CALIFORNIA // People in the Middle East and North Africa region love to watch TV – especially when it is free.
But increasingly, Mena residents are willing to pay for the content they consume, be it via satellite packages or online on-demand services.
According to the research firm IHS Markit, the number of households in the Mena region that are subscribed to pay-TV services topped five million by the end of last year, a growth of 8 per cent from 2015, while revenues rose by 15 per cent to US$2.27 billion.
“The Middle East and North Africa region is one of the fastest-growing for pay-TV, in both subscriber numbers and revenues,” says Constantinos Papavassilopoulos, a senior analyst at IHS Markit. “The launch of services such as Netflix and Amazon Prime is fuelling the market and is a good sign for further growth.”
IHS Markit expects growth to continue, with households subscribing to pay-TV homes touching seven million in 2021 while revenues are expected to almost double to $4.03bn in 2021. The growth is fuelled primarily by the GCC, where the pay-TV penetration rate stands at 60 per cent while countries such as Egypt lag behind with just 3 per cent.
For the past seven years, two satellite operators, beIN Media Group and OSN, have dominated the market capturing more than 60 per cent of subscribers and more than 55 per cent of revenues.
But these traditional satellite operators face stiff competition from online services, which are sometimes called video on-demand (VOD) or over-the-top (OTT) players. “Over the past few years, TV consumption patterns in Mena have broadly followed the trends witnessed at a global level,” says Medea Nocentini, the senior vice president of strategy at OSN. “Traditional TV consumption is fairly stable but it is complemented by growing on-demand TV consumption, both on satellite box recorders and on online platforms.”
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At a glance
What: The way we watch TV is being transformed by innovative technology.
Why: Viewers want to access shows from several platforms.
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Total online video market revenues in the Mena region stood at $500 million in 2016, a year-on-year growth of 51 per cent from 2015, says IHS Markit. About 65 per cent of this revenue came from advertising, but going forward, subscription will drive growth, it says. “Subscription services in the region saw 137 per cent growth in 2016, spurred by the launch of Netflix and strong performance from local players,” says Mr Papavassilopoulos.
“Subscription accounted for over 30 per cent of the total online video market in 2016, and is expected to contribute 45 per cent of total market revenues by 2020.”
This trend is being fuelled by the younger population across the region alongside the rise in both fixed and mobile broadband penetration.
“Developments in TV and mobile technology are transforming the way people in Mena consume TV and film content,” says Ms Nocentini. “Satellite and cable are the primary sources to access pay-TV content, but online options are increasingly becoming an alternative, particularly among the young population in markets with an advanced broadband infrastructure.”
Local players such as ICFlix and MBC’s Shahid.net have enjoyed success in the region and now global services including Amazon Prime and Netflix are also operating in the Middle East market. Malaysia’s Iflix recently secured a $90m investment to expand to the region and has partnered the telecoms operator Zain to offer its services to Zain customers. One of the reasons for the interest in VOD in the Middle East is not just the high number of traditional TV viewers, which stood at 95 per cent of the population in a recent study by Northwestern University in Qatar, but the high levels of censorship and regulation on broadcast TV.
Viewers are willing to pay for subscriptions in order to experience uncensored content, but broadcasting rights poses a problem for the majority of both satellite and VOD services.
“In order to compete with close to a thousand satellite channels available for free, VOD platforms need to invest heavily in acquiring premium content rights, branding and marketing royalties to be able to capture a bigger chunk of the viewership market,” says Bogdan-Alexandru Zoicas, a managing partner at Online Video Network, based in Romania and which has an office in Dubai.
The Middle East has a very diverse population and a “one-size-fits-all” approach will limit market reach, says Mr Zoicas. “[One] considering factor is the language. There is an increasing demand for Arabic content for native Arabs, while the preferred language for movies remains English. This is the differentiating factor from other more developed markets.”
Another differentiating factor is the steady rise in consumption of television shows on tablets and smartphones. Currently, more than 80 per cent of viewers in the region prefer to watch their shows and movies on television, according to the broadcast researcher Nielsen, but the number of users consuming on-demand content on tablets is set to rise by 77 per cent every year until 2020.
“We are used to convenience, it’s everywhere and it has everything to do with that little mobile device you carry in your pocket every single day,” says Mr Zoicas. “It has impacted the way we spend our time online [and] the way we consume video content. It gives me the freedom to choose what to watch, where to watch it and when.”
Consumption on mobile phones is at its highest in east Asia, while in the United States and Europe it is still relatively low. The Middle East currently sits in the middle, where there are fewer train and bus commutes – one of the components of the trend in east Asia.
“Despite high mobile device penetration in the Mena region, I do not expect this newly-emerging streaming industry to replace broadcast TV and linear channels,” says Danny Bates, the co-founder and chief commercial officer at Starz Play, an on-demand entertainment subscriptions services provider. “That said, digital streaming services – especially when packaged with device manufacturers and telecom operators – will certainly reshape the media landscape, just as we have already seen in other parts of the world.”
Whether consumption on smartphones and tablets will overtake that of TV remains to be seen, but content producers are working hard to ensure that their shows can be enjoyed on any screen.
“The mobile phone is a really important vehicle and if we can make the pictures more compelling and engaging on mobile, we can engage users on the mobile screen,” says Neil Hunt, the chief product officer at Netflix.
US-based Netflix has set aside a $1bn budget for research and development and is working with manufacturers to develop better streaming of its shows and films. The company has most recently worked with Dolby to produce and stream content in high dynamic range (HDR), which provides better picture and sound quality than standard dynamic range (SDR).
“Not only do you get higher-quality images, the way the system works, you get higher streaming – it will take up 10 per cent less bandwidth,” says Mr Hunt. “That’s a big deal for experience for carrier and consumer.”
HDR also uses 15 per cent less battery power than SDR when playing the same content on mobile phones since the technology optimises lighting on the phone screen.
Going forward, these small advances will matter if content creators and broadcasters are to remain competitive. Viewer experience on any screen, be it mobile, TV or even virtual reality headsets, will need to be seamless with no compromise on quality.
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