twofour54 is in the zone

Abu Dhabi is so keen to be the axis between East and West it’s named its media zone after its geographic co-ordinates. Tony Orsten, CEO of twofour54, tells Arabian Business why the UAE’s capital is in line to be the Los Angeles of the Middle East.

Twofour54 is a reminder that if you build it, even in the sweltering Gulf desert, they will come. Two years ago, spotlight-shy Abu Dhabi was the most unlikely of media luvvies. Today its state-funded media hub is home to outposts of Bloomberg, CNN, and Cartoon Network — and a further 69 firms that have bought into the premise that the Arab world is the next media moneypot and twofour54 the key to unlocking it.

“This is all about people believing the Middle East is a new place for them to come and make a business work,” says Tony Orsten, the British-born CEO of the multibillion-dollar media zone. “It has double-digit growth potential going forward across all media. That’s why they’re here.”

There’s little doubt the Arab world will be media’s next great gold rush. There are 300 million Arabic speakers around the globe, but they are starved of content. Just one percent of the reams of material in cyberspace is in Arabic. Of the three gaming giants, Nintendo, Microsoft and Sony, not a single video game is available in Arabic.

According to consultancy group Booz & Co, media revenues in the MENA region will fly from $14.1bn in 2008 to $26bn by 2013. Capturing a tiny sliver of that market would be a record haul for any media brand.

The business case for twofour54 then, is solid. The firm splits into three arms — intaj, production facilities, tadreeb, a training academy and ibtikar, a funding unit to give seed capital to new businesses. The result is a creative hub for training and production that is geared at coaxing out an Arab media economy.

By 2014, it will have spent a rumoured $3bn on building studios, training facilities, and funding capital for Arab entrepreneurs and fledgling Arabic content firms.

It will also have moved to its permanent home; a bespoke, 6.5 million sq ft media zone, currently under construction, whose buildings will resemble giant televisions. Some 21,000 people are expected to work there.

“We’re here to create a media industry; by Arabs, for Arabs, in Arabic,” says Orsten briefly. “The talent is there, we just need to upskill it and make it part of an industry.”

For Abu Dhabi, the payoff is a thriving economic sector unconnected to oil, that will create the kind of jobs that educated Emiratis are willing to take.

Still, this is no blank cheque. Each of the ventures that twofour54 chooses to back must turn a profit, to allow the firm to recoup its cash — though Orsten is tightlipped on the timescale. “We are sort of paying back all of the investment over a period of time — I’m not going to get tied into how long. But it will be a period of time that is all agreed. So we have a real case, a real business plan and we are really going to pay back all our money to the government."

For a fledgling media zone, twofour54 has been staggeringly successful. At just two years’ old, it has caught the attention of some of Western media’s biggest names. Its deals include a joint venture with US media conglomerate Viacom, to launch Comedy Central Studios Arabia; a tie-up with Time Warner’s Cartoon Network to create an Arab animation academy and production studio; and contracts with the BBC and Thomson Reuters to school would-be media professionals. Another ten deals are in the pipeline for ibtikar this year.

“There’s a lot more coming. It’s across all areas; it’s production, it’s gaming, it’s internet,” Orsten says. “In this country, it takes longer than expected to get from ‘let’s talk about it’ to signing the deal. But the theory is that when the deal is signed and we’re done, it floats.”

One of these deals will involve a tie-up with a multinational gaming firm, to export homegrown Arabic-language video games across the region.

“We’ll have a very large gaming partner working with us from the international world, which we can’t talk about," Orsten says. "Gaming already has a way to get to market and is relatively cheap and these big firms are looking for opportunities.”

If the case for an Arab media industry is clear, what is less so, is why twofour54 should be its epicenter. Not only are there better-established media zones in the Gulf, but its debut — made squarely in the global crash — came at a time when many media firms were notching up immense multibillion-dollar losses.

“Our launch went something like this; ‘Hurrah! Oh,’” admits Orsten. “But the stream of people coming still came. Which is not what was expected — but they still came.”

So what is enticing them? Cynics would suggest they’re chasing the cash. Faced with anorexic ad revenues in the West, oil-rich Abu Dhabi would seem to be an easy sell. Orsten looks momentarily irritated.

“No, no, no. We’re not sending out truckloads of cash to say; ‘You get this if you come here,’ at all. If [firms] come here, and some have, and say; ‘Where’s your chequebook?’ that conversation turns to; ‘Thank you for coming.’ We are absolutely not paying people to come. Not a penny.”
He pauses. “We don’t want to create a subsidised industry. People understand that there’s an opportunity now to make content and make money from it. There is a hunger and a need.”

