Kana is an Ethiopian general entertainment, free-to-air, satellite TV channel. Elias Schulze, managing director at Kana, says that exciting times are ahead. The young American venture capitalist, in addition to Kana, is also Africa CEO for Kaymu, an online marketplace with operations across 15 African countries. Kaymu is a joint venture between Rocket Internet, MTN, and Tigo Millicom. He previously worked as an Engagement Manager for McKinsey. Prior to that Schulze worked at Emerging Capital Partners, an Africa-focused private equity firm based in Washington DC. He is also co-founder of The Africa Group, a boutique advisory and VC firm. He holds both a Bachelor's and a Master's degree from Georgetown University's School of Foreign Service. Bruh Yihunbelay of The Reporter sat down with Schulze for an exclusive interview regarding the new TV channel and other pertinent issues. Excerpts:
The Reporter: Who came up with the idea of establishing Kana Television? Walk me through the whole process of the establishment.
Elias Schulze: Two years ago one of the local co-founders, Addis Alemayehou, and I had drinks and he said that we can do something in the TV sector here. There is a lot of room to expand and people are watching a lot of foreign content. This is a big country and there is a lot of talent. So we decided to do something together. Addis is a great entrepreneur and a gut guy and I am from a consulting background. So I believe in numbers. So I said that's great and decided to study it.
So basically what happened is that I hired a Nigerian friend who is at McKinsey to look at the market. So we conducted a study and spent some time and money on it. What we found out was actually interesting. There is room here but it will be a little bit tricky because it is a really vibrant but early stage market. So what do we do about it? At the same time the other two co-founders, Zeresenay [Berhane] and Nazrawi [Ghebreselasie], joined. This was two years ago. So we believed that Ethiopia is an interesting market. Initially we we thinking of a slight tilt towards music but we were figuring out what sort content we are going to broadcast.
In the mean time, I met with our operating partners and lead investors – the Moby Group. Those guys really had a fantastic vision. I remember I walked into the room and there was the CEO, COO, CFO and Head of Business Development. So we talked for about an hour and a half and since they have heard a lot of great things about Ethiopia they wanted to explore the idea together. That was about a year and a half ago. They visited it and really enjoyed it and said that local partners really had a strong vision. We are from different backgrounds. Zeresenay is an amazing filmmaker, Addis has a background in communications, Nazrawi is a creatives and a strategy guy and I have a background in entrepreneurship in different sectors including finance and consulting.
Basically that's how the relationship was formed. We went back and forth many times and found something that was a really nice match. Because the Moby Group have done similar things in other markets they said that this model is kind of interesting and that there is a lot of room to expand here in Ethiopia. They wanted us to take the lead and they will provide support.
We started hiring people and in the process we had to interview 400 people to get sixty actors. About nine months ago we got the green light and so we just started sprinting and we haven't stopped since then. We are hoping that around the end of March we will be live. The progress has been great because the team is so strong and I think we have a common vision. This isn't hierarchical and each person is meaningful.
For example, if I don't get my coffee in the morning, I can't concentrate. So the lady who serves me the coffee is as important as the director who is directing the show and the director is as important as the actor who is acting the voice. So everything is so closely linked and there is no unnecessary bodies at Kana. Everyone has a pretty important role to play, which I kind of like because it creates a lot of excitement together.
You have two companies operating the whole thing. There is BeMedia and Kana. What is the structure and the relationship between the two?
First of all, we looked at the law for a very long time. We went to different Ethiopian lawyers and talked to people in the administration. We wanted to make sure they understood what we were doing. So what we discerned – and this is similar to how other companies have operated – is that the best and the most clear way is to have a clean and professional content. It should ultimately be something Ethiopians here and in the diaspora are very proud of, the same way Americans are proud of Hollywood, Indians are proud of Bollywood and Nigerians are proud of Nollywood.
So the best way to do that is by making BeMedia, which is owned by Zeresenay, produce the content. BeMedia will be sort of Kana's exclusive partner. This is basically Ethiopia exporting services to Kana, which is internationally-based. Of course, Zeresenay is also a co-founder of Kana. It's a nice relationship and we are able to have an Ethiopian entity, BeMedia, working with us in sort of a joint venture, which is Kana.
There are other ways we could have considered. We could have done it in Washington DC, Johannesburg or Nairobi but we said let's go all in. You don't commit to a marriage halfway. That means being very visible, very present and very transparent. So we decided that the best way to do it is by producing the best content, doing it very much aligned with Ethiopian rules and bring good -will.
We are not here for a short time. The company, the investors, the co-founders, the local partners are all in it for a long-term play. We also hope to spur the development of other actors. We don't believe that there are competitors in this market. We think that everyone is trying to race towards the same direction and maybe in the future like 10 years from now we can argue that there is a competitor and have to fight for a market share. What we are doing right now is trying to grow a very small pie into something significant, which is a very unique moment in history.
Your programs are 70 percent foreign and 30 percent local and you dub all of the foreign contents. Considering the fact that the Ethiopian television audience is diversified especially when looking at the urban and rural demographics, what sort of research did you conduct before deciding on what type of content you are going to air?
