Middle East TV
Continues To "Baffle And Bewilder"
By Chris Forrester
Middle East broadcasting
has seen some major changes this past summer - and not all of them are good. First,
John Tydeman, ADD (Arab Digital Distribution)'s president has departed the company.
Tydeman is a well-known and highly-regarded figure in satellite pay-TV, having
been one of Rupert Murdoch's key players in the launch of Sky Television, Star
TV, and, going further back, the launch of the Astra satellite system over Europe.
He was also for a time a senior figure at Showtime.
However, Tydeman's departure,
although unconnected, came at the end of a disastrous summer for ART/ADD. The
problems revolved around ART (Arab Radio and Television)'s exclusive rights to
the complete FIFA World Cup soccer tournament that had cost the company a reported
$80m to secure. ART's awareness-building campaign kicked in a few days ahead of
the first matches and resulted in massive overload of the company's telephone
system, with one insider admitting they were at one stage handling more than 10,000
calls a day. The problems didn't end there. "The back-office [organisation] was
horrible. It was an unmitigated disaster, a total fiasco. It wasn't marketed properly,
and they should have been selling the World Cup at least 6 months ahead of the
event, not six days. All of a sudden the 'phones were ringing off the hook, and
ART imploded. People were screaming for subs, threatening to kill people, rioting,
government officials were calling [ART president Sheikh Saleh Kamel] directly."
However, it could all
have been worth it if the approximate 80,000-90,000 who did get through and took
out subscriptions stayed loyal to ART. In simple terms each of their subscriptions,
typically $50/month, would have translated into an income (although not profit)
of $54m in a full year. Had the bulk of those subscribers remained for a second
year then ART was in profit. Unfortunately, around 90% cancelled.
That's not all. John Tydeman
was enthusiastic about making ART a one-stop shop for everything televisual, adding
a huge number of international channels, and even managed to persuade Star Select,
a pay-bouquet previously carried on the Orbit platform, to switch from Orbit and
join ART as part of Tydeman's multi-level 'Pehla' platform.
This deal was a good one,
at least for Star Select, boosting their guaranteed payments from ART. It could
also have been a good one for ART if only viewers had been able to organise their
way through the complex labyrinth that is the ART/ADD subscription process. Indeed,
with the possible permutations of the four mini-platforms on offer (Pehla, Al
Awael, FirstNet, and Star Select), then, having to calculate the clusters of channels
within each mini-platform (kids, kids & knowledge, family, sports, gold, etc),
viewers were confused, local reports suggest, as to which bundles to take. Those
same reports suggest that far from growing the Star Select subscribers, numbers
have shrunk by some 75% since the switch from Orbit.
Few people comment on
actual subscriber numbers for the competing pay platforms, although Tydeman did
make a formal presentation to the influential International Advertising World
Congress in Beirut earlier this summer. Tydeman admitted in his presentation that
Middle East subscriber statistics are fraught with danger and generally not worth
taking seriously. Indeed, in a study released in July by Screen Digest, the latter
lists ADD's rival Orbit as having some 420,000 subscribers, a figure now wholly
discredited. "We have taken an alternative viewpoint,"Tydeman
told delegates, saying that ADD has employed what he described as an independent
research group ("7 Degrees") to assess the size of the Arab digital TV market.
Tydeman said the six main
Gulf-based Arab states have a combined population of some 27 million. Egypt and
the other Mediterranean-based Arab states are extra to this number.Tydeman
admits that he knows the actual subscriber numbers in his market, split between
the three rival platforms of Showtime, Orbit, and his own ART-backed ADD platforms.
He said, "If we release the actual numbers [they] would not be seen as being reliable,"
and by implication perhaps not trustworthy. He said the study looked at cable
households by market and DTH (Direct-To-Home) homes by sub-region, and deliberately
omitted hotels and public-place "viewing points."
Tydeman said ADD asked
research outfit "7 Degrees" to talk to the hardware manufacturers, other suppliers,
satellite dealers, and system installers, to give their own low/high estimates
of the DTH situation in their local markets. In addition, Tydeman says the various
cable-only markets there were some 92,000 households subscribing to one or more
Orbit channels, some 81,000 homes subscribing to one or more Showtime channel,
and 123,000 viewing ART/ADD channels. Tydeman stressed that there would be an
obvious high overlap.
