COVID- 19: IROKOtv Cuts Salaries, Places 83 Employees On Unpaid Leave After Massive Revenue Loss
IROKOtv has announced it will be placing 28 percent of its Nigerian workers on indefinite unpaid leave of absence due to the drop in revenue caused by the Coronavirus Pandemic. The company also will be cutting salaries of 49 employees.
According to the Nigerian Video On Demand platform’s founder, Jason Njoku, the economic situation and uncertainties caused by pandemic forced the company to make the decision.
So we had a decision to make. We had to right-size IROKO for any reality. Because you know what? No-one knew what was going to happen next.Jason Njoku, Founder IROKOtv
Dropping Number of Subscribers
During the early days of the lockdown, IROKOtv registered a boom in sales, driven by high consumer sentiment. According to Jason, the platform hit its highest daily addition within the first few days of the lockdown.
However, as the lockdown became protracted and insecurity began to spread, consumer confidence dropped, causing a significant drop in the number of daily subscribers.
While IROKOtv was losing subscribers, Netflix, YouTube and other international streaming platforms were gaining a lot of them. Jason said he was not surprised that it is an out of Africa thing. He added that for their kind of paid product the surge didn’t last.
IROKO furloughs 28% of its Nigerian Team
Following the significant reduction in the number of subscribers, the company said it is furloughing about 28% of its Nigerian team. The Furloughed employees would be unpaid, but will still be eligible to use IROKO’s health insurance due to the current health crisis.
Jason shared that the company opted to furlough instead of sacking because they wanted to retain the option of scaling quickly in case things become better.
“I wanted to safeguard the business I also wanted to hedge my doom and gloom bet that things may not be as bad as I thought they were. So we retained the option of scaling up again pretty quickly,” Njoku said.
About $200-250k lost in Revenue per month
Despite the furloughing of staff, Jason has revealed that IROKOtv still remains unprofitable. The company is expecting a loss of between $200-250k/month for the rest of the year.
According to the company, the naira devaluation from N360 – N450 increased the operation cost of the company, thereby reducing profit. Jason says their goal is to reach cash flow positive.
Njoku said, “our AWS bills are $45k/month. Just like that. Things just got real for us. Devaluation = N360 –> N450. In April that went from N16.2m/mth to N20.25m/mth. Scaled the rest of 2020 = N32m per year newly budgeted expense (assuming N450). Our N3,000 annual subscription just went from $8.33 to $6.67.”
He added that the platform’s annual subscription of N3000 dropped from an equivalent of $8.33 to $6.67, thereby reducing the revenue it generated. He further added that price increase isn’t feasible since they provided important and essential services.
To soften the impact of the drop in revenue the company is cutting the salaries of about 16% of its Nigerian team. Jason says the company is planning very conservative fundamentals to see it through this period.
He added that Africa is not the rest of the world where trillions of dollars in palliatives are being pumped into resuscitating the economy. He further added that with the triple threat of COVID-19, Oil and economic collapse, there are very few moves a business can make.
Below is the email Jason Njoku sent to the IROKO staff last Friday.
These are truly unprecedented times. What comes next is anybody’s guess. What we do know is that everything will change. Nigeria most definitely will never be the same again. Iroko in order to survive this new reality needs to change. We need to survive. In order to do that we need to slim down and get to our fighting weight so we can re-emerge smarter, stronger, faster. Unfortunately this requires us to make temporary adjustments which will impact fellow some of our team members. We have taken the Covid19 pandemic seriously from zero 0. Iroko was the first Nigerian company to implement working from home and encouraging going remote and self distancing. This wasn’t in our best interests. This was for employees safety. This was before Covid-19 really became a thing here in West Africa and I remember the reluctance and resistance from team members locally. When Lagos and then the Federal government started their statewide lock downs we were ready, in good spirits and in a good position to ride it out whatever came next. We had already gone remote and so in theory were ready to go. Ready to work. That was 6 weeks ago. It feels like a long time ago. It is. When the Covid19 lock downs started Iroko saw an initial surge in subscribers in Nigeria as our community took the initial lock down like a 2-3 week holiday. All was good. Since the extension of the lockdown, the subsequent security instability and just last week the global collapse of the oil markets our numbers too have reduced significantly. And this is scary. Really scary. Whereas we can’t predict the future we cannot hope the situation away. We cannot pray the situation away. We need to act. We need to do something. We need to move early to protect as many employees as possible over the rest of 2020.
With that we have been forced to slim down Iroko by furloughing approximately 28% of our Nigeria team members. What is furloughing? We are forced to place employees on an indefinite unpaid leave of absence. The remaining employees will be required to take a material pay cut (effective from May onwards). We will communicate over the next 24hrs those who will be affected. This decision was not taken lightly as we waited for the last 6 weeks monitoring the situation to see how we could improve and how we can mitigate it without any additional job losses. There appears to be no way. These are truly unprecedented times. What comes next is anybody’s guess. Our hope is that things rebound quickly so we can welcome those who are furloughed all back, but early indications expect things to be pretty bad for the rest of 2020. We will provide regular updates to the companies position over these perilous times. Those of us left need to get our collective heads down working as hard as we can to entertain African in this time. Whereas entertainment isn’t essential, it is important. Our entire purpose and existence is supposed to bring our members happiness and escape from day to day realities. The work we do has a dramatic impact on happiness. There is no better time to spread hope & happiness. Those of us fortunate to continue need to remember this as we go forward.
Stay well, stay safe, stay distanced.