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The Five Digital Personas of the Middle East Broadcaster

October 6, 2015 1 comment

If you’re a traditional free-to-air broadcaster in the Middle East, you most likely belong to one of five camps when it comes to the impact of technology and OTT services on your business and on your audience. Only one of these groups has a chance of surviving the shifting content consumption landscape.

Group 1: The Unaware (“What’s OTT?”)
This group includes quite a few household names, as well as several privately-owned standalone channels across the Middle East. The prominent members of the group are the state-owned broadcasters who have only applied cosmetic changes (“Let’s change the logo!”) to their channels. Their management teams are neither digital natives nor digital immigrants. They are preoccupied with managing the historical baggage that has accumulated in their organisation over decades. They are the captain of the Titanic standing on the bridge but not seeing any icebergs. This group will be swept aside, and they won’t notice until it’s too late.

Group 2: The In Denial
(“It won’t happen here!”)
This group has an often-heard chant: “Linear TV is forever. Viewers are lazy and passive. Our markets are different. The internet is too slow. The mobile screen is too small. The kids will want linear TV when they grow up.”
Oblivious by choice, they believe their market is somehow isolated from the impact of technology and operates under different rules. They make incremental changes to their channels (new grid here, new sports rights there) and see no need to change how they go about their business. This group will also be swept aside, but not before realising their error in judgement and attempting a futile last-minute attempt at reinventing themselves.

Group 3: The Wait-and-See
(“I’ll jump in when it’s worth it!”)
This group has it figured out. They have crunched the numbers. They have forecast the audience shares. They have built business cases with multiple scenarios at various degrees of sensitivity. They have evaluated the technology. They go to all the cool conferences. They know what it takes and will wait until the market is right and the revenues are worth going after.
This group will get a surprise. Just as they decide to jump in, they will discover that the others are already there. They will find that new previously unheard-of companies and brands ‘suddenly’ command a significant market share. Then they will crunch their numbers again, and find out that they need to significantly increase their planned investment to catch up. Those who can afford it may remain relevant.

Group 4: The Easy-Does-It (“Here’s a pretty catch-up website, and maybe an app or two!”)
This group is confident they’re taking the right steps. You can watch their channels live on your TV, your computer, your tablet and your phone. You can download the app. You can catch up with almost any programme broadcast over the past six months. They played with Periscope and Snapchat to show the world they’re cool with tech. Except they wrongly assume the answer solely lies in deploying technology, while the content, the consumer and the business model remain unchanged. Digital is something a few young people on one of the floors of the building take care of, while for everyone else it’s business as usual.

Group 5: The Paranoid
(“They’re coming after my audience!”)
They cannot sleep. They know their time is finite. They disagree on how long they can maintain the same unsustainable business model before making the transition to the new one. They worry about losses in the transition period. Meanwhile, the audience is fragmenting. The consumer is distracted across multiple screens. Technology is moving faster than the planners. The audience is experimenting. Their expectations of what and when and where and how they can consume content are changing. The advertiser has noticed, and budgets are shifting.
TV is wrenching itself from its linearity and being redefined by ever-changing technology in the hands of the consumer.

Which group are you in?

This post first appeared in BroadcastPro magazine here.

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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.”

Categories: Media Economics Tags:

AlJazeera and ADM: Life after the Premier League Rights Saga

August 15, 2013 Leave a comment

The saga of the renewal of the Premier League television rights recently culminated with their award to Al Jazeera on an exclusive basis. As usual, the price paid has not been announced. Given the nature of the auction process and judging by its extended duration, it would probably be safe to assume the final amount is in the hundreds of millions of dollars.

If there is one thing that everyone agrees on, it is that the process took far too long. The result was announced roughly a month before the scheduled start of the 2013 season, leaving fans and subscribers confused as to how and where they will be able to watch the games. That the PL allowed the process to drag on for so long must imply that they reaped a financial benefit above and beyond what they would have gained by accepting the initial bids. Nevertheless, the proceedings did not help the reputation of the sports rights sales processes in MENA, which are in general quite ambiguous in nature.