Although vague on specifics,
Tydeman then added the three rival platform's totals and said "the figures come
out at between almost 300,000 and 400,000 subscribing homes, and my own personal
belief is that the [total] is somewhere about 350,000 thousand." Additionally,
Tydeman said their 'middle of the road' assumptions were that Orbit had about
90,000 subscribers, Showtime ("although this is very generous and I think it's
too high") had about 140,000 and that ART/ADD was the largest platform with somewhere
in the vicinity of 150,000 to 180,000 homes subscribing via DTH. Add in cable
subs, and the overall totals, that is DTH plus cable (with some considerable overlap),
|GCC (excl. Saudi Arabia)
*Data: ADD/"7 Degrees"
More than one conference
delegate expressed some surprise at the figures and the way they were compiled.
"ADD know their own, highly specific, figures. Why not issue those?" asked one
highly placed local media observer. It seems a fair comment, and one has to ask
why any broadcaster should fund what might be described as a wholly spurious exercise
to 'prove' what the broadcaster already knows only too well.
Peter Einstein, president
of Showtime, has subsequently disputed the figures, arguing that Tydeman's Beirut
comments on Showtime's absolute subscriber numbers were "totally incorrect. His
indicated range is closer to our DTH figures alone, without cable, MMDS, and other
distribution. DTH is the strongest component."
However, Einstein also
issued some good common sense about the Middle East's long quest for accurate
subscriber data. "As far as numbers go, this business is not about being first.
It is not important for us to compare ourselves with our rivals in terms of numbers.
There's the all-important ARPU [average revenue per subscribing unit], or overall
margin and the movement toward break-even and profits. Whether we accomplish leadership
in subscriber numbers is almost immaterial, and whether we lead the pack or are
at the last place in the pack is also unimportant. What my shareholders want is
that movement into profits, and these are the measurements that matter, although
it could be that we'll achieve some of the other milestones on the way. As for
Showtime, and its target to break-even this winter (2002-2003), and certainly
by 2002/2003 is that we are on target to achieve that goal."
The summer also saw another
batch of free-to-air digital channels launched. Khalifa TV out of Algeria, Melody
TV from Egypt, Dubai's Channel 33, TV5 Oriental from France, for example. More
are promised with Egyptian, Beirut and Dubai entrepreneurs evidently desperate
to climb aboard the television bandwagon. Einstein had a few words for these new
TV stars: "Free to air [transmission] in the Middle East is bewildering. I don't
altogether understand why people would want to put free-to-air channels up there
that have little or no chance of ever making money. We all know that the advertising
market in the Middle East is diabolical, and to slice that already small pie yet
again, to take another ultra-thin slice of that pie, does nobody any good. I shake
my head with bafflement. But many, many of these channels are there for a non-economic
purpose, and if there is a non-economic purpose in their being available, then
what can one say constructively? The whole premise of pay-TV is to supply them
with programming and entertainment that they cannot get anywhere else. So, whatever
someone may be putting out on Dubai Channel 33, even if it includes some English-language
'western' product, we know it will be old and people are always prepared to pay
for something fresh and new and cannot be seen elsewhere. It is the normal pay
vs. free market model that's existed all over the world. There will be an audience
for free-to-air, but it will be older window material."
Meanwhile - and also speaking
at the Beirut conference, and ahead of the launch of MBC's news channel - LBC's
Pierre Daher not unreasonably complained that Middle East broadcasters are not
getting anything like a fair return from the advertising community. "It is a very
competitive market. Three years ago, if you would have asked me 'who in the Arab
world would produce the Millionaire show,' I would have said nobody was able to
produce a show [every week] to that exacting standard. It has happened. MBC ran
it, with the same telephony model used in the West. It served them well for about
three months but then the telephone income fell away. They have continued, which
means that if your competitor is spending that much on programming and it is seen
on screen as quality programming, then we have to react. It also means that prices
for producing this sort of quality go up. We spent in 2001 compared to 2000 about
35% more in programme costs only. However, on the income side the whole market
has not increased by more than 5%. Margins are tighter than ever. It cannot go
Daher said both LBC and
MBC tried to hammer out some sort of merger deal, which he said remained his ideal,
and "for the moment" is off the table. "We tried to create some sort of synergy
together. It failed, although you will know of the so-called merger between MBC
and Future which has taken its place. However, in my opinion this has done no
good for the advertising industry. Had our merger taken place, between the Number
1 and Number 2 stations, it would have raised the total amount of income coming
into the sector."
