MENA TV channels increasing relentlessly

MENA TV channels continue to grow

Almost all of the 350 million or so television viewers in the MENA region are watching DTH satellite. In 2004, there were 100 satellite television channels in the Middle East, but that number has grown consistently at an average of 80 channels per year so that viewers now have a choice of more than 700 discrete free-to-air (FTA) television channels, and an additional 200 or so channels operated by regional PayTV networks on the 7/8° West and 25.5/26° East hotspots.

The rapid growth in the number of FTA channels might imply a profitable TV advertising industry. However, net television advertising revenues for regional broadcasters are very low – nowhere near enough to support the cost of the channels involved. In fact, the MENA TV advertising market amounts to less than $900 million in aggregate, and TV ad spend per capita is about 1/30th of the equivalent in the US.

Revenue and profitability have not been driving the MENA industry to date The main forces behind the growth in TV channels have been: the ready supply of capital amongst governments, institutions and family businesses in the region, combined with the enduring desirability of TV channel and network ownership.

These dynamics have a significant

Free-to-Air channels by genre (Including channel duplicate feeds and pseudo-channels)

FTA Channels 25.5E 26E 52.5E 7W 8W Total General 11 116 3 416 6 552 Religious 19 3 62 84 Sport 47 1 33 81 News 5 21 41 67 Movies 9 1 31 41 Entertainment 1 10 1 27 39 Cultural 6 23 29 Music 5 21 26 Series 2 1 17 20 Children 7 13 20 Business 3 13 1 17 Teleshopping 6 9 15 Documentaries 2 1 4 7 Politics 1 4 2 7 Chat 6 6 Game 6 6 Lifestyle 1 5 6 Comedy 3 3 Health 3 3 Presentations 2 1 3 Regional 2 2 Racing 1 1 2 Cooking 1 1 Talk shows 1 1 Travel 1 1 Total FTA 17 258 11 744 9 1039

Source: ChannelSculptor analysis January 2013

effect on the purchasing decisions of broadcasters. New channel owners generally have plenty of capital but little or no experience in television, and tend to assume that the first thing they must do is build a facility.

Each year, dozens of new channels are launched, and in many cases, the decision on which technology to purchase will precede commercial planning and even programming strategy. The effect is a dispersed group of single channel facilities and system integrations. Outsourcing of technical services such as channel playout remains comparatively rare.

Audience Measurement Gains Importance There are several factors that impede profitability amongst regional FTA channels, but perhaps the most significant is the need for development and refinement of MENA TV ratings. MENA TV advertising spot rates remain very low when compared with mature advertising markets. Even Turkish TV audiences command spot rates about three times those in MENA for an equivalent audience size. There are several reasons for this, but significant amongst them is the lack of detailed technical audience monitoring in the MENA region, and the consequent lack of advertiser confidence in audience research.

In the MENA region, recall-based research remains the main determinant of audience data and, therefore, the value of TV advertising. This research can take the form of cold calling or approaching individuals in the street. These recall-based methods are affected by forgetfulness on the part of the audience, and can be prone to bias on the part of the researcher. Since they do not provide accurate viewing times, recallbased results also tend to oversimplify viewing behaviour and exaggerate the relative performance of channels.

By contrast, the audience monitoring systems used in international TV markets do not rely on recall. Instead, they use automated people meter devices to track TV viewing on a minute-by-minute basis. This provides an insight not only into programming viewing habits, but even viewing habits during advertising breaks.

The UAE’s tview initiative has adopted people meter technology and has been publishing detailed audience data for the past year. tview is now widely recognised as a viewership currency in the UAE, and is beginning to gain acceptance as a valuable source of insight for the MENA TV industry.

The largest MENA TV advertising market is Saudi Arabia. The great hope for transparency and revenue growth for the regional TV advertising industry is that, under the guidance of the Ministry of Culture and Information, Saudi Arabia will commence publishing its own people meter’s research during 2014.