Unless Al Jazeera has been quietly preparing for winning the PL rights, the short duration until the season’s kick-off leaves them with a considerable challenge. Undoubtedly, Al Jazeera will provide a high standard of coverage with a star line-up of pundits, presenters and commentators. If, as has been speculated, the PL has mandated that cards be paired with decoders, Al Jazeera has a limited amount of time to make sufficient decoders available in the market. Ironically, ADM’s decoders are compatible with Al Jazeera cards, but pairing will require the cooperation of ADM, which may be difficult to secure. There is a marketing challenge in defining and communicating pricing, availability and technical requirements to potential subscribers. Finally, there is a customer service challenge in signing up a significant number of new subscribers within a short period of time. The coming weeks will confirm whether Al Jazeera is able to meet these various challenges.

The exclusivity of the PL rights as awarded to Al Jazeera firmly answered the question of cooperation among MENA rights holders. Many speculated that ADM and Al Jazeera had drawn a line in the sand in the face of ever escalating rights costs. Indeed, had this scenario played out, it would have set the tone for a reduction in future sports rights values in the region. As it stands, future rights costs may rise sharply if ADM attempts to replace the PL rights with Spanish, Italian or UEFA rights as they come up for renewal in the coming years.

As many have commented, the costs of sports rights in the region are not commercially viable. Although I do agree, neither Al Jazeera nor ADM are naïve enough to think that they are purchasing assets to generate a financial return over a three-year period. Each has his own strategy and perspective and, in both cases, my guess is their reasoning extends beyond the commercial constraints of regional pay-tv.

Some have been critical of the rights owners for embarking on strategies that promote price hikes. I would agree that constant shifting between platforms is not conducive to long-term subscriber growth, but in the end sports rights are worth whatever someone is willing to pay for them. Incidentally, rapidly escalating costs for sports rights are not unique to the MENA region. The primary difference is that in most other markets, the bidders are driven by a commercial objective and operate within a market with sufficient scale to justify the costs.

For ADM, it must now of course determine the fate of its platform, which has hundreds of thousands of subscribers and represents a significant multi-million dollar investment. Most subscriptions will likely be expiring between August and December and ADM needs to offer its existing subscribers a viable alternative. It can of course shut down the platform and cut its losses, thus leaving Al Jazeera as the only viable buyer of international football rights in the region. Alternatively, ADM may elect to expand its HD entertainment offering to retain subscribers and gain new ones. Another possible scenario is for ADM to wait until major football and sports rights come up for renewal and attempt to acquire them. Each of these scenarios will have a significant impact on the pay-tv market in the region.

What next for Al Jazeera? Typically, pay-tv operators use sports rights to attract subscribers to a larger bouquet of entertainment channels with the aim of maximising revenues. So far for Al Jazeera, sports rights have been an end in and of themselves. After securing the rights for every major football tournament, will they focus on local football league rights? Or will they cast a wider net and seek to expand into entertainment? It would be an opportunity to create a compelling and complete pay-tv portfolio to entice a larger number of consumers at a lower subscription price point that Al Jazeera is clearly comfortable with. In comparison to the costs of sports rights, movie and entertainment channel rights in the region are a “bargain”!

(This post appeared in BroadcastPro Middle East.)

What will the Television watching experience be like in 5 years?

April 28, 2012 Leave a comment

I posted an answer on Quora.com recently in response to the following question:

Q. What will the Television watching experience be like in 5 years?
I sit on my couch with my phone in my hand and remote in the other, but still watch tv in the same way I did 15 years ago. With smart TV’s and users on the couch having smart phones, I imagine there is a lot of disruption and changes that will take place in this market.

A. “The passive lean-back experience at the heart of television watching has resisted many attempts to change it. It will remain at the core of watching and will not be replaced by viewers selecting the next video file every five minutes in the next five years. Even as digital video rises in advanced markets, television viewing is rising alongside it. The most evident support for this is that web players like Youtube and Yahoo are changing themselves to organize content into “channels” (sounds familiar?).

These days five years is too far out in tech terms to predict! However, there are trends that are influencing the mainstream television watching.

1) TV will continue to extend to multiple platforms: Tablets, consoles, web and mobile. This will make TV a more personal and portable experience since it will increase individual viewing rather than family-unit viewing. In Western markets this is already the norm, but in developing markets this will be a stronger influence.

2) Rise of the second screen and social communities: Consumers continue to multi-task while watching TV, but increasingly they will be looking at additional info to support their TV viewing. This will build communities around content in a new way that extends beyond broadcaster borders. TV has always been social and the subject of conversation. However, technology now means that the scale and reach of the conversation changes (from a few friends/colleagues to global discussions) and the speed of the discussion accelerates (from next-day to immediate).

