President and CEO, Orbit
Rome, July 1998
TBS: Thereís been a lot of talk that Orbit is moving out of Rome. Is this
We are not moving out of Rome, we are focusing on decentralizing portions of our
business, what weíre calling the Arabization of Orbit. Over the last five years
weíve encountered many obstacles; those obstacles have now been overcome, and
weíre much more comfortable with integrating our business back into the region.
The business will not be centrally located in one place, it will be divided into
sections. Primarily the infrastructure weíre establishing is built around the
production plants that we have for Arabic products.
TBS: A lot of which
you would do outside Rome anyway.
Zilo: We have very
little production in Rome. We donít have the studio capabilites, itís difficult
to get access to talent, etc. So we were since our inception producing all our
programming for our second channel, al-Thaniya, from the region--Kuwait, Cairo,
and Lebanon. So now having experienced the higher, incremental costs of having
to go through third parties, where you donít have your own infrastructure, weíre
now focusing on that infrastructure to bring our costs down in order to be able
to produce more. Anyone who is committed to [this], like Sheikh Saleh has done
on his side in Avezzano and elsewhere, you have to have the infrastructure to
keep your costs down and have vertical integration and control of your programming.
The fundamental issue that we find everywhere is that studios are very rare, and
the people that you commission to do the work then have to deal with another,
third party, and everybody takes a piece along the way.
TBS: Will you still
commission outside work?
Zilo: We will commission
outside work, we will cause the outside people to use our facilities, so we have
control of those markups.
TBS: Is this reorganization
or this decentralization already underway?
Zilo: Itís been
underway for six months.
TBS: Where will the production
centers be located? Weíve heard mentions of Cairo and Jebel Ali in Dubai.
Zilo: By this time
next year we will have substantial resources in Cyprus, Dubai, Jebel Ali, Kuwait,
Cairo, Lebanon, and here in Rome. The bases Iíve just cited are existing today,
theyíre just smaller. This should allow us to integrate ourselves better into
the culture and the language, and also bring down the costs. People, I believe,
overreacted to this concept of decentralization and turned it into a catch-all
of, weíre leaving Rome. Now, anythingís possibletwo years from now, three
years from now, we may, who knows. In the same way that any broadcasterís strategy
may change and their focus may change. Business is vibrant, business has to adjust
to the conditions of the day. So weíre not precluding it, but thatís not in the
TBS: Earlier this
year trade publications were reporting that Orbit expected to show a profit within
a yearís time. Is decentralization and the cost of new startups and expanded production
facilities going to delay that move into becoming a profit center?
Zilo: No. The timeline
to break even for us is December. Nothing is going to distract us from that. A
lot of the elements of decentralization actually are contributing to reducing
costsone body alone moving out of Rome saves you 42 percent of the salary.
Anything that has to do with infrastructure is a capital cost, thatís long-term,
as a separate element. So thatís expansion, as opposed to the operating business
TBS: Arenít you
concerned at all that you might be politically vulnerable? After all, youíre carrying
news programming from the American networks, youíre carrying discussion shows,
which can be controversial; thatís part of their excitement. Was that a consideration?
Did it make you hesitate at all?
Zilo: Not at all.
Weíre sensitive to it; you have to be able to protect your business from political
and commercial fallout. And those two elements go hand in hand. And that is why
we are splintering our operations, to put it in various locations, so as to have
the redundancy. For instance, at the moment [the public affairs talk and call-in
show] Ala-l-Hawaí broadcasts live every day from Cairo, and sometimes the topics
are innocuous and sometimes they are not. And sometimes we have very colorful
individuals. If we were slapped on the wrist for any reason, itís very easy within
a couple of hours for us to move [host] Emad al-Deeb from one location to the
other. And in fact we do move him; he travels a lot, from Beirut to Palestine
to Amman to London. So weíre prepared to put out this show from anywhere with
a few hours notice. We donít see that as succumbing to political risk by going
into the region because weíve mapped out the critical core areas that need to
TBS: Where do you
think the market of encrypted satellite networks is going? Right now in the region
weíre basically looking at Orbit, ART, Showtime. Do you expect more players in
Zilo: Well, I definitely
believe thereís a market for pay television in the Middle East; otherwise we wouldnít
be doing what weíre doing, and I certainly wouldnít be doing what Iím doing. Having
said that, I donít believe that there is room for multiple platforms, in the same
way that I donít believe thereís room for a multiplicity of free-to-air satellite
platforms. In both instances you have a limited pot of advertising money for the
free-to-air services, and on the pay/encrypted side you have a limited purchasing
ability from the region. As such, we can all struggle along with a piece of the
pie, but it would be difficult for everyone. So I think in the long term, if I
were to predict it now, two to three years from now, the landscape of pay television
will be very different. I donít think there will be new entries; you may see a
few of them, but itís one thing to have the ego and the pride of launching a platform,
itís another thing to turn it into a business. Nobody likes to admit to defeat,
nobody likes to admit to commercial difficulties, so theyíll struggle along, but
to say thereís room for multiple commercially successful ventures? I donít believe
so. I donít think thereís room for more than two.
TBS: Will Orbit
be on Nilesat?
Zilo: Orbit wonít
be on Nilesat. We have excellent relations with ERTU, Egypt 1 and 2 are on our
service on an exclusive basis, and there was no obligation for us to take transponders
on Nilesat. In fact, none of the transponders are available now.
TBS: BBC Arabic
TV news was both a problem and a package that brought considerable prestige to
Orbit. Since the demise of BBC Arabic television news we have al-Jazeera, we have
the Arab News Network out of London, as new ventures in the Arabic satellite news
market. Do you ever consider undertaking a new Orbit Arabic news channel once
more, but perhaps with a more culturally sensitive partner?
Zilo: It is in
our plans, at a point in time, to incorporate a new Arabic news service into Orbit.
Itís all about timing. News is a very expensive proposition; my priority right
now is to produce Arabic entertainment programming, which will not run the risk
of being politically offensive. The moment is not right for us to deal with the
launch of a news channel, but we do have inclinations and plans to do so in due
course; whether itís next year or the year after I canít say. Will it be with
a partner? The likelihood is that it will not. We know from our own experience
that editorial integrity is sacrosanct with control, and as such whenever you
have a partner you have a consultative process. News happens too quickly to go
through that consultation process, and therefore our decision, our inclination
is that we not go with a partner. TBS