A sure sign that a region of the world is coming into its own as a television market is when international channel operators start producing local content there.<\/p>\n
In October, Discovery Communications will start showing its first local production on TLC in the Middle East and North Africa\u2014a chat show for Arab women called Nida\u2019a. TLC is carried on the OSN platform, where the channel launched exclusively in March 2014.<\/p>\n
An even bigger indication of a region\u2019s emergence is when international companies invest big bucks in launching premium services. In April, Starz launched STARZ Play Arabia, a new direct-to-consumer multiplatform SVOD service (and its first branded offering outside of the U.S.) in 17 countries and territories throughout the Middle East and North Africa (MENA). This is very possibly the hottest growth market in the world right now, along with sub-Saharan Africa, where pay TV still has plenty of head room for growth.<\/p>\n
Free-to-air television in MENA generated about 63 percent of total television revenue last year at $1.52 billion, according to global consultancy firm A.T. Kearney, followed by DTH pay TV at 29 percent with $711 million, IPTV at 7 percent with $167 million and OTT video at less than 1 percent with $21 million.<\/p>\n
STARZ GAZERS One of Starz\u2019s partners in the venture is Parsifal International, headed by Peter Ekelund. Parsifal is also a partner in HBO Nordic, which has a multiyear licensing deal with Starz Worldwide Distribution.<\/p>\n \u201cThey came to us while we were doing the analysis of our options internationally and proposed the idea of rolling out a service for the OTT and bundled markets in the Middle East and North Africa,\u201d Penney says. Starz and Parsifal are the majority partners in STARZ Play Arabia.<\/p>\n \u201cWe saw the attractiveness of having a branded subscription service in a big region of 380 million people where there was a lot of demand but the [landscape] was not as competitive as in more developed markets,\u201d Penney says. \u201cThere are infrastructure limitations around broadband and the providers in the satellite market are at price points too high ($50 to $75 per month) to hit the sweet spot of the consumer market. We saw an attractive market with a growing middle class and sophisticated audiences able to enjoy English-language programming and pay a reasonable price.\u201d<\/p>\n The STARZ Play proposition, priced at $13.99 a month, targets wealthy Gulf markets such as Saudi Arabia, Kuwait, the UAE and Qatar. The venture has a team in Dubai, headed by Maaz Sheikh, which is driving forward the regional priorities of having the technology in place, licensing the content and getting the marketing rolling.<\/p>\n BUYING TIME \u201cThe first phase is about getting people to try our product and like it, and it\u2019s also about learning how to improve what we\u2019re doing,\u201d Penney says. \u201cThen we will be going to the telcos and seeking to integrate what we have with their marketing. If a company is rolling out 4G, for example, having our content to offer will give them a new rationale to attract consumers.\u201d<\/p>\n Penney notes that Starz first put money into the venture in Q4 2014 and the service had gone live by the spring of 2015. He acknowledges that the speed had much to do with getting into the market fast and establishing a first-mover advantage.<\/p>\n \u201cWe have studio deals that gave us a long runway, so we didn\u2019t have to rush in terms of being sure we had the content. We wanted to get in front of the consumers fast, so that we could improve quickly and develop our knowledge of the market. That\u2019s critical in enlisting partners.\u201d<\/p>\n The potential of the OTT space has pushed a flurry of recent activity in the market. Leading pay-TV company OSN launched Go by OSN for non-pay-TV subscribers. Free-to-air satellite leader MBC partnered with Samsung to launch its popular Shahid app on smart TVs. Sports channel leader beIN SPORTS re-launched its OTT service and began selling multi\u00adscreen subscriptions.<\/p>\n Mideast OTT platform icflix has enjoyed very strong growth in this new space. \u201cSince our launch two years ago we have already had over 350,000 subscribers across the MENA region, growing by around 25 percent month on month,\u201d says Carlos Tibi, the company\u2019s founder and CEO. \u201cWith mobile devices readily available and screens becoming larger with every new release from the major mobile manufacturers, consumers are more inclined to leverage their devices as their personal video viewing instruments. As a result, we are seeing a big jump in access from mobile devices. To broaden accessibility further, icflix will soon be available on Xbox One and PS4.