The silver bullet for MENA HDTV

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HDTV is a certainty, but when will it take off in the Middle East? Nick Grande analyses the market.

With over 98 percent penetration, MENA satellite TV is currently the only game in town. By contrast, less than one percent of regional TV households watch digital broadcast provided by domestic broadcasters (such as Etisalat and QTel). Things are changing though: aggressive fibre and DTT initiatives mean HDTV will be available in most domestic markets in two to five years.

In my address at CABSAT 2009, I predicted that FIFA World Cup 2010 will prove to be the only stimulus that can prevent pan-regional HDTV from being consigned to history by regional telcos.

Few MENA broadcasters recognise how strategically significant HDTV is. Satellite channels are accustomed to their 15-year viewership monopoly, but more and more viewers have invested in HD-ready TVs. These viewers will soon be seeking HD channels in the same way that they sought Compact Discs in the 1990s.

Twenty-two million US households now regularly watch HDTV broadcasts - 40 percent up compared to last year. In Europe, there are now more than 130 satellite HDTV channels, including dedicated movie and sports channels, as well as channels from Disney, Discovery, Viacom and the BBC. The number will rise to 600 by 2013. By contrast, MENA HDTV is at a standstill. Last year, there were three regional HDTV channels. Now there are two - Luxe.TV and Oman TV (the latter of whose HDTV commercial launch date remained unconfirmed at the time of press).

My years at Showtime taught me that the HDTV problem sits in the "important, non-urgent" pile - expensive to implement with no guaranteed or immediate financial return.

Priority goes instead to instant growth opportunities / survival threats such as football, movies and series rights. The problem for pan-regional broadcasters is that ignoring HDTV opens the door to domestic IPTV / DTT services championed by profitable, government-backed and cash-rich regional telcos.

In five years, the MENA free-to-air market has grown from 80 to almost 400 channels, and the cost of programming has spiralled. Advertising revenue has failed to keep pace: few if any regional FTA channels are profitable - most are funded by external (often governmental) capital and compete primarily for viewership and status.

Regional Pay TV networks have historically been more profit-oriented, but the recent FTA explosion has changed this: they now compete not only with each other, but also with FTA operators, aggressively acquiring the premium content normally reserved for subscription services. The result is irrational competition: broadcasters throwing money at the problem, hoping their capital resources outlast their competitors. Nobody seems prepared to quit.

Ironically, when FTA channels are haemorrhaging money it's actually more likely that they will launch HDTV channels.

HDTV is an opportunity for wealthier FTA networks to enhance their status: satellite costs are stable and HD/MPEG4 head-end costs have reduced, so HDTV suddenly looks cheap compared with the cost of movie rights! Once one major network launches in HD, others will of course follow.

The prospect of ten major FTA channels operating in HD within 18 months might sound positive for HDTV, but there is a catch: nobody will be watching them.

The MENA satellite footprint delivers the same television channels to 300+ million people in 23 countries.

Viewing is homogenised from Morocco to Kuwait not only by channels, but also by the quality of receiver technology.

For more than 90 percent of MENA households, television is a free service acquired using a set-top-box (STB) purchased from the local souk. Such low-end STBs are incapable of running an EPG, let alone MPEG4 HD channels. Even the five percent or so who subscribe to pay TV services tend to prefer their own box to the one supplied by the network.

This means that any HDTV channel launched on Nilesat or Arabsat is broadcasting to an audience who cannot see it. To be visible, HDTV channels need to lower the cost of STBs.

The delay to MENA HDTV means we can learn from other markets, and the trend is clear; pay TV is the key driver in Europe, with more than 38 million pay TV households expected to receive HDTV services by 2013 - twice the number of FTA HDTV households.

The reason? Pay TV providers supply and install HDTV hardware in viewers' homes.

As with any consumer product, HD STBs must reach critical mass in the marketplace.

The first million STBs to receive HDTV services in MENA homes will seed the demand for the next 20 million.

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