Digital Dilemma: Television and Technology in Emerging Markets
Peter Einstein, President and CEO of Showtime, at the MIT Arab Alumni Association
Conference at Beirut's Sheraton Coral Beach on March 24, 2002.
Good morning distinguished guests, ladies and gentlemen.
I'd like to welcome you
to this session on regional television networks which I have called: The digital
dilemma: television and technology in emerging markets.
I'd also like to introduce
our panelists. Dr. Nadim Munla, CEO of Future TV, and Pierre El Daher, CEO of
LBC International. We're friendly foes all working with the best interests of
the Middle East television viewer at heart.
Nadim is currently spearheading
the integration of three of the major regional commercial television channels:
Future, MBC, and Zen. He will be presenting his views on the future for regional
networks through rationalization and re-positioning.
Pierre has led the development
of LBC into one of the few regional mega-channels based on developing a commercially
viable product that is attractive to viewers and advertisers. Pierre will be outlining
his view on the way forward for the advertising industry in the region when it
is faced with even greater media opportunities presented by digital broadcasting.
In this brave new world
of digital convergence, content - movies, music, software - is available in multiple
formats and accessible through an ever-growing range of devices like mobile phones,
PCs and PDAs (Personal Digital Assistants).
Yet, despite the sophistication
and development of emerging technology, the epigram coined by Viacom chairman
Sumner Redstone - 'Content is king' - still rings true.
Technology is simply a
means to an end and what users really want is quality content-better television
programs, more movies, faster computer programs, the latest music releases.
So it is surprising that
an under-developed region like the Middle East should be a digital pioneer.
The region witnessed the
launch of the world's first digital television network in 1994, albeit operating
on a non-standard technology platform.
When MPEG-2 was adopted
as the de facto standard, two more digital television networks were launched
Unlike other markets around the world there was no history in the Middle East
of viewers paying for television. There was no analogue-pay-TV base and the result
was an immediate transition from an analogue free-to-air television market to
a digital pay-TV market.
The rush to saturate the
region with digital TV networks created the world's most competitive pay-TV market,
with three competing platforms-and that competitive environment is bad news for
broadcasters … and for consumers.
Broadcasters are faced
with the cost of subsidizing hardware-decoders and satellite dishes-while, at
the same time, bidding competitively to acquire broadcast rights to a finite amount
of premium and exclusive content. The result has raised the cost of initial investment
that in some cases may mean that a return will never be realized.
The competitive environment
is also bad news for viewers because they are faced with the expensive option
of potentially having to subscribe to three networks to watch the premium and
exclusive content that interests them.
In principle the Middle
East and North Africa should prove a safe bet for investors in television with
more than 300 million people sharing a common language. Yet there are only around
20 million television households while the regional per capita income hovers around
The television sector
in the Middle East is also skewed by the funding of public sector, state-run channels,
while the commercial, regional free-to-air channels - including MBC, Future and
LBC - are battling in a stagnant advertising market.
Regional television development
in the region is therefore a classic case of the technology dilemma. How quickly
should new technology be rolled out in emerging markets? Is the market ready or
are broadcasters shooting themselves in the foot? Can the market sustain the investment?
In the television sector,
viewers don't 'buy' brands or technology - they 'buy' content. Technology is simply
the gateway to deliver entertainment services and programming.
The good news is that
digital broadcast technology can deliver a range of cost-effective, value-added
services like distance learning channels, real-time stock market tickers, demographic
and special interest group niche channels like The Golf Channel, and a greater
range of viewer options like Pay Per View movies, interactive video games and
viewer polls and voting.
Because of the early adoption
of digital technology-and the vision of the Egyptian government to launch two
high-powered digital broadcast satellites-the Middle East television sector is
embroiled in trench warfare in both the free-to-air and pay-TV segments.
The issues are many but
I think three are of key importance.
Quantity vs. quality
There is simply too much
television choice in the Middle East. Around 700 TV channels are accessible with
just three satellite dishes-and too many of those channels are what I call 'me,
too'-public state-funded channels delivering similar content.
