahara downwards, Nollywood, along with European football, is a constant presence on African television screens. While cultures may differ across Africa’s vast geography, many African consumers find common reference points in Nigerian stories. Brand Nollywood is already priceless; a ready-made product for Africa’s online video revolution.