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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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When Hollywood is Not Enough – OTT Content in the Middle East

October 6, 2015 Leave a comment

The pure-play premium OTT market in the Middle East recently saw another entrant in the form of Starz Play Arabia joining the likes of Icflix, OSN Go and a bevy of telco offerings. Meanwhile, rumours abound of the impending arrival of Netflix and the launch of new broadcaster-backed offerings. This is all good news, as competition undoubtedly benefits consumers and drives innovation.

However, even at this early stage, it is becoming harder for services to differentiate themselves. Features such as HD streaming and multi-device support may have been enticing in the past, but they are now expected to be standard. Thus, the competing services have three primary competitive levers: price, content and convenience.

It is a safe assumption that a price war in a business that relies on volume rather than margin is a race to the bottom and best avoided unless one has deep pockets and a propensity to ignore commercial common sense. Inevitably, pure-play OTT services will converge around a similar price point or be ‘free’ as part of triple or quad play offerings.

Content, is of course, the weapon of choice in this fight. And here again, it is easy to default to the lowest common denominator: Hollywood. Yes, Hollywood content can serve well as a glamorous window display with big brand-name actors and titles, but its ability to sustain high growth in subscriber numbers in the Middle East is, in my opinion, doubtful for a variety of reasons.

One reason is the lack of scarcity. There is no shortage of Hollywood content on free-to-air channels. Beyond blockbuster movies, viewership levels are not as impressive as they used to be. US drama series and sitcoms, in particular, do not appeal to a wide segment of the population in the Middle East markets that matter commercially.

Another reason is the windowing structure imposed by the studios, which results in a very delayed arrival of titles onto the OTT platforms. This model is out of step with market realities, but changing it is not always easy, due to the need to protect the US market or other international distribution commitments. Thus, ardent fans of a particular title will watch it in the pay-window or download it illegally shortly after its US broadcast. For everyone else, the content is free on FTA channels.

Television ratings indicate drama is the most popular genre, and time and time again, consumer surveys show that Arabic is, by far, the preferred language for drama series to be watched in. Although dubbing might work for a Turkish series because the locations and actors don’t seem too distant, dubbing becomes much less convincing when the characters and settings are obviously foreign.

We come to the unsurprising conclusion that Arabic drama content is key to success. Even more alluring would be an OTT player’s ability to offer original content outside the Ramadan window. But simply taking a page from the book of Netflix and producing original content in sufficient volume to convince people to part with their money is not viable for all players. It takes significant production and marketing budgets to produce and promote content that appeals to the various markets within the Middle East.

Relying purely on library content is not a convincing offering for Middle East consumers. Licensing a first (Ramadan) or second (post-Ramadan) run of an Arabic drama series would allow OTT players to play their other trump card: binge viewing convenience.

An OTT player offering all 30 episodes of a drama on day one of Ramadan would create a new viewing experience for viewers. Similarly, offering exclusive Arabic dramas for binge viewing immediately after Ramadan would free viewers from the shackles of TV schedules. Since it is customary for licensors of first and second windows of Arabic drama to be granted a multi-year third run (library) window, an OTT player would still be able to maintain a broad long-tail offering.

The OTT player that can offer a large selection of exclusive first- and second-run Arabic series on multiple platforms, available from the first day of Ramadan or the post-Ramadan window for binge viewing, would certainly have a tempting proposition for subscribers in the Middle East.

This post first appeared in BroadcastPro magazine here.

Categories: content Tags: ,

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:

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.