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Summary

As international online video services arrive, regulation and governance that facilitate local initiatives that can compete with international players are needed in Pakistan. At the same time, the taxation regime on broadband, attitudes to illegal content interception and online/offline piracy, and the national digitization strategy all require some degree of reassessment.

The regulatory regime in Pakistan's media industry has a cultural skew – it should be about so much more

Pakistan has unrealized digital potential, and a concerted effort is required by all parts of its media value chain – spearheaded by effective regulation – to drive growth in the digital ecosystem and bring the country out of the lull it is presently in. Ineffective regulation is one of the primary causes of the present state of the industry. The media regulatory authority, PEMRA (as well as telecoms regulator PTA), is known to be more focused on cultural and religious clampdowns than eliminating what can be described as universally illegal, such as signal theft and copyright-violating content.

So although a tough stance is usually taken on content that offends cultural and religious sensitivities – such as the YouTube ban between 2012 and 2015 for some content considered religiously objectionable – other forms of illegality have taken root. Thousands of "cable wallahs" who provide illicit access to TV networks for a very low monthly fee ($5 or less), online piracy, and illegal streaming have flourished because the authorities have not been effective at policing piracy. The present progressive chairman of PTA, Syed Ali Shah, is said to be bringing about change to the regulatory fabric in Pakistan, but the question is how those worse affected by any change will respond to his reforms.

The lack of government incentives to upgrade technologies is not helping the situation. Ovum estimates that over 50% of TV homes are forecast to have analog signals by 2021; if the present state of affairs continues, it will be a decade – well beyond neighboring countries' DSO deadlines – before Pakistan will have a majority-digital TV market. This is significant because digital TV ecosystems tend to generate more revenue and provide far more and varied commercial opportunities for the entire entertainment value chain.

In a country that is very much a developing nation for broadband, state-imposed VAT and corporate tax is hindering uptake of advanced services. Higher Internet speeds are taxed in Punjab state, where a rate of 19.5% is taxed for anything faster than 2mbps; in Sindh state, there is an 18% tax rate if the monthly broadband bill is PKR1,800 ($17); and in Khyber Pakhtunkhwa, there is a 19.5% tax rate for 3G mobile data and above.

This keeps download speeds down and prices up in a market that is increasingly demonstrating its appetite for online services that require better broadband. Due to the regulatory and governmental track record for the Internet, Pakistan has the fourth largest offline population in the world (discounting pre-3G technology), with more than 150 million people not yet connected.

Against this backdrop, I spoke on the need of all the video industry players to collaborate with each other to realize some of the potential in Pakistani digital entertainment. At present, the combination of cable wallahs, an analog TV market in excess of 90%, illegal online viewing, a pay-TV market weakly differentiated from FTA, a lack of defined release windows from cinema to FTA, and a nonexistent local OTT industry are contributing to a revenue loss of anywhere between $0.5bn and $1bn for Pakistan's media industry per annum. This is not to mention the adverse impact this is having on local creativity, talent retention in the country, and the length of content release windows and timeframes. The reversal of this is something that can only be achieved at regulatory, state, and federal government level.

The combination of digitization on traditional TV and the uptake of online video services is unexplored terrain for Pakistan. The appetite for digital services is clearly there: PTCL put Pakistan on Netflix's radar when it communicated to Reed Hastings the huge traffic it was seeing on its network in the first three months of the year post launch. Pakistan is ranked top for Dailymotion traffic, constituting 25% of its global traffic, which it achieved during the YouTube ban. YouTube itself is making up for lost time and trying to gain a foothold in Pakistan, enabling offline viewing and local advertising, and organizing local events to bring local talent together. Southeast Asian SVOD player iFlix will be launching soon, and there are rumors circulating of a local content aggregator launching as well, both of which will have downloadable video content and an offline viewing facility. All of this points to a vacuum left by traditional TV platforms.

The Pakistani authorities and government agencies need to enable, incentivize, and encourage local players to explore the country's digital potential, which arguably should have been realized long ago. Otherwise, the market will remain in an unenviable situation, lagging behind its developing neighbors in the MEA and Asia-Pacific regions in terms of TV digitization and embracing the Internet and online video.

Appendix

This piece was based on Ovum's participation in "Huawei Collaborate," an event held in Islamabad in September 2016. It was the first of its kind in Pakistan and gathered all the major national players in the digital services industry. The theme was the endorsement of collaboration and the need for the industry to come together and work as partners rather than competitors, and there were presentations on the arrival of digital music, gaming, IoT, a national Wi-Fi network, and VR into the country, and the monetization opportunities they can bring. For Ovum's presentation on traditional and online video in Pakistan, see below.

Further reading

Ovum: Trends informing the evolutionary trajectory for video and digital media in Pakistan, CP0400-000001 (October 2016)

Author

Ismail Patel, Research Analyst, TV Practice

ismail.patel@ovum.com

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