MENA youth (those aged 10-25) have – some believe irrevocably – shifted their entertainment consumption habits from traditional TV to online
MENA audiences are brand-driven when it comes to channel selection: original content is a bonus but not a deal breaker; channel brand awareness will remain critical for the next decade
The next step in MENA’s TV market maturity is a comprehensive audience ratings system but local political sensitivities mitigate against this
The balance of power is shifting back to telcos as content and OTT players look for distribution to scale up
beIN Media has entered the MENA entertainment market but will not upset OSN’s pay-TV dominance – yet.
Conferences are usually marketed as events where people get to network, share ideas, showcase their achievements, and announce what is in the pipeline. Five years ago, at standard TV industry conferences, the talk of the day was very much about how IPTV would become the be-all and end-all that would finally kill off the gargantuan global networks of terrestrial, satellite, and cable. We are here in 2015 with a different picture in front of us. It would have, therefore, been somewhat outlandish to start forecasting yet again how the TV industry will look in 2020. Then again, this is exactly what happened last week at TV Connect MENA 2015 in Dubai.
DTH will remain… for a long time
In fact, in one of the two panel sessions I chaired, two senior industry insiders – from CNBC Arabia and Rotana – took the audience by surprise by claiming that the business of DTH delivery of TV in the Middle East will be dead by 2021. The reason? Costs. The alternative? You guessed it – IP-based video. Unfortunately, no-one from the regional satellite industry was present to challenge this assertion. Also, while cost is an important factor in any technology surviving or not, it does need to be tempered with other considerations.
Satellite in MENA will not disappear for the next quarter of a century. Significant levels of spillover piracy from the Indian Sub-Continent and Europe will drive up the value of satellite dishes; swathes of North Africa, non-energy Middle Eastern states, and the Sub-Sahara are wholly unsuited for fiber optic deployments at scale; and satellite broadcasters of all persuasions – entertainment giant OSN, beIN Media, newly-launched My-HD, and religious broadcaster Al-Majd, et al – will simply not disappear from the D2C scene without a fight. Related to this, in many parts of Africa, digging up the ground simply isn’t a viable option – satellite is the only option for TV delivery, and it can only be threatened by mobile TV or 4G/5G STBs, although mobile will most likely assume a complementary position to DTH in Central Africa.
Competition in pan-regional DTH has become interesting with beIN Media recently entering into the entertainment and movies market, expanding out from its core sports business. The move comes as no surprise as it has the financial power and the will to expand into what has traditionally been OSN’s regional monopoly. However, alarm bells should not be ringing for the pay-TV giant yet: Ovum expects it will take some time before OSN’s market leadership mantle is close to being usurped. OSN has the brand value in entertainment, and has long-term content deals with major Hollywood, Bollywood, and other global studios that beIN is just starting to look into. Just last month, OSN announced a major deal with US cable giant HBO. OSN seemed to be quietly confident about its short-to-medium term prospects at TVC MENA and Ovum’s forecasts suggest that it will take some time before beIN can build a critical mass of content licensing deals, and drive significant churn among OSN’s established customer base (see Figure 1).
Audience ratings systems are inextricably intertwined with politics
One of the more thought-provoking discussions on the stage was the lack of a comprehensive published audience ratings system across the Arab Middle East. The presence of ratings for TV channels and shows is a sign of market maturity, which the GCC is sorely lacking despite the distribution network and technological advances. The conference argued that social media has stepped in as a substitute, identifying what content works with local audiences and what doesn’t.
However, social media provides, at best, patchy and, at times, misleading data on TV audiences. Gaining insights into household demographics, usage habits, and the preferences of individuals and households, and identifying the key consumer segments to drive advertising, maximize content offerings, and personalize services can only be achieved through a transparent ratings mechanism, independent of government. Outside investors and venture capitalists want to know exactly how their businesses are faring, and the lack of transparency has put them on hold.
This can be a politically sensitive matter as many networks comprising of the ubiquitous “filler channels” are owned by powerful local interests. Publishing ratings is considered intrusive and is tantamount to airing out the personal competencies of channel owners (or lack thereof), and goes against those vested interests.
Ovum does not expect a comprehensive ratings system – in a manner that is seen in Europe, the Far East or the Americas – to be in place in any GCC market in the next decade. For local investors in both the broadcast and advertisement sectors, social media remains the primary go-to platform to gauge popularity of shows. Advertisements in the pan-regional and main national Gulf channels are dominated by a handful of very large multinational companies such as airliners, automobile manufacturers, consumer electronics, and FMCG manufacturers.
Even if an audience ratings system is in the GCC, it will not automatically mean it would be free from partiality. In Turkey for example, where there happens to be a ratings mechanism, one company revealed there was a rigging problem, and that not many Turkish industry insiders trust the published figures.
