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Fri 11 Sep 2009 04:00 AM

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New horizons

With the merger of Orbit and Showtime complete, the newly formed company's president and CEO Marc-Antoine d'Halluin says the final quarter of 2009 is shaping up as a watershed period for the pay TV operator.

New horizons
New horizons
Marc-Antoine d’Halluin, President and CEO of Orbit-Showtime.
New horizons
Orbit-Showtime boasts exclusive rights deals with all the major Hollywood studios. A total of 15 movie channels are now available on the new platform.
New horizons
The 75-channel bouquet offered by Orbit-Showtime includes first-run access to a number of US series. D’Halluin says there are few rights packages available, making it difficult for new competition to emerge.

With the merger of Orbit and Showtime complete, the newly formed company's president and CEO Marc-Antoine d'Halluin says the final quarter of 2009 is shaping up as a watershed period for the pay TV operator.

Marc-Antoine d'Halluin is understandably proud of the fact the merger of Orbit and Showtime, two formerly fierce rivals in the Middle East and North Africa (MENA) pay TV sector, has occurred not just smoothly, but in "world record" time.

"You simply wouldn't achieve what we have managed in such a short period in any other major television market," he says. "In Europe, you would have to receive approval from various regulatory authorities, not least the European Union itself.

"In the Middle East you just don't have to deal with that type of bureaucracy."

Yet, the speed at which the merger has been finalised belies months of behind the scenes negotiations between the two operators, culminating in July's much anticipated announcement.

D'Halluin concedes that the company, which has officially been rebranded Orbit-Showtime, still has some way to go before it realises the operational efficiencies and commercial opportunities the merger promises. This fact is best illustrated by the operator's decision last month to launch a ‘new' channel bouquet consisting of 75 channels - a positive development, yet one which merely equated to the formal integration of each operator's existing channel line-up.

The company has moved to leverage its stranglehold on the first-run feature film business by offering 15 movie channels in the new bouquet. The merged entity currently maintains exclusive distribution rights with every major Hollywood film production studio.

Other highlights include expanded television news services and documentary channels, including the full roster of Discovery, History and National Geographic offerings.

Yet, the sheer scale of the revamped bouquet suggests there is room for rationalisation in the future, a proposition endorsed by d'Halluin.

"Our 15 movie channel roster is comparable to Sky's offering in the UK," he says.

"However, we probably don't need 15 [standard-definition] movie channels moving forward, so there may be some consolidation. We might settle on a combination of 10 SD and five high-definition (HD) movie channels, for example."

D'Halluin describes HDTV as the next major television industry battleground in the MENA region.

He expects Orbit-Showtime to be at the forefront of future developments, particularly following the launch of the operator's first HD channel in July.

"The channel has proven very popular with our subscribers," says d'Halluin. "We're also broadcasting three English Premier League (EPL) games in HD on a weekly basis, but to be honest, these developments represent the tip of the iceberg in terms of our HD plans."

Indeed, d'Halluin reveals Orbit-Showtime plans to launch "six to 12 HD channels within the next six months".

"We will launch a critical mass of HD channels - perhaps as many as 12 - before the end of the year," he says.

D'Halluin claims the introduction of HDTV services will also provide the pay TV operator with an opportunity "to reset the [commercial] balance, which has tilted towards the free-to-air sector in recent years".

"Consolidation is inevitable in the FTA market," he says. "The recession has demonstrated that the current FTA landscape is untenable.

"The pay TV market holds the key to HDTV services in the Middle East. It provides a perfect landscape for the introduction of these services. You can control the rollout of HD STBs and you can place a commercial value on these services."

HDTV also provides an opportunity to reinvigorate the industry's fight against rampant piracy, the Orbit-Showtime chief argues.

"The pay TV industry must shoulder some of the responsibility for creating an environment which allowed piracy to spiral out of control," d'Halluin says. "It was wrong to advocate an open platform when the industry was first established.