\u201d<\/p>\n GOING OVER THE TOP One of the most positive signs is that the region is already addicted to online video. Saudi Arabia is already the number one YouTube country in the world in terms of views per capita, according to consulting firm A.T. Kearney. Also in the Gulf countries, fiber optic and xDSL connectivity is widespread. That said, pay-TV penetration in the region is less than 11 percent.<\/p>\n The Middle East has strong similarities to the African market, where newer digital platforms also offer huge growth potential.<\/p>\n \u201cThe Middle East is similar to Africa in that there are big incumbents\u2014OSN in the Middle East and MultiChoice in Africa\u2014with a number of innovative and disruptive new entrants to the markets that could provide incremental business opportunities for us,\u201d says Kiaran Saunders, the VP for Europe, the Middle East and Africa at A+E Networks. \u201cThere is also a parallel between the two regions in that the original incumbents went after the higher end of the market while the others aimed at the growing middle class with much lower-priced offerings, basing their model on a high volume of subscribers rather than a high price. The big difference between the regions is that the new competitors in the Middle East are not all small guys. Saudi Telecom is now getting into the television market. Etisalat, the UAE-based telco, is also coming into TV. This represents a very different kind of threat for the incumbents.\u201d<\/p>\n PHONING HOME<\/strong> In the Middle East, FIC\u2019s portfolio of channels straddles both pay and free-to-air segments. Pay channels across the region are largely accessible via DTH on OSN and free satellite through both Nilesat and Arabsat. FIC channels are accessible on DTH (OSN and My-HD), and on IPTV. Its blue-chip factual and series content can also be seen on icflix and eLife.<\/p>\n \u201cThe Middle East is the only region in the world where we have a free-to-air National Geographic Channel branded after a city\u2014National Geographic Abu Dhabi (NGAD),\u201d Raina says. \u201cWe work very closely with SVOD operators that have recently started operations in the region. Moving ahead, we will develop offerings for OTT devices.\u201d<\/p>\n The average mobile penetration in the region is between 75 and 80 percent. \u201cWith higher time spent on such devices, it\u2019s natural that most service providers vie to get a share of that attention and entertainment services think no differently,\u201d Raina continues. \u201cCurrently there are at least ten video products, besides YouTube, that are available as apps on OTT devices. We estimate this is set to increase in the coming period.\u201d<\/p>\n \u201cThe emergence of OTT video provides a window of opportunity for new players to enter the Middle East, whether as regional players or global contenders,\u201d says Christophe Firth, a senior manager at A.T. Kearney in Dubai. \u201cAbsolute subscription and penetration numbers are still low. One reason is that piracy is a very big issue in the region. Premium content is available for those who know how to find it and there is not the same stigma as in Europe or America.\u201d<\/p>\n Online piracy remains a common problem. According to A.T. Kearney, about 27 million homes across the Middle East and North Africa have access to pay-TV services, but only about a quarter of them (under 7 million) actually pay for the services.<\/p>\n \u201cThere is reluctance on the part of premium content providers to make content available to OTT, partly because they fear that it will expose them to possible piracy and because the pure OTT companies do not enjoy the same status as Netflix, the company they are trying to emulate,\u201d Firth says.<\/p>\n OSN, which has come into the OTT market, is a very different beast, being a big satellite pay-TV operator. Its OTT is bundled with pay TV and now it has a stand-alone OTT offer. OSN has the reputation and it can get the content.<\/p>\n Another problem is that broadband penetration is low outside the GCC. Furthermore, credit-card penetration is low, so payment can be difficult.<\/p>\n \u201cOur goal is to integrate into as many consumer touch points as we can,\u201d says Starz\u2019s Penney. \u201cOne of our first tasks is to give people more options to pay, so we are not dependent on credit-card payment. Some people will even want to pay cash, so we need to have the mechanisms in place.\u201d<\/p>\n In late 2014, A.T. Kearney conducted a series of in-depth surveys of industry leaders across the region, including 45 executives from most of the leading international and regional broadcasters and content providers, pay-TV operators, telecom operators, pure OTT providers, advertising companies and technology providers, plus 6,400 consumers.