However, with the youth migrating to online and, given that analytics from online video are far more easily measurable and attainable, the relevance of TV audience ratings will be gradually eroded over time. In several years’ time, traditional TV will have to start adapting to the platform that the youth audience is already heading towards, thus involuntarily taking a step closer to scrutiny of the audience statistics.
Acceptance of censorship and multiple languages mean maintaining multiple catalogs
Part of the aforementioned regional sensitivities manifests in broadcast censorship. The traditional hesitance of non-regional media investors and companies has been attributed to the uncertainty in how regional regulators would react to their content being broadcast. Surveys indicate that the majority of viewers in MENA would accept a censorship filter before they viewed foreign content. In practice, however, censorship is relaxed behind the pay-TV firewall, for two reasons: regional regulators simply do not understand the dynamism of VOD market as well as they do traditional TV, and, even if they did, it is very much beyond their scope and jurisdiction – like social media platforms such as Facebook and Twitter (and YouTube).
For mass-market pay-TV players, this is leading to them hosting “multiple content profiles.” These are censored and unedited (with the option left to viewers), as well as language-based profiles: Arabic (original, dubbed, or subtitled), English, and other languages. Maintaining multiple catalogs will be a task in itself, although sacrificing on one of these might cause a dip in the interest of the regional viewership. The conference agreed that this is most likely to be the way ahead for pay-video players in MENA.
Challenges facing monetization in pay TV
However, there are more immediate challenges facing the both pay-TV and online TV. Barring sports, seasonal programming (i.e. Ramadan, essentially), and other popular live events, one panel session agreed that the youth segment has fundamentally shifted the majority of its video consumption from traditional TV to online. This poses a long-term problem – how to monetize pay TV, at both subscription level and advertisement level.
The general attitude to all paid services (i.e. in all sectors, not just entertainment) is still largely brand-centric, and original content in TV tends to feature as a bonus in a subscription provider’s arsenal. The time needed to build critical mass is a long and arduous one – something that must be endured in MENA by any player with serious ambitions there for the foreseeable future. This is at least until the current cord-shaving youth segment agesand becomes the spending force in a decade’s time, when personalization, segmentation, and content-driven curation will have superseded brand loyalty, as is happening now in the mature regions of Europe and North America.
Challenges facing transactional OTT (already?)
In pay-OTT, reports suggest that the conversion of Starz Play’s trial viewers to paying customers has been poor. The appetite of the regional populous for free content – traditionally whetted by FTA, then by free OTT such as YouTube – is causing a problem for pay-VOD, at least for the less-established brands, even if they do boast a strong Hollywood content proposition in HD like Starz. Online payment for online services is very much in its infancy in the region: One statistic brandished at the conference was that 90% of credit/debit card transactions in Saudi Arabia is to withdraw cash from ATMs. Online copyright infringement is also widespread in the region and has a high level of cultural acceptance as intangibles such as digital content are widely considered as things that should be obtainable for free. This is another reason why foreign investors are somewhat hesitant about launching and/or licensing their content with regional players.
Ovum believes SVOD viability in the region will survive in the long term only through partnerships – among OTT players themselves and with distribution partners who can help them acquire and retain customers, followed by acquisitions and market consolidation. Ovum expects the major fixed telecoms incumbents in the region that are keen to explore alternative revenue streams to be major players in the upcoming consolidation of standalone SVOD services. Ovum also believes that it will take time for SVOD services to gain traction in the region: Service providers and backers will need to have long investment horizons to succeed in MENA.
Can Intigral deliver a shot in the arm?
Away from the conference, the Ovum team received a demo of Intigral’s ambitious STB-based, multi-lingual OTT TV and VOD service initiative. It has drawn upon the experiences of many global OTT players and delivered what it claims is an engaging and effective user experience, with recommendations, segmentation by genre, and an nDVR facility. Intigral has secured regional content rights for a host of UX innovations including program startover, backwards EPG for up to 14 days, and extensive live seek functionality. If Intigral delivers on all its promises for a mooted 2Q16 launch at a low price point – below $20 per month – it is a potentially differentiated and genuinely innovative TV proposition at that price point. Given the right backing, it might just be the break in innovation the region is crying out for. But, as with all technology vendor demonstrations, final judgment must be reserved for the version that actually finds its way into consumer households.
SVOD Service Provider Analysis: Netflix, ME0003-000582 (August 2015)
On the Radar: Starz Arabia, ME0003-000577 (July 2015)
GCC: Fertile yet Untapped Territory for International SVOD, ME0003-000568 (June 2015)
Forecasting the New Era of OTT Video, ME0003-000548 (April 2015)
The Outlook for OTT Digital Video, ME0003-000506 (December 2014)
Middle Eastern TV Content Catalog Profiles: OSN and MBC, ME0003-000483 (October 2014)
Ismail Patel, Research Analyst, TV Practice