3) Time-shifted viewing will dominate and begin to influence the broadcaster scheduling model and advertising formats. DVRs/ Network playback/ catch-up viewing online will encourage advertisers to focus on integration of brands within content rather than relying only on spots (but those will still be there in five years time).

4) New younger talent: New talent (actors/ writers) will reach the TV screen through discovery on the web (e.g. Youtube etc). Barriers to entry into the TV business for individuals will be lower. Some programs will be “hits” at a TV scale before they reach the TV screen.

The barriers to massive change in television watching are not technological but commercial and social. The technologies to change our tv viewing experience are already available but the entrenched advertising and subscription business models in markets like the US will continue to be a large hurdle against revolutionary change. On the social level, viewers still want to have a predominantly passive viewing experience rather than on-demand viewing. This may change as younger generations grow up without the habit of watching broadcast channels but five years is too soon for it to become mainstream.

TV watching will drastically change when someone figures out the perfect recommendation engine to line up programs selected from sources all over the web and at the same time untangles the complicated rights and window-release systems currently in place to free-up content while still able to finance its creation. But that’s a separate discussion altogether!

In summary, the TV watching experience will be more social, more suited to the viewer’s time, more integrated with advertising, more personal, more portable and will feature more on-screen talent.”

In Search of A Sustainable Business Model

April 12, 2012 3 comments

(This is a copy of an article written for BroadcastPro)

On the surface, the free-to-air television sector in the Middle East is thriving. Viewing time is one of the highest in the world. Even in the turbulent political environment of 2011, research indicates that the advertising market has continued to grow. Hundreds of channels exist yet satellite operators can’t keep up with demand and continue to launch new satellites. International players such as Newscorp and Turner have made investments in Middle East media. The region’s population is growing rapidly and is very young by global standards, thus making it attractive for advertisers. The large number of broadcasters supports an eco-system of profitable entities ranging from international and regional production houses to infrastructure providers and media professionals.

In reality, a minuscule number of broadcasters are profitable. Ad figures are inflated by rate card monitoring that does not take into account regular heavy discounting. On a net basis, ad spend per capita is lower than global benchmarks. In the absence of a single regulatory body with authority over the many countries in the region, the advertising and broadcasting sectors are practically unregulated. In advertising, this has led to aggressive but not always transparent sales practices. In broadcasting, the lack of regulation has led to large discrepancies in the quality of content. Audience measurement is either non-existent or relies on antiquated methodologies.

The rapid development of satellite Direct-to-Home distribution, while a necessity in the past to avoid strict government control of the television sector, has come at a cost. Broadcasters and advertisers cannot target individual markets and therefore larger countries tend to get the lion’s share of television spend while local TV advertising budgets are diverted to newspapers.
Despite the lack of profits, new channels continue to launch, at times as misguided commercial ventures but mostly in pursuit of non-commercial goals. This is fine in a normal free market scenario, but with the lack of audience measurement and no regulation of the claims channels can make or how their advertising inventory is sold, the market becomes distorted. Its overall value is diminished as too many players are left chasing an undervalued advertising spend.

There is no short term solution or quick fix for the various issues afflicting the TV sector in the Middle East. Many are regulatory and related to the multi-country footprint of the sector and therefore cannot be easily resolved. Ultimately, the current key players in the Middle East’s television industry including broadcasters, advertisers, media buyers and sales representatives, are best positioned to improve its prospects by taking pragmatic steps to increase revenues, reduce costs, and support transparency.

Key actions include:

All parties should support the introduction of audience measurement tools. The UAE is the only major Middle East market that is close to launching people meters.

Broadcasters can increase their revenues if they work closely with advertisers. The evolved advertisers need to expand their arsenal beyond the 30-second spot to cut through the clutter. Yet currently the content development process at broadcasters barely involves their ultimate clients. If more budgets are to be allocated to TV, broadcasters must reach out to advertisers and seek to develop content that entertains audiences while integrating brands in a seamless non-intrusive manner.

Broadcasters should begin to shift their mindset to that of content owners and capitalise on new platforms to increase revenues: IPTV platforms are emerging in Saudi and other countries. OTT is a nascent but promising sector. Satellite operators are considering spot beams. YouTube viewing on mobile is one of the highest in the world. Broadband penetration is growing rapidly in key markets. All these platforms provide opportunities for content owners to create more relevant localised content, extend television brands onto the web and mobile, generate syndication and licensing revenues, or explore new advertising mechanisms.