"However, we are working to ensure our HD services are eminently more secure. We are going to close the loop on these pirates, which should ensure we gain access to the revenue streams currently denied to us."

In regards to Orbit-Showtime's cable network deals with UAE telecommunications service providers Etisalat and du, d'Halluin says the pay TV operator plans to "coordinate with both partners to secure revenue streams that are meaningful to us"."However, our core business is DTH satellite and will remain so for the foreseeable future," he explains. "In the next decade, broadband will make its way into most homes, but will this encourage consumers to watch television on broadband rather than satellite? I think not. Broadband is about internet access, while TV is best served by satellite in this region.

"In saying that, we are happy to consider any new platform that is developed. What's key is that we own and control the content we broadcast."

D'Halluin says another priority for the operator is ramping up local content production.

Prior to the merger, Showtime co-produced an independent feature film (alongside Saudi prince Waleed bin Talal and National Geographic) titled Amreeka, which went on to win the International Critics (FIPRESCI) Prize during Directors' Fortnight at this year's Cannes Film Festival.

He says the success of the film, which focuses on the trials and tribulations of a Palestinian family who have immigrated from Ramallah to Middle America, provides an indication of the potential of the local film industry to garner not just critical, but commercial acclaim.

"The film was well-received in North America and was widely hailed by critics," he says. "As an organisation, we want to provide the means necessary for Arab filmmakers to bring their stories to life and to dispel many of the myths perpetuated about this region in certain media sectors."

While the Orbit-Showtime merger has spearheaded much-needed consolidation in the MENA pay TV sector, speculation persists that US pay TV operator Echostar plans to recast the net again by establishing a DTH service in the Middle East. D'Halluin remains dismissive.

"The Middle East doesn't need another DTH operator," he declares. "Even if Echostar does decide to enter the market, there are few if any content rights still available. In my opinion, Echostar would be better served addressing the issues it faces in the US, rather than turning its focus to the Middle East," he adds, commenting on Echostar's ongoing $1 billion legal stoush with DVR manufacturer TiVo over patents.

Perhaps one of the biggest developments to impact Orbit-Showtime's ongoing content strategy is the loss of the EPL broadcast rights to Abu Dhabi Media Company (ADMC).

Showtime invested a reported US$120 million in securing the rights in 2007 for three seasons, compared to ADMC's $300 million-plus for the same period starting 2010.

While Orbit-Showtime is bidding to secure licensing deals with ADMC for the pay TV rights to some - if not all - EPL games, d'Halluin would not be drawn on the process of negotiations.

"Our discussions with ADMC are ongoing," he says. "We are keen to see how ADMC implements its plans and if it makes sense for us, why not [be involved]? We're open to exploring new opportunities."

According to the 2008 annual report published by Showtime parent KIPCO, the pay TV operator's subscriber numbers rose from 303,000 in 2006 to 406,000 in 2008. Given Showtime commenced broadcasting EPL games in 2007/08, the deal was undoubtedly a significant contributor in generating new subscriptions during this period. D'Halluin agrees.

"It's a complex matter but the short answer is yes," he says in reference to the commercial impact of the EPL rights during this period.

"Securing the rights represented a turning point for Showtime. It coincided with our decision to restructure the company; both in terms of our operations and the way in which we branded our content. We became far more disciplined," he says.

"However, the merger has ensured that our reliance on one content genre or one particular property has decreased. We now offer a much more complete package. Of course, premium sport is part of that equation and we will consider bidding for other TV sports rights in the future. But, for the meantime, we are happy with our content offering and where we are positioned as an organisation."

Top Middle East pay TV providers by subscriber numbers

1. Digiturk (Turkey): 1,971,000 subscribers

2. ART (pan-regional): 894,000

3. Orbit-Showtime (pan-regional): 619,000

4. E-Vision (UAE): 340,000

5. du (UAE): 81,000

6. KCV (Kuwait): 54,000

Source:Informa Telecoms & Media.

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