For an online movie streaming service, selling DVDs in shops might seem like a backward step.
But for Nigerian film provider Iroko it’s all part of a long term plan to dominate online films in Africa. Having successfully set up an African diaspora-based business of streaming films all over the world, Njoku is looking to build its African audience. But the internet isn’t good enough in many parts of the continent. Which is why Iroko needs a DVD business, says founder Jason Njoku.
He is currently selling films through 370 shops and markets in Johannesburg, a venture that was started in June. “Ideally we’d like it [DVD selling] to break even, but it’s a business that we want to have a stake in as it dies over the next 10 years,” explains Njoku, “The offline will come online.”
There are three main centres of movie making in the world. Hollywood, India’s Bollywood, and… Nigeria, inevitably known as Nollywood.
IrokoTV has built up an audience of over 1m in over 170 countries, focusing on the Nigerian and African diaspora.
And marketing to a diaspora throws up some strange results. “Malaysia is around our fifth or sixth biggest country – I’d never have imagined that,” says Njoku. But a diaspora is a limited market. Njoku reckons there are around 30m Africans in the diaspora – “and only a subsection will watch Nollywood movies”.
But Nigeria is moving up – not long ago it was Iroko’s 15th biggest market, but now it’s ninth or tenth (the numbers change from month to month). As Njoku explains: “We have more viewers in London than we do in all of Nigeria – but London probably has only half a million Africans, whereas there are 170m people in Nigeria.”
Eventually, as African internet infrastructure improves, so will Iroko’s potential market. Perhaps all of sub-Saharan Africa would be in reach – over 800m people. “As Africa comes online, what are people actually doing?” asks Njoku. “It’s mainly entertainment and sports. Nothing else matters.”
For now, Iroko is happy to focus on a core catalogue, and a niche market that is “narrow and deep” rather than trying to offer too much to a wide audience.
“It’s incredibly costly to build a large scale in this business. Look at how much Spotify, Netflix have to spend just to be in the game. Our cost base is a fraction of a fraction of that.”
Iroko started with initial funding from a friend of Njoku’s – Bastian Gotter, an ex-oil trader, who put in £90,000. Since then, Iroko has raised $13m from investment companies Tiger Global and AB Kinnevik. The company says it is on target to generate $5m in revenue in 2013.
While there are several online go-to destinations for US films, such as LoveFilm or Netflix, Iroko is looking to dominate Nigerian films in a different way.
Firstly, IrokoTV is a mine of data for how Nollywood movies are watched, ranging from which actors are most searched for, to how many people started a movie or finished a movie. The viewer comments often exceed 1,000 per film.
“For me to watch a movie, I always refer to Internet Movie Database (IMDb.com) – there’s nothing like that for Nollywood – we are the most sophisticated feedback loop there is,” Njoku says. This is far more useful knowledge than just the basics, such as that Nigerians don’t watch romantic comedies, and prefer action films.
But as well as licensing films for online distribution, Iroko also edits and produces its own films – it has a catalogue of over 90 movies already. “Imagine if Netflix owned its own catalogue”, says Njoku.
It’s a lucrative proposition. Nollywood films are often akin to TV series – with long episodes, and a slow pace of plot. Iroko edits the films into a watchable single-sitting movies of around two hours, down from a typical four to six hours.
At present, around two-thirds of Iroko’s revenue is from advertising, but it is a difficult sell due to the dispersed nature of the audience. And it’s cyclical. “Ideally, our ads revenue would be zero,” says Njoku. But it’s about getting enough people to pay for monthly services. And to avoid to high a churn of customers, IrokoTV offers subscriptions in three-, six- and 12-month packages.
“The internet is still something where people expect things to be free,” Njoku adds. For Iroko, that’s probably as big a challenge as getting Africa online in the first place. “As a platform, we are less than two years old. It will take 10 years to really show our potential.”