The arrival of the hugely popular Fox network on the Middle East's free-to-air TV comes as the region's entertainment industry is undergoing a transformation. Hollywood is heading East, with big US networks and studios staking their claim to affluent audiences and lucrative airwaves.
Showbusiness has been no business for most of the oil-fuelled economies of the Gulf, with imported Egyptian soap operas and paid-for international satellite channels providing most of the region's 200 million people and 38 million households with their entertainment.
That is about to change, however, as local audiences look forward to an entertainment revolution, sparked by the arrival of some of the biggest names in Hollywood bringing new channels and production facilities - and aiming to convert plentiful petrodollars into TV advertising revenues and movie box office receipts.
"The Gulf is on the cusp of an entertainment revolution," says Avi Bhojani, the Dubai-based CEO of BPG Group, a unit of WPP Group. "We are seeing an influx of new channels, as well as new studios opening up and big names like Warner and Universal coming to town."
Fox, the most-watched US television network, started broadcasting the first free-to-air branded Hollywood channels this month across the Middle East, in competition with the Dubai-based MBC group.
The arrival of News Corporation-owned Fox is set to shake up the regional broadcasting industry, which is also seeing a surge of investment in new production studios and even theme parks branded by the biggest names in movies, including Warner Bros and Universal.
"The Gulf is witnessing a rapid change in its entertainment industry," says Elie Khouri, regional MD of Omnicom Media Group. "Witness the growth of MBC through its new brands, the portfolio of channels at DMI and now Fox Movies.
A downturn in US and European TV advertising is also focusing attention on the region, as well as negatively impacting on advertising revenues in developed markets.
Middle East advertising figures continue to soar. According to a report by global media services agency ZenithOptimedia, forecasts show a decline in advertising growth in North America and Western Europe from 4.4% to 3.8% last year.
Meanwhile advertising spend in the Middle East is expected to grow by 54.2%, according to the agency. Advertising spend in the UAE has increased from US$869million in 2005 to US$1.3billion in 2007, the highest figure in the region, according to Spence Felix, exhibition manager for signage, imaging and media at ZenithOptimedia. He predicts the UAE will spend in excess of US$2billion by 2010.
Rising advertising revenues and a rapidly expanding population are already attracting attention from US networks such as Fox and studios including Warner Bros and Universal.
"There is enormous financial growth and very large international investments coming into the region," says Dawood Al Sheryan of MBC, currently the biggest player in terms of market share in the free-to-air TV broadcasting space here.
Earlier this year Fox International Channels brought the first free-to-air branded Hollywood channels to the Gulf, in partnership with Rotana Media Services.Previously Fox TV had only been offered through pay-television subscription with channels such as Fox Sports and National Geographic.
"We are a believer in pay television and we're going to continue to be a believer," says Ward Platt, president of Fox International Channels, Asia. "But at the same time the growth of pay television has been pretty slow while that of free-to-air satellite channels has been pretty fast."
Rotana president Nezar Nagro refuses to disclose the value of the deal, other than to describe it as "huge" and indicate that it is intended to be a long-term partnership of around 15 years.
"The partnership started out because our owner, HRH Prince Alwaleed, has a share in News Corp," says Nagro.
Marc-Antoine d'Halluin, president and CEO of Showtime Arabia, describes the recent growth in the regional TV market as "astonishing".
He says that since becoming CEO at the beginning of last year, he has seen around 150 new free-to-air channels launched in the Middle East. Anrawes Snobar, senior research analyst at the Arab Advisors Group, confirms that 80 free-to-air channels were launched in the period between January 2007 and August 2007.
MBC's Al Sheryan insists he doesn't see the arrival of the most-watched US TV network as a threat.
"At MBC, we welcome competition because it advances TV. Today, MBC has 37% of viewers in the Arab world while the rest is divided between the remaining channels. So we have the lion's share."
Fox is trying to differentiate itself from the incumbent MBC by showing films with minimal ad breaks or even without any breaks at all.
"Some channels obviously are perceived to have too many ads. Some other free-to-air channels often get complaints about having too many ad breaks, especially in the movie space. Some of our movies will be uninterrupted, which gives people a chance to watch a movie in its entirety without being interrupted by commercials," says Platt.
Pay TV is also booming in the region, with Showtime revenues surging 30% in 2007 and predicted to grow at a similar rate in 2008, says d'Halluin. The company's biggest subscriber base is the UAE, followed by Saudi Arabia and then Kuwait.
"But our base has increased more than 25%," says d'Halluin. A big chunk of Showtime's global operations come from the region, accounting for between 35% and 40% of total revenue.
With the arrival of more free satellite channels - Fox's second channel launches at the end of this year and more are in the pipeline - Showtime is faced with the challenge of remaining attractive to subscribers.
"We have to ensure that the mix of packages is right with the right prices so we have an attractive proposition for people to choose, even if they have free-to-air platforms," he says.
According to a recent report by Booz Allen Hamilton, the media landscape is changing quickly in the Middle East and a number of trends are emerging.
Large TV channels will need to improve the quality of their programming to differentiate their offerings and stay relevant in the market; new series formats, such as sitcoms, could become a key differentiator in the market.
It also says that Arabic TV series relevant to the Gulf will capture a large share of audience in the main advertising markets. As Fox and MBC compete for viewers and more channels appear on the increasingly congested airwaves, the Gulf's television-viewing audience can bank on an entertaining year ahead. RELATED LINKS:The rise of brand Bollywood, Spongebob looks to the GulfFor all the latest business news from the UAE and Gulf countries, follow us on Twitter and Linkedin, like us on Facebook and subscribe to our YouTube page, which is updated daily.
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