Broadcasters can reduce content costs by sharing productions across markets or acquiring rights for smaller geographic territories. The pan-Arab channel is a convenient myth and very few channels can be both popular with audiences across all countries and be able to generate revenues from those countries.

Advertisers too must play a role in rewarding broadcasters that create premium content with verified audiences. In too many instances, the short term focus on reducing spot rates has led to a negative ripple effect across the advertising value chain.
The TV sector in the Middle East must repair its business model if it wants to sustain itself in the long term and attract investment on a commercially viable basis. Eventually, internal voluntary reform, if not exercised, will be replaced by externally imposed regulatory reform.

When will the web video sales horse catch up with the technology cart?

October 19, 2011 Leave a comment

At the medialive UAE conference yesterday, I listened with interest to a panel discussing how to generate revenues from the “new media ecosystem.” It quickly became apparent that several markets in the MENA region had reached the stage where the technology to generate revenues from web video was ready for prime time but was yet to make a significant impact because the business understanding and processes required were not yet mature. In other words, the “new media ecosystem” exists at a technology level but lacks a clear sales ecosystem to create value. There are now online video on-demand sites like istikana.com and online television channels like elgomhoreya.tv. YouTube reports rapidly growing MENA usage while regional variants like Ikbis have sprung up. Digital creative agencies like flip and nervora can help develop innovative advertising and engagement solutions.

Yet most advertisers who look at shifting marketing dollars to the web are presented with a now familiar list of top five sites with banner and CPM rates. If not that, then the now obligatory Facebook fan page for branding and interaction purposes is the default suggestion. Little effort is made to make use of the superior data that web campaigns can provide, which is surprising given the region’s lack of accurate advertising currencies and performance measurement.

Similarly content owners who make their content available online will find meager sums awaiting them. As a result, most seem to default to using the web as a branding and reach mechanism rather than a revenue generator.

The reasons for the business ecosystem lagging behind the technology are varied. Google’s representative on the new media ecosystem panel admitted they couldn’t generate revenues from YouTube in MENA because they did not yet have the right resources on the ground to do the selling. Clearly a global company will prioritise larger markets at the MENA region’s expense. For media buyers, even those with specialized digital units, the majority of their revenues is still tied to traditional media spend and traditional media economics. This in turn affects the number of staff and effort put into digital sales. For all its touted measurement capability, the MENA web does not have a standard audit body. Advertisers are sometimes more comfortable with the display-based advertising formats that more closely resemble what they are familiar with in print media. Broadband speeds are increasing by the day, but still vary wildly from one market to the other thereby limiting the reach of web video. Finally, even in mature markets, web video sites are struggling to equate the value of a web view of a video commercial with its more expensive television variant. When you consider that a consumer who does not click “skip” and chooses to watch a video advertisement is more engaged than a passive consumer watching television, it would seem the higher value attributed to TV viewing is partly influenced by the legacy of the industry’s development rather than statistics and data.

It is clear that web video advertising will continue to grow rapidly in the MENA region. To reach its full potential though,the sector needs changes in advertiser mindsets, media buyer economics and broadband infrastructure. That may sound like a tall order, but it is only a matter of time before the pieces click into place.

The Myth of Monitored Advertising Spend

October 29, 2010 1 comment

It is very common, when meeting with someone from a non-MENA media company, to hear them discuss the billions of dollars spent on advertising in the region. Based on these statistics, the uninitiated build unrealistic business plans or expect to license their content and channels at astronomical prices.

Businessmen from abroad are not the only ones to make the mistake of over-estimating the advertising spend in the region. Frequently, local newspapers will happily print articles about advertising spend and deduce quarterly or annual growth rates from them.

I wish these figures were true. The publishers of these articles fail to explain  that they calculate these figures by simply multiplying forms of advertising by the rate card of the media in which they appear. What they also don’t mention is that in some media, rate cards could be discounted as much as 80%. These figures then fail to take into account advertising inventory that is given away for free to sister companies or as incentives on media buys. These figures finally fail to mention that they do not include all forms of media.

While it is useful, at a very broad level, to look at monitored levels of advertising spend, it would be wrong to make any substantial business decisions based on them. Instead, researchers and companies should rely on knowledge gained from local partners to help them navigate the maze of advertising data before they can trust the numbers. It is the responsibility of the parties issuing these numbers to ensure they provide the proper disclaimers and explanations so as to avoid misleading readers.

Categories: Media Economics Tags: ,