MENA TV Listings Conundrum The publication of programme listings and synopses has been standard practice amongst broadcasters across the world since TV guides first began to be printed during the early days of linear

television. Listings data has become so standardised and commoditised in mature TV markets that it is now available and used not only in electronic programming guides, but also in services such as TV audience measurement, recommendation engines, social media apps and interactive advertising.

Against this backdrop, it is surprising and disappointing to note that the majority of TV broadcasters in the MENA region (including several large government-backed broadcasters) still do not publish any TV listings at all, and many are apparently unable to publish or predict what programmes will be on air even a day or so in the future.

As a result, despite several attempts over the years, the MENA TV industry remains incapable of producing a reliable TV guide. The problem is, of course, compounded by the ever-increasing number of MENA TV channels.

On the face of it, the issue arises simply from a lack of discipline and planning amongst broadcasters. The root of the problem, however, is more structural – it stems from the fact that the regional industry is based on pan-regional freeto-air satellite broadcasting.

FTA satellite TV can be delivered using any MPEG2 set top box, and the market for distribution of set-top boxes is fiercely price competitive, driving the production cost (and, therefore, the technical specifications and functionality) of STBs as low as possible.

Numerous box manufacturers produce endless box models, each sporting their own proprietary and often poorly designed navigation system. This issue is compounded by the fact that the MENA region includes more than 20 distinct countries, each with their own channels and viewer preferences.

Even if the data from all these broadcasters was somehow collated, it would be almost impossible to get it to the majority of viewers’ set-top boxes.

The result is a chicken-andegg situation, where broadcasters’ ambivalence reflects the fact that they do not benefit from publishing listings.

The lack of reliable listings has significant effects on the industry. Most importantly, the viewer experience navigating FTA TV is miserable. He has to memorise channel numbers and for most channels can only guess what will be on TV the following day.

Sourcing reliable EPG listings data represents a real commercial opportunity for IPTV operators to differentiate their services from those available over DTH satellite. Once viewers have experienced the ability to navigate viewing opportunities, it is hard to go back to blind chance.

Published EPG listings data also represents a route for middle-tier broadcasters to get noticed by viewers. When there are 700 channels to choose from and no means of differentiating them or knowing what they will be broadcasting next, viewers will default to the channels they have become familiar with. An EPG encourages the viewer to step outside his comfort zone and try something new.

Regional Move to High Definition In March 2009, Luxe TV was the only HD TV channel in the MENA region, whilst Europe already had 130 HD channels. Four years on, there are now tens of millions of HD screens in living rooms across the region, and more than 10% of the MENA channels are broadcast in HD – more even than Europe.

By early 2013, there were 103 HD TV channels operating in the region:

OSN is driving the advancement of

HDTV Channels in the MENA Region

Encrypted HD Channels Unique HD Channels OSN 24 Abu Dhabi TV 9 MBC 8 Al Jazeera 4 Total 45

Government-Owned Free to Air HD Channels Abu Dhabi TV 8 Dubai Media Inc. 6 Saudi TV 14 Al Jazeera Kuwait TV 2 3

Qatar TV Bahrain TV 4 1

Oman TV Others Total 1 4 43

Private FTA HD Channels 15

TOTAL MENA HD Channels 103

Sources: Lyngsat, KingofSat, ChannelSculptor

HD in the region, representing almost a quarter of HD channels available. However, there is another more significant trend in the region:

More than half the HD channels operating in the region are governmentowned, and 80% of these are broadcast free-toair because encryption is perceived (rightly or wrongly) to undermine emerging HD audiences

These market dynamics are in stark contrast with developed television markets elsewhere. In Europe, 917 (9.3%) of the 9,879 linear channels are HD (source Mavise, March 2013). The proportion is similar to MENA, but the encryption mix is different. In Europe, most HD channels are privately owned, and between 75% and 95% are encrypted:

In fact, more than 80% (source Mavise, March 2013) of the channels being aired in HD are encrypted versions of existing SD channels. The SD versions are commonly free-to-air. With the notable exception of state-financed news providers (such as Russia Today), who broadcast HD FTA, European broadcasters are using encrypted HD channels as a tool to develop new subscription revenues and recoup their investments in HD infrastructure.

