It is a question everyone in the industry is asking: what will become of television? As hand-held devices become evermore popular, drawing advertising dollars and now even launching exclusive content, some are wondering if the box-set has had its day.
The multi-faceted issue has many arguing that TV will slowly become obsolete as viewers increasingly desire on-demand and premium content. But within the debate, there are arguments that suggest pay-TV will out-do free-to-air and survive as competition to online. Others say that is a myth.
“Absolutely not,” says Chris O’Hearn, the general manager of the UAE’s Television Audience Measurement System (tView) and a passionate advocate of the traditional linear TV model over on-demand services.
“[The traditional linear model] is just as important as ever. On-demand viewing is still only a fraction of live, linear viewing, even in markets where the vast majority have access to DVRs [digital video recorders]. In the UK, for example, the hugely popular iPlayer service accounts for just 2 percent of total BBC TV viewing,” he says.
“TV is and will remain fundamental to lifestyle.”
While pay-to-view TV services are growing in popularity worldwide, in the Middle East, free-to-air TV remains a significant part of the market, says Nick Grande, managing director of Dubai-based ChannelSculptor, a consultancy service that links TV content producers, operators and telecommunications companies.
The majority of TV viewers are also simultaneously using a handheld device.
In the region for eight years, ChannelSculptor manages the content for about 100 channels on local broadcaster du and recently also started working with Omantel.
“The fundamental thing to realise about the Middle East market is that there is a predilection towards free content. Relative to other, more mature television markets, paid content in whatever capacity has struggled to gain penetration. [Pay-TV] penetration ranges from 20 to 30 percent, or in some countries 90 percent. The Middle East, [however], has never gained more than 10 percent penetration; it tends to be about the 6 percent mark,” Grande says, indicating the region remains relatively traditional and has enormous scope for development.
The CEO of pay-TV provider OSN, David Butorac, strongly disagrees. He declared in an opinion piece for Arabian Business in January that pay-TV would actually help keep linear TV alive.
“I believe that 2016 will be the year that pay-TV proves unequivocally that linear television is here to stay,” he wrote, harnessing his opinion on the fact viewers are today demanding “better and exclusive content”.
The pay-TV business model, Butorac says, is undoubtedly based on delivering premium content. It is the only means for survival in an industry that now boasts more than 600 channels in the Middle East.
To achieve this, OSN has secured deals with studios including Warner Bros, Paramount, HBO, Fox, Disney, Sony, MGM and Universal, to bring small screen blockbusters such as ‘Game of Thrones’ and ‘Downtown Abbey’ to the Middle East quickly. The turn-around from when television series abroad are available in the Middle East has been rapidly sped up from months to within as little as 24 hours, Butorac says.
It cannot be ignored, however, that digital options have been expanding. Consultancy firm IHS estimates about 5 percent of total global TV revenue (including public TV and broadcast advertising revenues) is attributable to online video. From 2009 to 2014, global pay-TV revenues increased at a compound annual growth rate (CAGR) of 7.3 percent. IHS expects global pay TV subscription revenues to continue to grow over the next five years.
IHS’ most recent report also found over the last five years, the Middle East and Africa were the second fastest growing region in pay-TV revenue, at a CAGR of 14 percent between 2009 and 2014. IHS has forecast that the Asia Pacific, MEA, and Central and South America markets will be the main drivers of revenue growth as pay-TV markets in these regions continue to develop.
Advertisers also are following. Accountancy firm PwC’s Global Entertainment & Media Outlook 2014-2018 report estimates total entertainment and media (E&M) spending on digital advertising is forecast to grow 12.2 percent between 2013 and 2018 and account for almost two out of every three dollars spent.
For MEA, total entertainment and media spend will increase from $43.5bn in 2014 to $65.9bn in 2018, PwC estimates. Within the region, Saudi Arabia is expected to see the biggest growth, rising by 16 percent over the time period.
PwC Middle East entertainment and media leader Philip Shepherd says: “Digital success is not about technology. It’s about applying a ‘digital mindset’ to build the right behaviours to be closer to the customer. The industry is reaching a tipping point, and by 2018, internet advertising is poised to overtake TV advertising.”
However, the rise of digital platforms is not necessarily stealing revenue nor viewers from the box-set – in fact, O’Hearn argues it is supplementing it.
“The discussion shouldn’t be about on-demand ‘killing’ TV, it is augmenting TV,” he says. That particularly applies across news, sports, popular competitions such as ‘Arabs Got Talent’.
“Obviously these type of shows have a massive impact because they are so compelling to watch live. But the fact that many people miss in this discussion is that viewing on-demand or on other screens is often incremental to traditional TV viewing, not exclusive or a replacement,” O’Hearn says.
The same rule applies to binge viewing – when a viewer watches an entire series back-to-back - he says.
“I think those remain the exception rather than the rule. Would we be as excited about season 5 of ‘Game of Thrones’ if we knew that HBO was going to release the whole thing and within 24 hours the entire plot would be across every social media platform around the planet?” O’Hearn says.