Ethiopia, is of course, fairly a rural nation and urbanization is happening fairly quickly. Even people in the rural environment have access to TV. So we wanted figures and facts and worked a little bit with Ipsos. Of course we are not operational so this doesn't really benefit us directly. We asked them to do a big study of the market. So they went to 12 cities and they interviewed about 3,500 people. What they discovered in urban areas was that the level of satellite penetration was far beyond our original estimates. So they believe that in Ethiopia one out of three households has TV. According to their estimates, in terms of people who are 15 years old and above – across the board – that reaches 18.5 million people. Out of that they believe that 11 million is rural and 7.5 is urban. Even if their rural estimates are not exactly correct, it still means that there are at least 10 million satellite viewers in the rural area. This is an interesting way to reach people across Ethiopia. Kenya, which is a peer market, has 2.7 million TV households. Ethiopia has about twice as many but Kenya's advertising sector is 20 to 30 times bigger. On a comparable basis that means they are 50 times bigger. In that regard, we have so much room to expand.
The great thing about satellite and Ethiopia is that the Ethiopian family is our judge. They are our first client. Whoever advertises later is our second client. So we believe that if we don't please our first client we can't get our second client. As much as possible we have to make sure that they are satisfied and content with it.
When we come to urban areas 77 percent was their estimate. So that means nearly four out of five households have satellites. It also means that people are watching both local and foreign content. So what we are starting is we are base loading our programing with a fair amount of dubbed content and some original content. And over time we will build more and more original content. That's really the goal, which is to have an exceptional array of original content.
We want to be exporting content and other people to be exporting content within five years. Turkey made 250 million dollars out of exporting content. That's a huge foreign currency generator. Even if we can do five or 10 million, everybody will be happy. So Zeresenay, being head of production, will lead that. So we can also partner with people who have amazing content.
In terms of the dubbed content, here is the fact: of television viewers in Ethiopia, half those who turn on the TV every day watch something foreign. 48 percent of urban TV viewers watch foreign content every day. This is a very interesting number because it means that they are hungry for stories that are universal. So we went over 200 shows and finally picked eight. Statistically speaking, it is actually harder to get a show on Kana than it is to get into Harvard. The shows we picked out have universal emotions. There is a reason why people are watching Korean, Turkish, Arabic and American shows. That's because they are universal stories and they relate to the Ethiopian viewer. So we picked them out very carefully making sure it really fits to the Ethiopian audience. Then we decided to produce it here. We have 60 people working on producing these shows. Originally, they came from another country but we've localized them and we believe that those stories that we picked really matter to the Ethiopian viewer. Ultimately that will satisfy the demand. So it is going to be a mix of dubbed and original.
It is not something that has never been done. Italy and France have been doing dubbed content for 50 years. Since it is a very unique market and as part of our large part of original offering we will put this into the mix.
How do you plan to generate revenue and when do you think will be the break even point for the company?
The local co-founders and the other people involved really like the approach of the Moby Group. They say this is a long-term thing and always say let's try to break even in three to five years. That's not even payback on investment because this is an expensive operation and we are investing a lot particularly on people, some in technology and in running cost. Three to five years is the profitability metric but of course earlier would be better. So this is a long-term thing and no one is going to run away.
Dayparting, which is the practice of dividing the broadcast day into several parts like daytime, prime time and late night, is common in TV programing. What sort of structure do you have at Kana?
When we launch, we will have four to five hours of original content. This means fresh content. The study by Ipsos includes a graph, which shows when people watch TV. Most people watch TV from 6:00 to 10:00 PM. So generally speaking that's prime time and that's when we put all the fresh content. Obviously, we will add programs and place them in different time slots. During the day we also have other things like music programs or we will strategically rerun things.
For example, on Saturday afternoon we have planned a marathon of one of our famous shows during the week and let's say you don't get home from work until 9:00 PM and you miss the show every day. So on Saturday you sit down in front of your TV and you and your friends watch the entire grouping of things that you missed. Strategically, we are thinking about how we can do it to maximize viewership in each slot.
We have eight shows and there are going to be four week shows. So at 6:00 PM everyday during the week you can sit down and enjoy a brand new episode of that show. Same thing on the weekend with different shows. So the idea is to keep things fresh and interesting and over time add more original and fresh content.
Ethiopia does not have TV ratings and that is considered to be the achilles heel for not being able to choose the network or the time slot for advertisement. How do you plan to tackle that and attract potential advertisers?
This is where I am particularly very excited and passionate about, which is bringing data into the market. We did the Ipsos study in order to give us a baseline. From that we know that there are 18.5 million satellite viewers and 7.5 of them in urban areas. We also know that the both EBC and EBS do well and that is great and I hope what we will provide benefits to those channels.
Like I said earlier we want the pie to grow. Right now Ethiopia's yearly advertising is 10 to 20 million dollars while Kenya's is 350 to 400 million dollars. So the point is not to take a big part of the small pie but to take a small part of the big pie. So one major thing is that we have invested to introduce numbers into the market even if right now we are not taking advantage of that since we are not live yet. So it's fine if that's being used in order for advertisers to spend more money on TV.