Here in the MENA region, HDTV over satellite will take several years to become widely adopted by viewers. The majority of the 40 million or so set -top boxes in living rooms around the region are still only capable of receiving MPEG2 compression. The cost of satellite capacity makes MPEG2 uneconomical for the broadcasting of HD channels, so channels must switch to the more

HDTV on European Hot Spots

180

160

Number of channels 140

120

100

80

60

40

20

FTA HD Channels Encrypted HD Channels Hotbird 13E Astra 19.2 Astra 28.2

6 147 44 137 14 67

Sources: Lyngsat, KingofSat, ChannelSculptor bandwidth-efficient MPEG4. This means that households wishing to watch HD TV channels must buy a new set top box.

MBC, the most popular TV network has recognised the commercial opportunity that HD represents: it has introduced an encryption system into its transmissions, allowing for programming royalties to be recouped from the sale of MBCenabled set-top boxes. By encrypting its HD offering and licensing to various platform providers, MBC has achieved several objectives:

It has distribution partners driving the take-up of MBC HD

It knows how many HD receivers are carrying its channels, and where they are sold

It has recouped some of its upfront investment in HD (headend, production and content rights) through licence fees

It has created a cachet around the MBC

HD channels

With MBC HD widely available in the market, attention is now focused on which other FTA commercial networks will launch encrypted HD versions of their channels. Rotana Media has followed MBC’s lead and will launch HD versions of its channels on pay-TV platforms such as My-HD in January 2014.

By contrast, state broadcasters such as Saudi TV, Dubai TV, Abu Dhabi TV, Qatar TV and Oman TV have all chosen to launch their HD services free-to-air.

If MENA broadcasters continue to launch HD channels free-to-air:

Pay-TV gains no new content, so there is no benefit to Pay-TV revenues or penetration

TV viewership does not increase (all

HD viewers already have access to SD) so there is no benefit to FTA audiences or advertising revenues, but

The satellite capacity requirement per channel, and the related cost of increase dramatically

More than 80% of the channels being aired in HD are encrypted versions of existing SD channels.

The resulting profit reductions will make the market less attractive to commercially run channels – whether regional or international. Regional satellites will become ever more saturated with state-financed broadcasters that can afford to operate at a permanent loss.

This is a bad outcome for the industry and for consumers — who will have to deal increasingly with programming decisions based on regional politics rather than viewer preferences.

The success of low-pay TV platforms such as My-HD (which launched in 2013) is therefore an important barometer for the commercial viability of the regional TV industry.

The Death of 3D TV and the Rise of 4K TV The blockbuster movie Avatar caused a tidal wave of excitement around 3D production throughout 2010-11, which had a ripple effect into TV broadcasting. Here in the region, the 2010 FIFA World Cup was broadcast in 3D by Al Jazeera, and in July 2011, twofour54 intaj launched the region’s first stereoscopic 3D TV lab.

Films such as Oscar nominee Gravity continue to demonstrate to the power of 3D film production. All the excitement surrounding 3D TV, however, now seems a forgotten memory.

Disney-owned sports TV operator

ESPN has pulled the plug on its 3D sports channel, three years to the month after it was launched. ESPN attributed the closure to poor viewer figures and said it would instead focus on other products.

MTG’s Nordic pay TV broadcaster

Viasat recently announced the closure of its dedicated 3DTV network, citing low viewing figures since the channel’s launch in 2012.

FIFA is now unlikely to have any 3DTV coverage at all of the 2014 FIFA World

Cup. Of course, the World Cup won’t regress technologically speaking.

