OSN’s David Butorac

OSN CEO David Butorac shares with TV MEA the strategies that have allowed the platform to succeed in a challenging landscape.

TV MEA: I read that OSN’s profits were up by 66 percent in 2014. What drove those gains?
BUTORAC: Pay TV has come of age in the MENA region. The faster we grow the subscriber base, the faster the revenues increase at the company. And we’re ensuring that we keep a tight rein on our cost base. So the business is accelerating rapidly. Pay TV has had a long gestation period in this region. Since the merger in 2009 between Orbit and Showtime we’re seeing strong growth and that’s being reflected in the financial performance.

TV MEA: As you expand your channel lineup, what are the sorts of things you look for?
BUTORAC: Any piece of content, whether it’s a channel or programming we put into our channels, has to deliver one of three things. It’s got to drive subscriptions, it’s got to drive viewership, or it’s got to be an anti-churn device. Ideally, any channel will deliver two of those three. At minimum it has to deliver one.

One of our core strengths is our portfolio of movie channels. We aggregate the very best movies and we run them in the shortest window possible. That’s a strength for subscribers who want to keep up with the latest Hollywood content. In fact, on a VOD basis, we’re offering content immediately off the back of a cinema release now.

When it comes to third-party channels, it’s the key brands that we have exclusively and are very proud of—Disney, Nickelodeon, Discovery, National Geographic—that drive subscriptions and viewership. Perhaps the biggest change we’ve seen over the last few years is that the success of our Arabic-language entertainment channels is driving our growth. In 2011 we launched our first owned- and operated Arabic-language entertainment channel, OSN YaHalaHD. As it stands today, that’s our number one channel. It’s gone from new to number one on our platform of 150 channels in the space of four years. We’re extremely proud of the performance of OSN YaHalaHD.

TV MEA: In what other ways are you localizing your services?
BUTORAC: The English-language content tends to be localized through subtitling, because most markets don’t want to see that content dubbed. We’ve invested in Arabic-language content and Turkish drama series, which are of high appeal in the region. We dub the Turkish series into Arabic.

Any service needs to be personalized and localized. Even with our new agreement with Viacom for the Nickelodeon services in this market, a lot of their children’s content is being dubbed. We actively encourage third-party channels to invest in local content because it just adds to the success and the stickiness of the platform.

TV MEA: How important is HD for OSN today?
BUTORAC: We’re evolving our owned and operated services to being in HD. All of our movie services are now HD. It’s a real driver. You can’t buy an SD TV in the market and the consumer wants to be able to watch true HD content. We’re the only broadcaster delivering true 1080i HD with full Dolby surround sound. Of the 150 channels and services we now have on the platform, about 59 of them are being delivered in HD and they are our core driver channels. HD is important to us and we’ll continue to expand the lineup. We’ll have a UHD 4K reception device in the market in 2016. That takes us to the next generation of ultra high definition.

TV MEA: Tell us about your nonlinear services.
BUTORAC: Consumers want to be able to experience content on devices when they are away from the TV set. We have two products. OSN Play is our OTT service for subscribers—it’s free for them to use. Go by OSN is an untethered OTT platform that allows us to aggregate fantastic library content from some of the major studios and offer it to the consumer, as well as a wealth of premium Arabic content. The uptake has been very, very strong. We have over 250,000 subscribers using our OTT platforms. The services expand our engagement with customers, which is the key opportunity presented by digital. We continue to invest heavily in the growth of our linear platform, but allied to that, and this will always be a core strategy of the business, is expansion on nonlinear platforms as well.

TV MEA: How are you tackling the piracy problem?
BUTORAC: Piracy exists in a number of different forms, and some are unique to this region. There’s a coalition of broadcasters, including OSN, and other companies in the industry. Chaired by MBC, the group is targeting the illegal redistribution of channels that have been created by pirates, broadcasting content they don’t have the rights to. So far we’ve taken about 43 channels off the air. The satellite industry is aligned to this. When we can prove the content is not owned by the channels, the satellite operators take the channels down. We’ve had huge successes in the region in getting rid of satellite-based piracy.

When it comes to online piracy, we are starting to get strong engagement from governments in the region. In UAE, governments are identifying websites that are illegally distributing content and allowing the telcos to shut those down.

We’re also having some significant success with governments in relation to the distribution of illegal satellite receivers. Particularly in UAE and Saudi Arabia, premises that are selling illegal services have been raided, fined and in some cases shut down.

The final plank in addressing piracy is recognizing that there are legitimate platforms elsewhere, principally in India and South Asia, that are purposefully selling their set-top boxes into our region. We are engaging with governments and the police to have the distribution of these services diminished. We’ve had some successes in the courts in recent months. In the UAE, Saudi, Bahrain and Kuwait, the governments are starting to engage. They realize there’s an economic impact of intellectual property piracy—and not just on companies like ourselves. Piracy is eroding economies and stopping broadcasters from investing in jobs.

We pay a lot of money to be the legitimate licensor of content in our region. We should be protected in terms of government action to clamp down on the illegal use of these boxes. Ultimately, the companies that are entering this market—legitimate companies in their own jurisdiction—need to take action. You can’t watch Indian DTH platform Dish TV in the Middle East without Dish TV having switched you on. It’s illegal actions on their behalf that are eroding the share of other platforms in the market.

TV MEA: Let’s talk about sports. I know rights costs continue to rise, and it is an increasingly crowded landscape. How are you adjusting your sports strategy against this backdrop?
BUTORAC: Sports is an important part of what we do. We have a very strong portfolio. But I’m not prepared to pay uneconomic rates for content, particularly in an environment where we have a couple of sovereign-backed broadcasters who are not driven by economic motivations of profitability. It’s very difficult to compete.

That said, OSN has a very proud record. We have recently retained the ICC cricket rights for the next eight years—that’s huge, particularly for the South Asian and expatriate markets. We exclusively own all rights to all the golf tournaments, including the majors. We have a very strong position in wrestling—being the exclusive home of all WWE content—rugby and a lot of the other core broadcast sports.

I won’t pay exponential amounts, and those tend to revolve around football. I can’t compete with someone who is going to pay an uneconomic rate. In any other mature business jurisdiction, there would be anti-competitive pricing regulation that would allow a company such as ours to appeal against broadcasters who knowingly operate at a huge loss. That doesn’t exist in this region.

TV MEA: What are some of your strategic priorities for the year ahead?
BUTORAC: One of the key things is making certain that we can offer a compelling and immediate service for all the strong content we have. This year with Game of Thrones—and we’re doing it with other products as well—we not only launched it day and date with the U.S., we actually launched it at the same minute as the U.S. We take away any imperative for a consumer to pirate the show because it’s available in glorious high definition on your OSN subscription the same minute as the U.S. That means it’s an early morning broadcast here, and then we rebroadcast it later in the day. Keeping our service fresh and current, with premium content, is a high priority. And continuing to invest in high-quality premium Arabic entertainment is also a high priority. Ultimately the vast majority—over 85 percent—of our audience is Arabic speaking. It’s therefore important that we continue to expand our Arabic-language content and indeed our South Asian and Filipino content for those large diasporas that exist in the Middle East, particularly in the Gulf states.