<\/p>\n The survey asked: Who is best positioned to win in the OTT video market? The results put the pure OTT providers in first place (40 percent), followed by satellite pay-TV providers (30 percent), telecom operators (15 percent) and free-to-air broadcasters and content producers (also 15 percent).<\/p>\n How fast will OTT streaming grow? A full 35 percent of respondents predicted growth of over 50 percent annually, which would put the total market size at over $1 billion in 2020, with a 25-percent share of the estimated $4.4 billion total TV market. More moderate growth of 25 percent to 50 percent would push the revenue to $329 million in five years.<\/p>\n Are the new OTT services a competitive substitute for traditional pay TV or are they complementary? At present, the answer is the latter, according to icflix\u2019s Tibi. \u201cicflix sits alongside traditional pay TV. We are not here to take away anyone\u2019s business; we\u2019re simply here to provide an affordable form of entertainment on people\u2019s time rather than allowing viewers to be dictated to about what they should watch. We\u2019re giving flexibility to the user.\u201d<\/p>\n This reality is reflected in the acquisitions policy. \u201cWe will not have exclusivity, unless it\u2019s an original production,\u201d Tibi says. \u201cWe don\u2019t believe in acquiring anything exclusively on icflix and the reason for that is because today in the digital era, as soon as movies are out they are pirated in high quality and become available across thousands of sites. Therefore the word \u2018exclusivity\u2019 doesn\u2019t make sense from a streaming perspective unless it\u2019s an original production.\u201d<\/p>\n WHAT\u2019S HOT<\/strong> For Western films, comedy takes 35 percent of viewing, the same as for Arabic-language movies made in the Middle East. For movies made in North Africa (outside Egypt), action is slightly preferred over comedy. Interestingly, Arab respondents said they actually prefer to watch movies in English (47 percent) rather than Arabic (45 percent). But for TV series, they want Arabic (81 percent).<\/p>\n \u201cLocal content is very important for us,\u201d says FIC\u2019s Raina. \u201cOur factual channel NGAD\u2019s latest production was Every Emirati Son, a documentary about the UAE army. Our entertainment channel FOX Movies features local adaptations of popular international formats; the versions of So You Think You Can Dance and Dancing with the Stars have been performing extremely well. We\u2019re currently working on Tropic of Cancer, another local production for NGAD. In the\u00a0coming financial year we have about six new local productions lined up for NGAD.\u201d<\/p>\n While producing local content tends to be an ambition of many players, first-run imported content can be more important.<\/p>\n Recently, FIC bought first-run content from Twentieth Century Fox for Africa for the first time. That includes The Strain, Tyrant and the breakout hit Empire. \u201cOur strategy was to become more relevant to platforms and viewers and that means having new and fresh content,\u201d says Adam Theiler, FIC\u2019s executive VP for Southern Europe and Africa. \u201cOne way to do this is to have a deal with a U.S. studio for first-run content. Another way to be new and fresh is to produce. We have a production pipeline for FIC including The Walking Dead, Outcast and Wayward Pines. A third way is to produce locally. We will definitely be producing locally in 2016.\u201d<\/p>\n AFRICA RISING <\/strong> Saunders says that local production is central to A+E\u2019s strategy. \u201cThere is a lot of local creativity in Africa and we want to be in production, as we are in South Africa. The local version of Pawn Stars [on HISTORY] is in its second season in South Africa. We also have a local version of Four Weddings on Lifetime. Local is a big part of what we do. With any new channel in a new country, production will be part of the future. Taking a generic U.S. channel and plopping it down in other markets doesn\u2019t work.\u201d<\/p>\n In the Middle East however, A+E is offering its pan-European feed. \u201cWe are not there yet in terms of localized content,\u201d Saunders says. \u201cLocalized channels would be part of our ambitions. The Saudi market is the big driver.\u201d<\/p>\n HISTORY and CI are the flagship channels. They are exclusively on OSN. A+E has now launched H2 on My-HD in Dubai, one of the emerging new players. \u201cSo we have split our offering between competitors,\u201d Saunders states. \u201cIn Africa, too, we have our flagship channels on MultiChoice and other channels on other platforms. We are seeing creative ways to package and bundle telephony with the television offering.