Archive for March, 2015

The case of the Zombie channel

March 16, 2015 2 comments

In a recent report, the increase in the number of Free-To-Air (FTA) channels in MENA (to around 1200) was described as a “boom”. While “boom” is a correct label from a numerical perspective, the rapid rise in the number of FTA channels is not necessarily a positive development for the viewer. It is widely acknowledged that the advertising market is not large enough to sustain all these channels, yet more continue to launch. While in the short-term this increased activity will benefit satellite platforms and create jobs, it is a mirage of growth that does not translate into the long-term creation of value.

There are no issues when channels knowingly launch for noncommercial purposes and they factor this into their business plans. In this case, they would have allocated sufficient resources to create a high quality product for viewers. The issue is with channels that launch believing they will be profitable, yet quickly find that generating revenues is difficult. Many refuse to close down, perhaps due to ego, saving face, or misguided optimism, and instead focus on cutting costs beginning typically with manpower and content. Thus the job creation becomes job destruction and content budgets dwindle so that the viewer is left with a “zombie channel” that has a high repeat rate for low-end content that serves no purpose. These Zombies individually hardly have any impact on viewership, but collectively contribute to the constant fragmentation of audiences.

This problem is usually solved through a combination of channel licensing regulation, defining programming standards enforced through watchdogs, and the economic forces of free markets. The multi-country nature of the MENA region means there isn’t a single body that has true authority over the entire region, thus creating easily exploitable loop holes. In addition, regulatory regimes vary considerably by country in terms of the adequacy and transparency. Thus we are left with the hope that prospective channel owners spend sufficient time to understand the business they are about to enter before embarking on the relatively easy technical task of launching a new channel. Otherwise, they risk becoming like the investor who, when asking how to become a millionaire in horse racing, was told to “start as a billionaire.”

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