There will be goal-line cameras for the first time, and numerous 4K trials will take place.

Here in the region, Al Jazeera 3D has disappeared, no 3D TV channels remain, and the intaj 3D lab was quietly shut down.

In the meantime, all attention has shifted to 4K TV. This step change in image quality has been fuelled by the impending ubiquity of H.265 HEVC (High Efficiency Video Coding) broadcast, making it possible to broadcast in 4K with far less bandwidth.

Netflix is already planning to launch 4K services using HEVC, and announced in January that from now on, all Netflix original programming will be shot and finished in 4K. Chief Product Officer Neil Hunt claims that Netflix will be streaming 4K content to its customers using only 15Mbps of bandwidth.

Amazon will follow Netflix into original

productions in 2014 – and again, all will be in 4K.

It will be far harder for MENA producers to follow suit in moving to 4K production – mainly because the audience capable of receiving 4K content services will be negligible. Netflix and Amazon have no distribution footprint in the MENA region. The cost of 4K satellite TV channels capable of reaching existing MPEG2 and MPEG4 set-top boxes will be prohibitively high – 4K over satellite will only work when regional Pay-TV networks such as OSN start distributing HEVC-capable satellite receivers to their customers.

In the meantime, the most likely candidates to launch 4K services are regional IPTV platforms with fibre networks (such as du, Etisalat and Ooredoo) and potential OTT services such as OSN Play, Shahid.net and ICFlix. Regional IPTV Networks Whilst IPTV consumption remains small compared to DTH in the region (less than 500,000 subscribers), there are several reasons why it is strategically important for Pay-TV:

Global shift towards content delivered over IP

Rapid growth of fibre networks in the

GCC

Packaging of basic tier IPTV content as standard in broadband offerings

Enormous financial and political strength of telcos in the region

The potential for GCC governments to establish and enforce satellite dish bans in the future

The inability of pan-regional FTA DTH delivery to serve the countries in the

MENA region individually according to their respective demographics

To date, the main regional IPTV players are all in the GCC.

The UAE now has more than a million homes passed with fibre, and half of these are already broadband subscribers. Du has around 120,000 subscribers and is the longest established IPTV network in the region, and is also the relatively refined one in terms of its operational set-up.

It has, for example, operated TVOD and SVOD services through its partnership with Vubiquity since 2009. Pay-TV packages such as OSN, Al Jazeera and Abu Dhabi TV are provided as upsells to the basic channel package.

Etisalat’s eVision cable network has existed since the 1990s in the UAE, but has now largely been superseded by its fibre-to-home IPTV service. eLife subscribers also number over 100,000, and functionality and services are comparable with du.

Most Qatari homes are now passed with Ooredoo fibre. The company is rapidly transitioning from its existing Mozaic

fixed copper line TV customers to FTTH IPTV services.

Saudi Telecom Co (STC) operates the Invision IPTV service. STC expects to connect two million homes with optical fibre for high-speed broadband in the medium term.

Other telcos engaged with IPTV include Batelco (Bahrain), FASTtelco (Kuwait), and PALTEL (Palestine) amongst others.

The regional IPTV networks all function primarily as redistributors of existing FTA channels and resellers of existing satellite pay-TV networks. Their key selling points are their abilities to: bundle TV with broadband services collect pay TV subscriptions as part of a telecoms bill offer all pay TV networks on a single set-top box, and provide Video on Demand (VOD) and catch-up services

To date, the IPTV networks have not attempted to compete with regional satellite broadcasters to acquire programming or channels, mainly because TV rights tend to be sold on a pan-regional scale rather than country by country.

OTT Networks and Trends Around the world, more than 1.7 billion devices capable of streaming over-thetop (OTT) video from services like Netflix and Hulu were shipped in 2013, according to research by HIS. Netflix alone topped 10 million subscribers during the year. Netflix plans to launch in new markets in 2014 as part of its ongoing expansion effort, but as yet, there is no indication that the OTT giant will enter the MENA region.