He added that if the newly
merged entity meant more channels coming into the already-crowded market then
he would react accordingly and promptly announced his own 'merger' plan. "It is
an interesting situation. It is a different world we are going into. We are in
discussions with the huge Al-Hayat newspaper group. They are more than discussions
but less than a merger. The first thing we will inherit is their newsgathering
abilities. The first step is to boost our own news coverage but it could also
lead to a news channel if the financial state permits."
Associated Press TV News
(APTN) is already a major supplier of news content to most of the Middle East
broadcasters and it seems plenty of them are looking to tap into the high profile
success (but not profits) being achieved by Al Jazeera. MBC has, within its all-embracing
broadcast grid, won some high plaudits for news coverage. It seems Daher is contemplating
some sort of rival operation to Al Jazeera and while APTN is keen to maintain
its news supply into LBC, the local tie-up with Al Hayat might be the first piece
of the complex jigsaw safely in place.
But he also urges caution.
"MBC has a strong reputation in its news coverage. Al Jazeera has taken that ground,
but we look at news somewhat differently. I look at news as another programme
opportunity, like any other programme on the grid. Is there a place for another
TV news channel? Today, you have MBC and LBC competing head-to-head. All that
we are doing is recognising that one of our relative weaknesses is news, and we
are taking steps to remedy that. Within the framework and the budget, which will
grow because we have a partner and can pool our resources, there is definitely
space to enhance news. But you might ask us if we were going to spend more on
variety programming this year, and the answer would also be 'yes'. But is there
space today for another 24-hour news channel? At the moment the answer is 'no'.
Politically there's plenty to talk about, but financially it would be difficult."
On the vexed question
of pay- vs. free-to-air, he admits there are challenges to both sides of the equation.
"This is a very tough question. Will they join us in being free-to-air, or will
we join them on their pay-TV platform? It is hard. The history of encrypted TV
in the area is bad. Its reputation is bad." His dilemma, along with the other
channels, is a shrinking income base. "We are reaching a point where it is quite
likely that this year will be a peak year for pan-Arab [advertising income]. The
peak in the Lebanon occurred in 1999. Since then income has gone down, about 10%
per year and last year income fell more than 20%. This year we will be 25% down.
By next year we could be 40% down on 1999. In terms of gross income the Lebanese
station will be $20m, and on satellite about $48m. Commissions would see about
40%-45% of that removed before we see anything. It's nothing. TF1 almost spends
more in a day than we do in a year!"
Besides the three or four
key channels there are another 55 or more free-to-air channels beaming out from
Arabsat and Nilesat, an increasing number transmitting only in digital. "They
don't bother me. They have already been marginalized, and although they each take
a percentage point or two away from us, the stations that are really hurting us
are the foreign stations. HotBird is a reality, and some of their pornographic
programming has a lot of appeal in this region."
Daher's message was clear:
"You ask if pay-TV must merge. I say even free-to-air stations must merge to survive.
We will have another year or so, losing a million or two each year. But after
that there will have to be changes. It is simple: put your station on satellite
and you multiply your losses ten-fold. Go onto pay-TV and you multiply them by
He talked about the Middle
East's "miserable" slice of the world's TV ad-spend, which grew 7-fold between
1950 and 1996, culminating in an overall global ad-spend of some $429 billion
last year. "The Middle East does not even reach $1 billion [across all ad sectors].
"I do not understand markets in terms of optimism or pessimism, but rather in
terms of realism. The Middle East has the potential to be a major world player
and the golden rule is liberalisation. What we need is on one side a lift of all
government restrictions to allow the emergence of free privately owned media in
all sectors, and on the other hand courageous investments in media. Such double
action will revive the market, encourage investors, increase consumption and put
the region on the global marketing map. With a population of over 300 million
people, all speaking the same language in a highly strategic region of the world
we have all the potential we need to compete with the rest of the world, and attract
billions of dollars in advertising budgets. If we don't do it, someone else will,
and instead of being the producers and creators, we will end up being part of
Asked whether he saw a
threat from outside operators like Rupert Murdoch or Vivendi, his answer was straightforward:
"We are not worth the bother." TBS
Chris Forrester is a TBS