Divide & conquer

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Patrick Samaha, COO of ATN and GM of MTV Arabia.

The thorny issues of HDTV implementation, broadband penetration and rampant piracy were among the hot topics debated at the recent Digital TV Middle East & Africa conference in Dubai. Derek Francis reports.

The 1966 Football World Cup marked a number of firsts, not least being the fact it represented the one and only time England has won the trophy. From a broadcast perspective, the event marked the first time a major sporting event was shot in colour.

While the event itself was televised in black and white, the colour scenes made famous from the Cup Final went a long way to ushering in colour TVs for the mainstream.

Today, that same generation can now witness the next big shift in the audio-visual sector. Again, sport is proving an important driver in the transition to digital TV services.

If there were any lessons to take away from Informa's Digital TV conference, held last month in Dubai, it would be that the successful uptake of digital TV services depends entirely on the market environment.

TV operators in the Middle East and Africa are looking to learn from their counterparts in Europe, where the EU has set a digital switchover date of 2012.

But it's not all smooth sailing; while the UK is one of the world's leading markets in terms of digital TV penetration, with four digital platforms offering enhanced content at various price points (Sky, Virgin Media, Freeview and the newest member, Freesat), Germany, by contrast, represents a more taxing proposition.

There, the continuing success of analogue broadcast services makes German demand for digital services limited, given the latter's higher price point. But in the Middle East and North Africa (MENA), digitalisation is uniform.

"The MENA region has already been pretty much digitalised; it's a market that's transitioned at a later stage with respect to the European market - it's leapfrogged the technology," explains Matteo Altobelli, marketing director, Eutelsat.

There is no exception. In Western Europe, there is the exception of Germany, which has a lot of free-to-air analogue TV channels, which are very sticky."

So to drive the uptake of digital pay TV services, MENA broadcasters need to differentiate their product - and to achieve this, premium content and sport can act as crucial drivers.

"The drivers need to be tailored to the market in question," says Phil Laurie, director, global distribution, Al Jazeera Network.

"In the Middle East, there is a distinction between the programming available on digital pay TV platforms (with more premium content and international programming) and FTA services - and that differential can be a driver.

"Sport, as anywhere, is a hook - Al Jazeera Sport's securing of the UEFA Champions League and UEFA Cup will undoubtedly drive the take up of Jazeera Sport's encrypted channels.

Going forward, HD will be another driver, particularly in the technology-savvy and wealthy GCC consumer markets," he added.

However, according to Laurie, the MENA region will struggle to support more than one HD pay TV platform. This is because of the higher cost base involved with HD, both on a technical and capacity level.

The cost burden is passed on to consumers, who may be reluctant to fork out more for content.

Given the difficulties in gaining traction in the pay TV market, many companies are increasingly looking to offer their content for free. Pay-TV providers need to ask themselves: why should consumers pay for TV services when they can access hundreds of FTA channels on a no-cost basis?

"The market in the Middle East is consumed with TV, but only if it is free," says Romain Delavenne, director, Capgemini Consulting Middle East. "If you are a pay TV provider, the market is challenging.

There are more and more FTA channels broadcasting a vast array of content. The development of free-to-air channels is based on this differentiation of content."

Still, there's plenty of scope for pay TV services in the region, with heavily-populated countries like Saudi Arabia and Egypt remaining virtually untapped. And the reasons for not subscribing to pay TV services aren't primarily to do with price.

The FTA model, being wholly dependent on advertising, conjures a different set of issues.

Television broadcasters are generally acknowledged as the biggest beneficiaries of advertising budgets globally, even while the internet threatens to overtake it.

But in the MENA market, TV ad revenues are small compared to Western Europe.

"The Middle East is one of the most densely serviced FTA television markets in the world, despite boasting a relatively small advertising market, which is quite strange really. One of the key questions is how can television provide additional revenues based on the brand, audience and content?" Delavenne asks.

Given the region's limited internet penetration, television remains the primary delivery platform for advertisers. Eutelsat's Altobelli explains: "The long-term sustainability of free-to-air channels operating in this region is largely based on advertising revenue projections.

Worldwide advertising spending has seen year-on-year growth since 2006.

"The only platform that has enjoyed stronger growth during this period is the internet. But broadband penetration remains limited in the Middle East, so advertisers rely wholeheartedly on television to deliver their message to consumers.

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