Google launched its answer to Apple TV in the US in July 2013 – the $35 Chromecast streaming device. The company is now rumoured to be preparing to launch Chromecast internationally this year. Perhaps surprisingly, smart TVs MENA EPL Broadcast Rights Cost 1998-present

Reported cost (US$ million) 400

300

200

100

(Final value unconfirmed)

Showtime +ART 1998-2001

ART 2001-2004

ART 2004-2007

OSN 2007-2010

ADM 2010-2013 Al Jazeera (BelN Sports) 2013-2016

continue to get a “thumbs-down from early adopters,” according to Strategy Analytics, with viewers preferring to use tablets, smartphones and other connected devices to access online media.

The MENA region saw the continued expansion and success of MBC’s www. Shahid.net service. Its access to the highest rated content in the region combined with the simplicity of the service, availability on multiple (Apple, Android and Windows) devices and the fact that it is free has made Shahid a huge hit.

The region saw the launch of another OTT platform in July 2013. Positioned as the Netflix of the Middle East, ICFlix aims to attract the maximum regional audience through a combination of Hollywood, Bollywood and Arabic premium movies and series.

With the constant reduction in the cost of streaming technology and bandwidth, consumers can expect a flurry of new IPTV and OTT networks over the coming two years.

Premium Sports Television Rights The past two years have seen important power shifts in premium sports rights both internationally and regionally, most noticeably in the English Premier League.

The global distribution value for EPL 2013-2016 broadcasting rights now approaches $10 billion. In UK, the rights are now valued at $5 billion, and telco BT has entered the premium sports market by giving away free EPL matches as part of its triple-play offering. They have followed up by acquiring the UEFA Champions League UK TV rights exclusively in November 2013, leaving the incumbent UK pay-TV platform BSkyB in turmoil.

The EPL 2013-2016 TV rights auction has been every bit as dramatic here in the Middle East. Al Jazeera’s exclusive deal with the EPL was finally officially confirmed in July 2013, ending a year of industry speculation.

Based on press and industry reports, the value of MENA EPL rights has increased exponentially over the past 15 years.

The 2013-2016 outcome was a surprise to many. Industry rumours had suggested that Al Jazeera had entered a reciprocal non-compete arrangement with Abu

IBC Content Everywhere MENA

Powered and created by IBC, the premier annual event for professionals engaged in the creation, management and delivery of entertainment and news content worldwide, IBC Content Everywhere is a new series of global events spanning Europe, MENA and LATAM. These are mustattend events for anyone involved in, or need to understand, the creation, management, delivery and monetisation of digital TV and video content over IP-based networks, and its consumption on mobile, handheld and tablet devices.

IBC already runs the largest annual broadcast event in Europe with over 50,000 visitors. Recent developments in mobile and internet technology have created a new but closely related market, comprising of producers of rich media, device makers, app builders, digital marketeers and cloud services. In 2013 over 918 million smartphones were sold worldwide - outstripping simpler handsets for the first time - putting multimedia in the hands of more users than ever before.

“Video is a huge part of the traffic over the Internet, this can’t be regarded as a bolt-on to existing broadcast infrastructure.” says Michael Crimp, CEO of IBC. “One third of the planet will have fixed broadband by 2017 and this demands new business models, platform-specific content, and will appeal to a mobilecentric audience. The challenge is to create business models and relationships that take advantage of this opportunity. We’re going to bring people together, to find answers to the questions presented by this, the next step in the digital revolution for media.”

Whilst the new events promise to uphold the values of high quality and independence that have made IBC so popular, there’ll be widespread use of near-field communications (NFC) devices to revolutionise the visitor and exhibitor experience. Using this technology, attendees are able to build a personal community around who they meet and what they see at the show. This innovation will also enable exhibitors to extend their offering across continents, through a virtual presence at multiple events if they wish.

