Over-crowded television market feels the pinch

Observers of the Middle East's television business could be left confused by recent developments within the industry.

New channels such as City 7 TV and Al Aan TV are eagerly entering what they see as a thriving market with more than 200 free-to-air stations offering everything from news and entertainment to children's programming. And alongside these, there are more than 100 pay TV channels now operating in the region through ART, Orbit and Showtime.

But news of significant job cuts at both CNBC Arabiya and Showtime, which made 60 people redundant in October, is a sign that even the region's most established TV brands are starting to buckle under the strain of an increasingly crowded and competitive market.

Meanwhile, both Dubai's One TV and Lebanon's Future Television have recently undergone major re-branding and launching exercises proof, if it were needed, that the region's television channels have to work harder than ever to attract viewers and advertising dollars.

When Campaign spoke to Omer Ghani, director of sales at CNBC Arabiya about the redundancy of 39 workers, he admitted increasing market pressures were behind the channel's decision.

Ghani revealed that the emergence of new channels in the market had created a number of challenges for his and other channels, citing "the struggle for advertising dollars, the struggle for audiences and the struggle for brand equity".

And he admitted the situation means established television networks have to work harder than ever to stay on top.

"There's a lot of competition and everybody is trying very hard to get their place in the market," he said.

"Somebody is always after the number one slot. In order to be a strong contender you have to be very strong as you move forward."

The admission by CNBC that the market is getting tougher does not bode well for new entrants into the market who are battling to attract audiences and advertising dollars.

In 2005, Booz Allen Hamilton claimed in a report that 140 free-to-air television stations in the Middle East shared just US$80 million in advertising revenue.

Based on figures for 2004, net advertising revenues were US$410 million, of which US$330 million went to the top eight channels, including MBC, LBC, Saudi TV and Dubai TV while 147 free-to-air stations shared US$80 million between them an average of just US$544,000 each.

The report predicted that, given this scenario, the number of free-to-air stations, particularly themed channels, is expected to "diminish significantly" as a greater emphasis on financial profitability will "reduce the level of irrational competition among broadcasters".

The pressure on free-to-air stations to achieve profitability and to justify their presence in the market is set to increase even further when people metering is introduced.

People metering will introduce, for the first time in the region, transparent data on ratings, revealing to advertisers which channels are truly worthy of a share of their advertising budgets.

Broadcast experts, including former Showtime CEO Peter Einstein, have already predicted that this will lead to a major shake-up of TV channels.

Speaking at the Campaign Conference, Einstein said this would result in channels that failed to deliver large audiences being deemed irrelevant.

"This market can't sustain over 200 free-to-air stations from a revenue point of view," he said.

"A lot of them are also here due to lack of accountability, so hopefully we will move towards ratings measurement."

But it is not deterring new players from entering the market. Hussein Ali Ahmad, director of sales and marketing at pan-Arab channel Al Aan TV, says operating in this environment is difficult but channels can succeed if they are determined and offer a proposition that stands out from the others.

"It is a tough market because there are quite a few channels that have established themselves and become consolidated like the MBC Group," he said. "The top ten major channels are taking a big share of the revenues, but we do think that there is still room for good content and format," he claimed, citing the station's emphasis on tailor-made local programmes such as cooking shows as its main strength.

The station has already set its sights on securing a major share of the pan-Arab advertising market and Ahmad claims it has already won major clients such as Nestlé, Samsung and Diet Coke.

For smaller and less established television channels that do not have the luxury of falling back on a strong brand and financial backers with deep pockets, producing good original content, and marketing themselves effectively will be key to their success.

But events at both CNBC Arabiya and Showtime have proven that even the most recognised and established television brands are beginning to feel the pinch in the region's over-crowded broadcasting industry.

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