Middle Eastern Promise

November 2, 2009 World Screen

 

This article originally appeared in the MIPCOM ’09 issue.
Middle Eastern broadcasting is suffering its greatest state of disarray in the past 15 years. Two old—and struggling—pay-TV protagonists, Orbit and Showtime Arabia, have decided to throw in their individual towels and merge their resources. But the region’s third pay-TV player, and undoubted market leader, Arab Radio & Television (ART), is staying determinedly aloof and very independent. And waiting in the wings is at least one other would-be pay-TV broadcaster, which is planning to use HDTV as the catalyst to success.
 
Meanwhile, it is fair to say that the region’s massively popular free-to-air networks continue to grow in number and importance—at least at the top of the tree. It is worth stressing this last point, because while there are some 500 free channels, it is only the top 25 that matter. The best of the rest struggle by on modest revenues from SMS and other telephone services. There are dozens and dozens of so-called “cultural” (read religious) and other governmental channels that have some slight importance in their individual markets, but little or no impact pan-regionally.
With some of the top channels now embracing first-run studio product from Hollywood distributors as well as top-notch locally produced formats, is it any surprise that the likes of Orbit and Showtime have struggled?
 
Gabriel Chahine, a partner and the head of consumer and media practice at the management consultancy Booz & Co.—which took a very close look at Showtime ahead of the platform’s planned, and subsequently cancelled, IPO—says that neither Orbit nor Showtime was generating solid revenues as a separate operation. “We don’t have the economics of the pay-TV networks, but it would be very difficult to imagine they are making money, especially with the amount they pay for sports rights,” he says. From an economic standpoint, three pay-TV platforms in the region “was way too much, and it’s very difficult for them to differentiate their content from free-to-air.”
 
Marc-Antoine d’Halluin, who ran Showtime Arabia, is the CEO of the new company. He said of the combination with Orbit, “This merger creates [the Middle East and North Africa’s] largest pay-TV operator, offering the very best premium channels in the region, as well as truly innovative services to our customers, including HD channels, video on demand and other interactive services.”
The rival platform ART firmly denies his statement about “Shorbit” being the largest pay-TV operator, but in the absence of published data, these sorts of claims and counterclaims are inevitable.
 
BRINGING THE BEST
What the new platform will provide is the “best of” Western programming and the hits that we are all familiar with: Desperate Housewives, 24, Ugly Betty, Lost and the rest. D’Halluin insists the merged platform will “have everything one can dream of.” It is, he says, looking at a bright future. He insists that both parties to the merger had hundreds of thousands of subscribers. “By that I mean the subscriber bases were not far apart, so at the very least it is a multiplication by two, and in fact it’s more than that for revenues.”
 
Which takes us right back to the old saying “Lies, damned lies and TV subscription numbers”! Perhaps d’Halluin thinks he is merging his numbers with Orbit’s oft-stated 400,000 “viewing points” and thus magically giving the merged business 800,000 “viewing points.” The reality is significantly less. One reliable source, extremely familiar with Orbit’s and Showtime’s actual numbers, suggests that the merged players will have an uphill battle to reach even 400,000 actual subscribers, and when wholesale subs are removed from the packages, the combined DTH numbers might be fewer than 250,000.
 
ART’s offering, and that of “Shorbit,” will need to be good, and seen as providing value for money, because the free-to-air players are year by year improving their own game. Popular local shows can generate blistering ratings (except there are no ratings, but that’s another story). But the top shows, like the long-­running comedy hit Tash ma Tash, can guarantee viewers, as can the Pop Idol and Star Academy talent searches. Last year’s massive Ramadan hit was Nour, a sultry, sexy telenovela from Turkey that cleared traffic across the Arab world, such was its impact. It prompted nightly chat-show comment, with pro and anti opinions on what the consequences of the program might be on Arab audiences.
 
Indeed, one major free-to-air player, MBC, the Saudi Arabia– backed channel cluster, just goes from strength to strength, drawing massive support for its ever-growing portfolio, which includes MBC1 (on air since 1991), MBC2 (since January 2002), 24-hour news outlet Al Arabiya (since March 2003), the kids’ service MBC3 (since December 2004), and MBC4, which relaunched as a channel for women in November 2005. In other words, MBC is now offering viewers the sort of full-service portfolio normally only found on pay TV. But there’s more. The past year or so has seen MBC Max, MBC Action and MBC Persia launched, as well as one tentative foot in the pay-TV door in the shape of MBC+ Drama on Showtime Arabia.
 
PRINCELY TIES
However, MBC is far from alone. LBC is another strong free-to-air broadcaster, and the pan-regional satellite version of the terrestrial network is now 85-percent owned by Prince Alwaleed bin Talal, the billionaire nephew of Saudi Arabia’s King Abdullah. The prince increased his stake in LBC earlier this year, along with the Rotana bouquet of film and music channels beaming out over the region. In other words, here’s another powerful, deep-pocketed individual looking to create an Arab media empire.
 