Part of that study revealed that television was much more effective in terms of its reach than radio. Second is how do we do it going forward? Now we know who is watching in general. So what we hope to do is work together with the other television channels, agencies and independent third parities to introduce to Ethiopia what has been the case in so many developed markets – a rating system.
The thing is we have to do it the innovative Ethiopian way. We can't afford to have these sophisticated devices on the screen like they have in New York City. So how do we do it more intelligently? Can we do something with mobile phones, interactive voice response, SMS or any type of interesting statistical assessments? Obviously there should be a third party group that is very credible that does that. We hope that within the next six months we can be part of the group that puts that together. So let's get smart groups like Ipsos from Kenya to partner up with people here to provide on a weekly or monthly basis and publicize it in newspapers and other platforms and let advertisers know what people are watching. There are different statistical approaches that are reliable and give advertisers a real base. And so we want to engage in that conversation and set up something. The overall aim is to grow the pie.
You said earlier that you would eventually increase local fresh content. What types of shows are you planning to introduce?
Moby Group supports the vision of the co-founders especially those who have produced things like Zeresenay and Nazrawi. We want to do things that are interesting including sitcoms, real dramas, documentaries and talk shows. Our focus is to produce and in select cases, co-produce or co-distribute, content that relays stories that matter and resonate with the Ethiopian viewer. While we have a core mandate to produce much of this content from within our own talented team, we are open to and welcome discussions on selective external collaborations.
Ultimately, our viewers are the judges, they have many options and are critical. They understand quality and know good stories. So we want to focus on stories that matter. We believe in entertainment with development. For instance, Difret, Zeresenay's film, is a brilliant production but also has a very strong social message. And that type of thinking is what we think is important. Development topics are great forms of entertainment too. Generally, we believe in entertainment and we believe in stories that matter. Some of those can have a development component.
One of the criticisms towards Ethiopian production is lack of quality in visual production. What sort of emphasis have you given to that?
In terms of visual production and creativity around that, this is a journey we are all learning from. Every single market goes through the same challenge. If you look at Bollywood films 10 years ago and now you can see that their level of production has increased. It is a natural part of the evolution of a media company and the entertainment sector. We have taken great care that our brand remains consistent in all ways including visual and messaging.
We sat down more than six months ago with our partners and asked the question: if Kana was a person what does it look like? What kind of Ethiopian is Kana? Out of that comes a view of what the channel represents. Everything from its colors to its energy is what we want to be consistent. A lot of that comes down to training as well. We've been very careful to select, invest and then train so that people can retain that high quality. It's about keeping quality standards and learning quickly. Moby Group has these learnings so we send our people there for capacity building for two weeks and they send some of their people to train people here. Ultimately, the idea is to strengthen the local team to the point where these guys who are junior graphics or junior creatives manager now in two years' time can be the head of the entire department and can be training other junior people. It's again part of the three to five-year profitability period and is about formulating a vision at the start and then retain that with discipline.
What challenges have you faced so far?
We like to consider ourselves as startups. Though we have a stronger base than other startups, we have the spirit. So any startup in any country has challenges particularly in a market that is fairly very young. One of the challenges was selecting the talent. It took a lot of time and energy. In other markets where the sector is more developed that would have been easier because people would have so much experience. We understand these challenges up front.
The second is setting up the basic infrastructures including the different dubbing studios. We wanted to source it locally. So selecting the factory that has the foam, the gypsum board or the bricks we can use was also a challenge. Infrastructure takes a little bit of time and energy. These were some of the challenges but going forward production by itself is time consuming and difficult.
For instance, you come home at 7:00 PM, grab a beer, sit down and enjoy a one-hour show with your family. To produce that one hour content, when we are efficient, it maybe takes five days of work. We have to have at least four or five hours of content every day. That in itself is a massive challenge. It has to go through an entire process from selecting to negotiations, translations, dubbing, syncing and quality control. It's a long and complicated process. So making sure that we have that content with the right quality every single day is a never-ending challenge.
Are you going to have shows like The O'Reilly Factor (an American cable television news and talk show on the Fox News Channel hosted by political commentator Bill O'Reilly, who often discusses current controversial political issues with guests) and The Tonight Show Starring Jimmy Fallon (an American hit late-night talk show hosted by Jimmy Fallon on NBC)?
We hope to develop and foster personalities that matter. Obviously not Bill O'Reilly because we won't touch politics. Each of the people we look to engage, we would hope they would build a personality around themselves whether they are famous not or not. In fact, we almost prefer people who are not because as entrepreneurs we like to build together.
Maybe we will do a doctors show in the future. Just have somebody warm that can engage with people who are having health issues. In each of the areas – it could be entertainment or business – I hope we develop really exceptional personalities. And we are very careful in picking those who go on air.
So is an already known personality off the table?
There are of course advantages to that at times. So that's not necessarily off the table but we do like the idea of growing together. The median age at Kana is 24 and that represents Ethiopia. We incorporate that spirit of youth and of optimism and hope that, I think, is flooding the country today.