\u201d<\/p>\n FIC\u2019s Theiler notes, \u201cAnybody in the media business in Africa is going to have a relationship with MultiChoice. We also have relationships with every other pay operator and as new technology grows with OTT and GSM [mobile phone] delivery, we will have others. We seek full distribution on all platforms and that means dealing with all operators. We want people to see our brands. You can\u2019t continue for the next five years to deliver linear pay TV without also doing OTT and GSM and TV Everywhere. We are adapting to this reality with our partners, and in some cases without them. We want to control rights and utilization. If there is going to be a nonlinear component, we need to provide that.\u201d<\/p>\n Theiler continues, \u201cThings never happen in Africa as fast as you think they will, but you need to be prepared. We would never undermine our current partners and pay TV as it exists. We want to reinforce the status quo and the operators that exist, as well as support what\u2019s coming. Current operators are doing a good job of adapting. When operators want to offer OTT or GSM, we\u2019re there too. It\u2019s not just about content but also about know-how.\u201d<\/p>\n He says Nigeria is far and away the place to be in Africa. Kenya is also growing and he adds Rwanda, Zimbabwe and Angola to the list of emerging markets.<\/p>\n \u201cWe are strong in West Africa, especially in Nigeria, but Ghana and Namibia are catching up,\u201d says Loni Farhi, the president of SPI International, which distributes eight pay channels across Africa, including services for movies, fashion and lifestyle, documentaries, music, combat sports (featuring live events), extreme sports and interactive gaming. The launch of an ultra-HD channel in 4K is around the corner. Meanwhile, his company is moving into free TV too.<\/p>\n \u201cThe pay-TV business is slowly but surely improving,\u201d Farhi says. \u201cNew platforms are being launched while some of the old ones are gaining subs and others are doomed to disappear. We are supporting every platform to the best of our abilities. Our bouquet of channels operates in the basic pay or premium tiers. We are in the process of creating additional free-to-air channels that will be advertising-driven in the fourth quarter of this year. We are currently discussing this with a number of platforms in Africa.\u201d<\/p>\n Local content, not yet part of SPI\u2019s offer, is also just ahead. \u201cWe are planning to offer a couple of channels with local content in the fourth quarter to make our bouquet even more in demand than it is now.\u201d<\/p>\n LOCAL WINS<\/strong> \u201cWe have some blocks on free to air and these have always been a key strategy for us to drive viewership and adverting revenue in markets that are important but with relatively lower pay-TV subs, such as Nigeria,\u201d says Raffaele Annecchino, the executive VP and managing director for South Europe, the Middle East and Africa at VIMN. \u201cOur MTV and Nickelodeon blocks have proven to be very strong, as they enable us to connect to Africa\u2019s mass population, which is very young, and drive these people even to pay TV as well.\u201d<\/p>\n Local activation on the ground is just as important as local content on screen. VIMN runs events like the MAMA (the MTV Africa Music Awards) and the Nick Festival for kids. It also does the Comedy Central Roast and lots of stand-up comedy showcases for new local talent.<\/p>\n \u201cWe need to continue to invest in local content with the objective of growing our portfolio,\u201d Annecchino says. \u201cWe already have a lot of channels in Africa. We want more. We want to build free-to-air scale. This is important for cross-promotion.\u201d<\/p>\n In MENA, VIMN opened a Dubai office three years ago. A Nickelodeon Shop has even opened in Saudi Arabia and others are coming. In January, VIMN launched Nickelodeon, Nick Jr. (in Arabic and English) and MTV Live HD on OSN\u2019s satellite pay-TV platform. Nickelodeon is also distributed via all the OSN platforms. There is a new Nick App and My Nick Jr. is in the pipeline.<\/p>\n Local production in the Middle East is also being explored. \u201cThe Middle East will show double-digit growth over the next five years,\u201d Annecchino says. \u201cWe are looking at Egypt, which is big market with over 80 million people. We are already present but want to be doing more. That will be a target over the next 24 months. The same goes for Lebanon.