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Tue 9 Mar 2010 12:24 AM

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Global media owners head to Abu Dhabi for summit

Annual growth in media revenues in the pan-Arab region to slow to 12-15% from 19%.

Top global media owners are gathering in Abu Dhabi this week for a summit that marks a new stage in the emirate's ambitions as a cultural hub and in the eagerness of recession hit media to explore new growth markets.

News Corp chief executive Rupert Murdoch, one of the most active foreign media investors in the region to date, will open the inaugural Abu Dhabi Media Summit later on Tuesday. Google's CEO Eric Schmidt will also make an appearance.

The line up of speakers shows Abu Dhabi's determination to position itself at the centre of what it hopes will be a rapid growth phase in the underdeveloped Middle Eastern media market, after a pause for breath when the Dubai debt crisis hit.

Management consultancy AT Kearney expects growth in media revenues in the pan Arab region to slow to 12 to 15 percent from the roughly 19 percent annual growth of the last few years, but still far faster than the 3 to 4 percent it has observed in Europe and the United States.

Matthieu De Clercq, senior manager, AT Kearney Middle East, said: "Advertising revenue is growing again, but not at the same level."

He said: "Dubai was a magnet for advertising, and highly driven by real-estate advertising, bringing prices to a level that nobody could afford. That time is over."

Dubai, part of the UAE, saw sharp increases in advertising revenues as the emirate prospered on the back of a real estate boom led by big budget government linked projects and floods of foreign investment into the growing economy.

Free media zones sprang up first in Dubai and then in Abu Dhabi, as the UAE's plan to become a media hub and diversify away from oil attracted interest from companies including CNN, the BBC and Thomson Reuters.

But first global recession and then a debt crisis last November took a toll on Dubai, the tourism and trade hub of the Middle East, and advertising budgets were slashed as projects were cancelled and companies trimmed their workforce.

Although hopes of progress on Dubai World's $26 billion debt restructuring have emerged this week, Dubai's temporary paralysis has given its less flashy but far wealthier neighbour Abu Dhabi a chance to shine.

Foreign media owners have until now largely shied away from the Middle East, despite the setting up of free zones for media and other sectors that allow foreign investors to repatriate all of their profits and to operate without a local partner.

According to Thomson Reuters data, just three deals were done last year that involved foreign companies buying Middle Eastern media assets, worth a total of $44.2 million, just 0.5 percent of the $7.9 billion of media deals done globally.

The figure does not include Internet deals.

Pay TV operators in particular have been put off by abundant free to air channels, piracy, and a lack of reliable audience measurement that makes it hard to sell ads, says Richard Broughton, senior analyst at media research firm Screen Digest.

But global advertising markets that are expected to return to growth later this year will make ad funded media look more attractive again, and may encourage investors to see the inherent advantages of Middle Eastern media markets.

Broughton said: "The fact there's a common language in many territories makes it simpler; you can get a very large reach for very little incremental investment," adding that there are now concerted efforts to curb piracy.

Broughton believes censorship - while it is a concern for print media and also a factor in Dubai's ongoing debt crisis, which has been fuelled by a lack of transparency - is less of a worry for TV companies, whose signals tend to be left alone.

Some evidence that foreign investors are beginning to take an active interest in the region has appeared recently.

News Corp's Fox International Channels said on Monday it would move some operations to Abu Dhabi in a new partnership with twofour54, a project led by the emirate's government.

News Corp agreed last month to pay $70 million for 9 percent of Saudi media group Rotana, with an option to double its stake, and US Web giant Yahoo last year bought Arab online portal Maktoob.com for a price estimated at up to $80 million.

Kearney's de Clercq said: "There is a real market, there are talented people, infrastructure and growth ... with very good profit for those who might want to come and invest."

The Abu Dhabi Media Summit, hosted by government affiliated Abu Dhabi Media Company runs March 9 to 11. (Reuters)

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