“It’s another revenue stream for broadcasters and again it is something that supports or connects to linear TV. For example, on demand and binge viewing of ‘Breaking Bad’ reached massive levels just before the final episode, which means that people can catch up, refresh or join in to something they missed initially. But they are doing it to hook into the linear TV experience, not because they inherently prefer binge or on-demand viewing.”
Online-only TV service Netflix also is acting as a disruptor to the broadcast industry. In January, it launched in the GCC countries, albeit with limited access to its programmes – creating another prong of debate, the use of virtual private networks (VPNs), which allow a user to bypass geographical boundaries for certain content by pretending to be accessing the internet from another country.
Netflix is expected to be particularly popular in Saudi Arabia, which bans cinemas and highly regulates outside content, while officially producing little.
ChannelSculptor’s Grande says YouTube also is popular in Saudi Arabia for similar reasons. “People tend not to think about it so much as it is not seen as a subscriber model or a viewership model [but] it is significant. Industry figures show pretty much everybody in Saudi Arabia is watching YouTube at some point.”
Last month, the Saudi government re-announced that it would establish its first media city, more than six years after making the same declaration to the Saudi Journalists’ Association in January 2010. The then-minister of culture and information was just as scant on details as the current minister, Abed Al Turaifi, was in February. Although, Al Turaifi said media firms within the city would be given “flexibility” to operate within the rules and regulations of the kingdom, according to local media.
Al Turaifi reportedly said new media houses would help communicate religious and national issues to the public. The decision was part of Saudi Arabia’s plan to strengthen its media presence abroad.
“We have lagged behind... We are trying to deal with it skilfully,” he said.
The move comes at a time when Saudi Arabia is engaged in political wars with multiple players, particularly within the region. It has withdrawn $3bn in aid to Lebanon’s army, while in January it cut-off limited ties with Iran after its embassy was attacked. The kingdom is also leading a coalition against rebels in Yemen, who it insists are being backed by Iran.
Further afield, the highly conservative kingdom is seen as a target for persistent concerns that Islam is to blame for terrorism. It is not clear whether Saudi Arabia intends to establish a broadcaster as its own soapbox, but its stated new emphasis on media from within the kingdom appears to be an effort to add its voice to the plethora of content available.
On the other hand, Qatar has withdrawn its unlimited funding of the Al Jazeera network, which includes both Arabic and English channels. In January it announced it would axe its American channel, which proved to be more of an excessive waste of money than any kind of influence that it had hoped for. The channel, which launched in 2013, is estimated to have cost Al Jazeera – and the Qatari royal family that funded it - $2bn.
Staff and other funding cuts also were expected at Al Jazeera’s Doha-based studio, although the network’s journalists have told Arabian Business they are yet to come and appear to have been stalled.
Al Jazeera was launched in 1996 by the former Qatari Emir Sheikh Hamad Bin Khalifa Al Thani as a means to help it become a regional influencer. The level of aggressiveness in obtaining that status has somewhat simmered under Sheikh Hamad’s son Sheikh Tamim Bin Hamad Al Thani, who took over in 2013.
Coinciding with prolonged low oil prices, Al Jazeera is no longer a national priority, Hafez Al Mirazi, a former Washington bureau chief at Al Jazeera Arabic who directs the Kamal Adham Center for Television and Digital Journalism at Cairo’s American University, told Reuters in January.
“Al Jazeera fulfilled its mission: making Qatar a household name, influencing politics, at one point it was a powerful tool of foreign policy but all of that is over now,” he said.
Saudi billionaire Prince Alwaleed Bin Talal’s attempts to arguably emulate or compete against Al Jazeera also have apparently fallen by the wayside. His Alarab TV station was shut down hours after launching a year ago. It had been established in Bahrain in an attempt to avoid Saudi Arabia’s conservative media regulations, with Alarab TV was intent on being “objective”. But Bahraini authorities, which rely on close ties with Saudi Arabia, appeared to run scared after the first interview was aired with the spokesman from the political opposition group Al Wefaq, Khalil Al Marzouk.
Prince Alwaleed also owns Rotana TV, a subsidiary of Rotana Group, the largest pan-Arab media company and of which he owns more than 80 percent (the only other shareholder is News Corp).
Abu Dhabi and Dubai also are creating unique content for television – clearly not writing off the industry. IN 2014, the capital’s media city Twofour54 partnered with tView to improve the level of accuracy of TV viewership data in the UAE.
CEO Noura Al Kaabi said at the time: “This important project is in line with twofour54’s objective of developing the region’s media industry through setting up new standards for providing television content which is reflective of the viewers’ needs”.
The move could be pessimistically seen as indicative that television is waning and greater insight into viewers’ habits is needed to help stave off its demise. But with another 200 million Arab youths aged under 25 years on the way, and undoubtedly eager to keep up with the latest popular content, broadcast content appears far from dying. In fact, it may well be entering its most exciting, and certainly most dynamic, era yet.
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