\u201d<\/p>\n Will new global players come into the increasingly hot Middle East? \u201cThere have been rumors about OSN being sold, but I would be surprised,\u201d says A.T. Kearney\u2019s Firth. \u201cOTT is interesting. The recent launch of STARZ Play Arabia is really the first media disruptor in the market. The elephant in the room is whether Netflix is coming. If you look at their global ambitions, you would have to think so. They said not long ago that they want to be in 200 countries by 2017. You can\u2019t do that without the 20 countries of this region.\u201d<\/p>\n THINKING BIG<\/strong> Firth remains bullish on pay TV in the Middle East. \u201cIf you [look at a] market like India, which has had similar obstacles to the Middle East, you see that they are by no means insurmountable. India\u2019s pay-TV penetration is up to 80 percent. That\u2019s largely because the operators are very imaginative in their packaging and pricing, and because they have found ways to distribute widely and collect their fees from people who [don\u2019t have bank accounts or credit cards]. They go door to door. There is certainly lots of upside potential. Operators need to be more innovative in their packaging, price properly and find ways to distribute to the unbanked.\u201d<\/p>\n Penney of Starz mentions that there is also a large and tantalizing opportunity that might arise if geo-political winds shift\u2014the chance to add Iran, the biggest and most advanced market in the region, to the pay-TV picture.<\/p>\n","protected":false},"excerpt":{"rendered":" A look at the rapidly evolving pay-TV landscape across the Middle East and Africa.<\/p>\n","protected":false},"author":1,"featured_media":1527,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[76],"tags":[],"class_list":["post-1526","post","type-post","status-publish","format-standard","has-post-thumbnail","","category-features"],"yoast_head":"\n
\n<\/strong>\u201cWe wanted to become more international, and build on the great progress we\u2019ve made in the U.S.,\u201d says John Penney, Starz\u2019s chief strategy officer. \u201cOver the past three years, we have produced the equivalent in original hours of HBO or Showtime. We are using this content as an anchor tenancy in the new STARZ Play Arabia.\u201d<\/p>\n
\n<\/strong>The platform needed thousands of hours of programming on top of what Starz provided. This was available through deals with the likes of Disney, Sony and Warner Bros. While Penney does not see direct investment in local production on the cards at this point, he says STARZ Play Arabia could certainly become the \u201cgo-to partner\u201d for local producers. The service has been in a soft-launch phase of targeting the direct-to-consumer market via the internet.<\/p>\n
\n<\/strong>Nearly 40 percent of the subscriber base is in the UAE, Tibi notes, followed by Saudi Arabia and Morocco. Egypt, Algeria and Tunisia are also important markets for icflix.<\/p>\n
\n\u201cConvergence has made its mark in the Middle East, especially in the GCC region with the telcos emerging as key service providers,\u201d says Sanjay Raina, the general manager of FOX International Channels (FIC) Middle East. \u201cToday, besides telephony and internet, they\u2019re also distributors of video content. And with pipelines established, it\u2019s easier for them to scale up their offerings, provide added value and glean incremental revenues from subscribers. Pay TV through the telco distribution model is very popular, especially in UAE and Qatar, and we are on all these platforms.\u201d<\/p>\n
\nThe A.T. Kearney survey showed that when it comes to Western imports, drama series account for 34 percent of viewing, followed by thriller\/crime series (29 percent), comedy (21 percent), action (15 percent) and animation (1 percent). For Arabic programming, drama series account for 43 percent of viewing.<\/p>\n
\n\u201cAfrica has caught everyone\u2019s interest,\u201d says A+E\u2019s Saunders. \u201cThe sheer numbers and the growth potential are huge. It\u2019s estimated that there will be over 25 million pay-TV homes in Africa by 2020, and that\u2019s not far away. Nigeria is the big one in sub-Saharan Africa. It has grown so fast. It will have 6 million pay-TV subs in five years, about the same as South Africa. Kenya is another big growth market.\u201d<\/p>\n
\nIn March, Viacom International Media Networks (VIMN) cele\u00adbrated ten years in Africa by taking its regional portfolio to ten channels with the launch of a localized BET to sit alongside the international feed, BET 2 (formerly BET\u2008International), adding to a slate that also includes Nicktoons and Comedy Central. VIMN\u2008Africa\u2019s channels reach more than 100 million viewers in 50-plus territories in sub-Saharan Africa. The company has its own ad-sales operation (unlike other international channel operators), and produces locally in South Africa and Nigeria.<\/p>\n
\nThe fact that Netflix has been advertising for Arabic-speakers on their website is a bit of a giveaway.<\/p>\n