MD: Turnaround Talk
At the close of June, MultiChoice confirmed what market watchers had long suspected: its DStv subscriber base is in sharp decline. With a loss of over 1.1 million subscribers in just one year, the media giant is facing structural headwinds that cannot be attributed solely to external pressures. The root cause? A failure to respond strategically to Porter’s Five Forces.
While rivals adapted to shifting consumer power, new market entrants, and emerging substitutes, MultiChoice stood still, neglecting the insights offered by Porter’s Five Forces. As a result, its South African base shrank by 589,000, with a further 591,000 lost across the rest of the continent, representing an 8% overall decline from 2024. Now, with a potential Canal+ takeover on the horizon and late-stage diversification efforts underway, the question isn’t whether change is needed. It’s whether change can come fast enough.
In the annals of corporate history, few cautionary tales are as instructive, or as sobering, as the collapse of Blockbuster. Once a titan in its industry, commanding a dominant market position and enjoying widespread brand loyalty. Yet it failed spectacularly.
While technological disruption played a role, a deeper analysis reveals a more fundamental oversight: the failure to heed the strategic insights of Porter’s Five Forces. This framework, developed by Harvard professor Michael Porter, helps businesses assess competitive pressure and industry attractiveness. Ignoring it can be fatal.
A Strategic Lens for Competitive Insight
Developed by Harvard professor Michael Porter, the Five Forces Framework is a cornerstone of strategic business analysis. It helps organisations understand the dynamics of their industry and assess their competitive positioning. Rather than focusing solely on internal strengths or direct competitors, it examines the broader pressures that shape profitability and sustainability.
Here’s a brief look at each force:
1. Threat of New Entrants: How easy is it for new players to enter your market and erode your share? Barriers to entry, like high capital costs, regulation, or brand loyalty, determine how vulnerable an industry is to disruption.
2. Bargaining Power of Suppliers: When a few suppliers dominate or offer unique products, they can dictate prices and terms, squeezing margins. Managing supplier relationships is crucial to maintaining control over costs and ensuring high-quality inputs.
3. Bargaining Power of Buyers: Well-informed or concentrated buyers can push for lower prices or better terms. Businesses need strategies to differentiate their offering and reduce switching incentives.
4. Threat of Substitute Products or Services: Can customers turn to alternative solutions? If substitutes are more innovative, accessible, or affordable, they can undercut demand and force strategic pivots.
5. Industry Rivalry: The intensity of competition, driven by market saturation, growth rates, and differentiation, directly affects profitability. High rivalry typically leads to price wars and margin pressure.
Blockbuster: Rewinding a Missed Opportunity
Blockbuster was once the king of home entertainment, with over 9,000 stores worldwide. But by 2010, it had filed for bankruptcy, eclipsed by Netflix and digital streaming. The reasons are strikingly similar to Kodak’s and equally avoidable.
1. Threat of Substitutes: Streaming services, such as Netflix and Hulu, provide a more convenient and on-demand alternative to physical rentals. Blockbuster failed to recognise how quickly consumer preferences were shifting toward digital consumption.
2. Rivalry Among Existing Competitors: Netflix, Redbox, and later Amazon Prime Video aggressively innovated and captured market share. Blockbuster’s late and half-hearted attempts to launch a streaming platform were too little, too late.
3. Bargaining Power of Buyers: Consumers grew tired of late fees and limited inventory. Netflix’s subscription model offered predictability and value. Blockbuster’s rigid pricing alienated its customer base, giving buyers every reason to switch.
4. Threat of New Entrants: The digital revolution lowered entry barriers. Tech-savvy startups could scale quickly without the overhead of physical stores. Blockbuster’s brick-and-mortar model became a liability in a world that was increasingly moving online.
5. Bargaining Power of Suppliers: As content creators began distributing directly to digital platforms, Blockbuster lost leverage. Studios no longer needed a physical intermediary to reach audiences.
Lesson: Blockbuster’s failure to adapt wasn’t due to a lack of resources; it was a failure of strategic foresight. A rigorous application of Porter’s Five Forces would have highlighted the urgency to innovate and evolve.
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Netflix: Winning by Reading the Competitive Landscape
While Kodak and Blockbuster faltered by ignoring the warning signs, Netflix thrived by actively applying the principles behind Porter’s Five Forces. Its rise wasn’t accidental, it was strategic.
1. Threat of Substitutes: Netflix recognised early on that DVDs, cable TV, and even piracy posed a threat as substitutes. Instead of clinging to physical media like Blockbuster, it pivoted to streaming and later to original content, offering a differentiated experience that was harder to replicate or replace.
2. Rivalry Among Existing Competitors: Rather than competing solely on price, Netflix has invested heavily in original programming, such as Stranger Things and The Crown. This reduced direct comparability with rivals, giving it exclusive leverage in a crowded market.
3. Bargaining Power of Buyers: Netflix reduced buyer power by creating sticky value, personalised recommendations, binge-worthy content, and a seamless user experience. These features increased switching costs and kept subscribers loyal, even as competitors emerged.
4. Threat of New Entrants: By building a massive content library, investing in proprietary algorithms, and scaling globally, Netflix raised the barriers to entry. New players couldn’t easily match its infrastructure or brand equity.
5. Bargaining Power of Suppliers: Netflix anticipated the risk of content suppliers pulling titles (as Disney and Warner Bros. eventually did). In response, it invested in in-house production, reducing dependency and gaining complete control over its most valuable assets.
Lesson: Netflix didn’t just react to change, it anticipated it. By proactively addressing each of Porter’s Five Forces, it turned potential threats into strategic advantages. In doing so, it rewrote the rules of entertainment and left companies like Blockbuster in its wake.
Industry dominance is not guaranteed
In an increasingly complex and competitive business environment, the downfall of once-dominant firms like Blockbuster, and potentially MultiChoice, serves as a potent reminder that industry dominance is not guaranteed; it must be earned and re-earned through strategic vigilance. Embracing Porter’s Five Forces is more than an academic exercise; it is a practical lens through which companies can assess risk, uncover opportunity, and build resilience. By continuously evaluating market entrants, buyer and supplier dynamics, rivalry intensity, and substitute threats, organisations gain a 360° understanding of their strategic position and can act proactively rather than reactively.
Business turnaround professionals play a pivotal role in operationalising this framework. With their crisis-tested expertise, they diagnose structural weaknesses, recalibrate value propositions, and align organisations with current market realities. Their ability to translate Porter’s insights into actionable strategies, whether through restructuring, scenario modelling, or stakeholder alignment, often determines whether a struggling firm recovers or recedes.
In a world where disruption is constant and competitive pressure unrelenting, success favours those who are not only aware of the forces around them, but have the clarity and courage to adapt decisively. Porter’s Five Forces remains an indispensable compass, and in the hands of skilled turnaround specialists, it becomes a roadmap for sustainable recovery and enduring relevance.