Speaking of the choice of Dubai as venues for IBC Content Everywhere MENA, Michael Crimp went on to say: “The Middle East and North Africa contribute to massive penetration and use of mobile technology, particularly for video and social media, with a thriving economy. The Middle East has over 284 million mobile users, with a market increasing at twice the speed of both Western Europe and North America combined. This is a hotspot of real growth, and therefore IBC want to offer a haven for building relationships in this region. Such relationships will be the bedrock from which new offerings will be built.” Visit www.ibcCE.org to find out more.

Dhabi Media, such that the former would keep the MENA UEFA Champions League TV rights uncontested and the latter would keep the MENA EPL rights. Such was ADM’s confidence that, according to Reuters, they bid significantly less than the $360m they paid for the 2010-2013 seasons (but enough to see off any rival bid from OSN).

Around the world, the English Premier League has consolidated huge increases in 2013-2016 licensing deals compared with 2010-2013. New territories have opened up – for example in Brazil, rights have been stripped out for the first time from a pan-continental deal and sold to Fox and ESPN for $50m, (more than four times what the rights were believed to be worth as part of the previous South American deal). Even Burma has generated a $25m licensing deal.

In 2010-2013, the EPL earned £1.4bn from foreign broadcasters, meaning that MENA rights represented about 25% of EPL’s revenues outside the UK for that period. Revenues from foreign broadcasters will exceed $2bn for 20132016. On this basis, EPL might reasonably expect to achieve more than $500m in revenues from the MENA region this time around – particularly given the commercial rivalry between Abu Dhabi Media and Al Jazeera Sports. Going into the negotiations, the revenue budget and expectations of the EPL management team probably reflected this.

The EPL has established a reputation for maintaining a straightforward philosophy: money talks. Whatever the perceived strategic advantage of one MENA bidder over another might be, achieving the maximum bid the market can deliver is what matters. They are also well-versed in eliminating collusion between bidders.

By January 2013, five months after the MENA licence should have been announced, there was still absolute

deadlock. EPL broke the stalemate by involving an agency (MP and Silva). This apparently provided sufficient basis for Al Jazeera Sports to overcome their inhibitions and bid.

Arguably the deal was a good outcome for all parties:

Consumers can now watch EPL, Serie

A, La Liga, Ligue 1, UEFA Champions

League, FIFA World Cup and several

Arab leagues on a single smart card and set-top box – for a single subscription

Al Jazeera have a comprehensive portfolio of premium football rights

EPL maintained its price protection by getting the deal they expected to get

Abu Dhabi Media rid themselves of a big non-essential operational cost.

Manchester City FC ownership already guarantees profile for Abu Dhabi, and

Etihad gets pride of place on their shirts.

However Abu Dhabi Media show no signs of abandoning its 500,000 pay-TV subscribers or throwing in the towel on premium sports. As of January 2014, it has appointed a new CEO Saif Ghobash, and have acquired the exclusive rights to broadcast the upcoming European Championship Qualifiers and the European games in the 2018 World Cup qualifiers. They have also recently added Ultimate Fighting Championships (UFC) to their TV rights portfolio. No doubt they will aim to retain the Formula One TV rights when they next come up for renewal.

In the meantime, led by its new CEO Roger Hall, Al Jazeera Sports rebranded as beIN Sports on January 1, 2014, bringing the network in line with its premium sports TV offerings in USA, France, Indonesia and Hong Kong. The new-look beIN Sports network will require paired card and set-top boxes by the end of H1 2014, in time for the FIFA World Cup which will be broadcast exclusively on the network in July.

By the time the English Premier League 2014-15 season begins in September, beIN Sports will expect all its customers to have the official beIN Sports set-top box, making the network the largest pay-TV platform in the region.

Nick Grande is Managing Director of ChannelSculptor, a Strategic Consultancy and Service Provider to the MENA Broadcast Industry.

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