What is needed is some
rationalization and re-positioning of channels to provide viewers with more focus
and better quality content. Nadim will be arguing this case but I think there
is a need to rationalize public sector, state funded channels through regionalization.
In my view there is an
opportunity for channels funded by the Arab states to merge programming and schedules,
to share regional news output, and to produce local/state news bulletins. Local
news and sport drives local audiences. In practice, what is called for is a regionalization
of another Sumner Redstone truism, the notion of 'think global, act local.'
It was on this principle
that MTV exploited the development an innovative multi-platform approach that
showcases award-winning content via 73 cable, satellite and terrestrial TV networks,
38 Web sites, PC broadband cable, mobile phones, PDA (personal digital assistants),
and other emerging technologies throughout Asia Pacific, Europe, North America,
Latin America and Russia.
The second key issue is
a stagnant advertising market. Advertising is the lifeblood of commercial free-to-air
television channels. It pays for content and production.
The sheer volume of channels
splinters audiences across ill-defined niche channels that fail to attract advertisers
or commercial program sponsors. There are too many channels each barely different
from the others chasing the same advertising pie.
A regionalization strategy
provides media buyers with stronger reach for regional campaigns with local (state)
Conversely, digital broadcasting
technology also facilitates the introduction of added value services that can
differentiate channels and networks.
Developments like Pay
Per View, interactive broadcast video games, and viewer polling provide greater
choice. They deliver tightly defined demographic and detailed 'buy' rates attractive
to advertisers willing to pay premium rates for spots.
Pierre will be assessing
the advertising opportunities offered by digital broadcasting and how commercial
stations can benefit through increasing advertising revenue.
Piracy and copyright
The third key issue is
piracy and copyright abuse.
Television piracy is theft.
It's bad news for pay-TV broadcasters who are being robbed of revenue. It's bad
news for viewers who are being fobbed off with inferior product. And it's bad
news for Government-especially here in Lebanon, which suffers from large-scale
There are enormous potential
benefits to the Lebanese economy in terms of job creation, revenue generation,
and inward investment resulting from rigorous enforcement of international copyright
A report by market research
company Statistics Lebanon revealed that the Lebanese economy is losing over $40
million a year through piracy of international satellite TV channels alone.
The deficit is derived
from losses in tax revenue and is compounded by the deterioration of all sectors
of the audiovisual market, including a 50 percent decline in cinema sales and
the closure of more than 3,000 video rental stores.
The hidden losses are
even greater. Showtime, for example, chose Dubai as its regional headquarters
and in four years has seen its number of employees in the Emirate rise from just
six to more than 100 staff.
Our operations in Lebanon
should match that rapid growth yet without proper copyright protection there is
little encouragement to invest. Meanwhile, Showtime operations in Kuwait, Saudi
Arabia and, recently, Jordan, have also grown significantly.
Lebanon is the most entrepreneurial
country in the region and has the most educated workforce with particular talents
in the I.T., media, entertainment and music sectors, yet companies are choosing
other cities in the Middle East for their regional headquarters.
That investment and job
creation should come to Lebanon but companies are being driven away by the relaxed
attitude towards copyright infringement.
use, reproduction, sale, or distribution of copyrighted material-is a plague of
the digital era. It is the largest single threat to the survival of creative enterprises.
The protection of copyright,
the stringent enforcement of federal laws, and the prosecution of offenders were
major factors in the success of Dubai as a regional hub for the media and I.T.
Until two years ago, Dubai
was not renowned for its excellence in media production and information technology.
However, government efforts to enforce copyright protection, complemented by investment
in infrastructure, have initiated the success of Dubai Internet City and Dubai
With Lebanon's talent,
creativity, and history of media production especially, there is no reason why
Beirut should not compete again on a regional basis.
I believe that these are
the issues caused by the early adoption and roll-out of digital broadcasting technology
to the Middle East region. It gives me great pleasure to invite our panelists,
Dr. Nadim Munla of Future Television and Pierre El Daher of LBC International
to give their appraisals of the opportunities. TBS