Even without a golden handshake, there is money to be made. More than half of the people in Saudi Arabia, Yemen, Oman, Kuwait, Jordan, Morocco and Egypt are estimated to be less than 25 years old. In the Gulf, that figure soars to two-thirds, creating a gargantuan opportunity for advertisers. Many of these consumers are young, wealthy and bored — and some of the faster adopters of new technology on the planet.

Ad spend in the wider Arab world was put at around $9bn last year, meaning spend per head is low. In the UAE, a study by Dubai Press Club put it at $22 a year, compared with $361 in the UK. In short, then, there is plenty of room to grow.

Kid’s television channel Cartoon Network, which has launched a branded animation training academy with twofour54, believes the region is wide open for growth.

“We’re constantly told the advertising on kids’ channels here is tiny, it’s in its infancy, but… I think there is real scope for it to grow,” says Chris Groves.

Groves is senior vice president of business affairs and managing director for the Middle East at Turner Broadcasting, which owns the network. “Some of our consumer product businesses around this region have doubled consistently every two or three years. There’s an awful lot of growth potential there."

Turner has bet the house on this potential. Later this year it is to launch a free-to-air, Arabic language Cartoon Network, in a bid to tap the region’s 35 million households. The network will air 24-hour coverage of kid’s shows such as Ben 10, and Powerpuff Girls, alongside homegrown shows such as popular 3-D animation series, Freej.

Turner is already in talks with at least three Middle East production studios to snap up new content ahead of the channel’s launch. In the future, it is banking on twofour54 to churn out a ready supply of content — and to take the lion’s share of the financing risk.

“This is where I think the twofour54 deal really comes in; to develop new content,” Grove says. “As and when great ideas come out of the academy — and they will — then twofour54 will make a contribution to a pilot. We can then buy and broadcast it, and twofour54 also gets its money back.

“It leaves everyone whole, providing we make good judgments about what is going to be a hit show and what isn’t. Nobody has an unblemished record on that, but we’re quite good.”

This, of course, is twofour54’s edge over rival media hubs in the region, such as Dubai’s Media City. Through Intaj, Tadreeb and Ibtikar, it has twinned training and funding. The payoff for firms that base themselves in twofour54 is that they get ready access to future talent and first pick of any content. Content which, in many cases, will initially be funded by Ibtikar Capital.

“The talent level here in the region is high — we’re talking about 340 million people, some twenty different cultures — it’s about providing a path to market,” says Orsten. “The aim of Tadreeb is to bring the skill level up. Because it’s difficult to get over that hump, you know; ‘I’ve got a great idea for a game, but how do I make it?’”

More than 1,000 students have already passed through tadreeb’s doors. Twofour54 estimates the industry will need between 12- and 15,000 Arab media professionals in the next five to ten years, to get up to speed.

“There is often an exodus to England, India, America — we want to keep the talent here. We want businesses that make money, that can hire people and export their content,” says Orsten. “What we’re doing is making it [media] a real career. We’re physically creating an industry with enough traction, that will have jobs available that will pay a real salary.

“In the UAE, kids come out of university and go into government or gas and oil. But if they really don’t want to do that, we want to provide them with a real opportunity.”

Twofour54 might be changing the face of Arab media at home, but arguably its biggest test will be rebranding the Middle East’s reputation abroad. The size of the challenge was brought home to Orsten a few weeks ago, as he stood on a studio lot in Los Angeles, discussing the UAE.

“I made a joke about how I was going shopping because I have to get something. And someone said; “Oh, so you go shopping in a black sedan with armed outriders?’” he recalls. “And he wasn’t joking. I almost felt like saying; ‘Yes. I’m going to Spinneys in my black SUV with my armed guards.’ That’s how crazy it is.

“One of the biggest problems we face is that they think it is a small region, and people kill each other. That’s what they think people do in their spare time.”

Media, Orsten says, will be the catalyst to mould that perception, by dragging local cultures and traditions into the mass communications age.

“Part of our job is to make this place export itself culturally to the rest of the world. Media is the fastest way to do that. But we have to do it in a way that is sustainable. If you fund projects and say; ‘Hurrah, we’ve made a movie but we’ve lost $400m on it,” there’s no point. Because in several years time, as oil revenues run down, people won’t fund another.”

He gestures across the lot. “So it — we — have to be sustainable. That’s going to be the key to all this.”