The missing link, so to speak, is sports. While it is fair to say that ART has very much focused on sports these past few years—helping to increase subscriber numbers a tad in the process—there are plenty of local media companies that see sports as their key to winning viewers. Perhaps the most aggressive of these is Abu Dhabi Media Company, which has bought the rights to Barclays Premier League English football for three years from next year’s 2010­2011 season. The games were stolen from Showtime Arabia, which had the rights for the past three years. It remains to be seen how Abu Dhabi monetizes the rights, although one option is to sub-licence the games to Showtime-Orbit.
 
Among the other players, there are scores of channels broadcasting out of the tax-free Dubai Media City (DMC). That there’s a need for new production space in the Arab world is undoubted. Middle Eastern television is expanding at a spectacular rate, with reliable forecasts predicting future massive growth. The consultancy Northern Sky Research says that the Middle East and North Africa will enjoy an average 38-percent annual growth rate in the number of HDTV channels available over the next ten years. Standard-definition channels have seen growth rates of some 30 percent annually over the past few years on Arabsat. Nilesat, transmitting out of Cairo, carries more than 450 TV channels with some 350 free to air, and claims a 45-percent market share. Indeed, the Paris-based broadcasting consultancy Euroconsult sees the region having 1,200 TV channels by 2015.
 
Various countries have created media zones, usually with easier taxation and ownership benefits, and limiting bureaucracy. Cairo’s giant Egypt Media Production City (EMPC) was originally conceived to bring Egyptian moviemaking back to life. To a very limited extent that’s happened, but today EMPC isn’t full of moviemakers but TV producers, with up to 40 talk shows a day coming from its facilities.
 
It’s the same with Dubai Media City (established in 2001), and its new Studio City operation. While there are complaints that Dubai’s initial concept was just a dressed-up real-estate scheme, there’s no doubt that the DMC emphasized the role of media in the Gulf, and is home for high-profile players like Showtime Arabia (and possibly Orbit in its merged guise), MBC, Ten Sports, Reuters, CNBC, and new players like the European formats giant Endemol. Jamal Al Sharif, the executive director of Dubai Studio City, says he expects 5-percent to 10-percent growth in 2009, despite the adverse impact of the global financial crisis, which has badly affected Dubai’s real-estate self-confidence.
 
MEDIA ECOSYSTEM
Abu Dhabi’s entry takes a very different approach, and deliberately sidesteps the argument that millions of square feet are needed to make a mark in production. The capital of the United Arab Emirates is home to twofour54, which was established to foster the creation of content in the region. Its COO, Wayne Borg, says the concept is very much focused on creating the right ecosystem. Twofour54 has already managed to secure some heavyweight clients and partners. Not the least is CNN, which is building its own studio at the facility in readiness to start daily transmissions of a nightly show. Tony Maddox, CNN International’s executive VP and managing director, says that the Abu Dhabi operation satisfied two aims. “We have a number of bureaus already in the region, and we run our Middle East website out of Dubai. We asked ourselves whether it was sensible to create a hub in the region, like a mini London hub, because our viewing figures in the Middle East are always good. This would then allow us to create a daily show for prime-time viewing… and [from this hub] we could coordinate the other bureaus we have… including our regular coverage out of Cairo, Baghdad and Jerusalem. When the Abu Dhabi opportunity came along, and we saw that we could operate our own facility, producing shows that we wanted to do, it ticked all of the boxes. It also gave us a much greater level of coherence as far as the region is concerned.”
 
Borg says plans to develop five high-definition studios are well under way, and, once completed, these will be fully equipped with the latest production and post-production technologies. Borg says, “Over time, we want to establish twofour54 as the regional center of excellence for the content-creation industry, housing an exciting, vibrant community of media-content creators which resonates internationally.”
 
STARGAZING
Both the pay-TV sector and the free-to-air players need this new content. But, long-established as Orbit, Showtime and ART are, there’s shortly going to be a new kid on the block in the shape of Charlie Ergen and the EchoStar/DISH operation. Ergen is not wholly “new” as far as the Middle East is concerned. EchoStar-branded boxes have been sold in the region for 15 or more years. EchoStar imports some ART and other Middle Eastern channels as part of its specialty linguistic packages on DISH Network in the U.S.
 
Now, EchoStar thinks it can be a consolidator in the region. Not, it stresses, among any of the existing pay-TV operators, but among the well-established and highly professional free-to-air players. And EchoStar wants to use HDTV as the catalyst for change. ART and Showtime/Orbit are starting to embrace HDTV, and the free-TV broadcasters want to start tinkering with HD. They recognize that it represents the future for TV, but as yet HD’s impact in the Mideast has been minuscule. Meanwhile, mobile telephony, and even new developments like mobile TV (DVB-H), are in use in some markets. Many, many channels depend 100 percent on income from premium-rate telephony and SMS messaging.
 
Generally these markets have yet to embrace digital terrestrial TV, although some countries are experimenting with the technology. Cable is virtually nonexistent except in the United Arab Emirates, although there’s nearly 100-percent national cable coverage in Lebanon (the systems are illegal, however). Qatar and Bahrain have advanced digital distribution systems.
 
Of one thing we can be certain: TV in this region will never be dull.