By Shane McGinley
The days of an entire family sitting down to watch a primetime TV show have long been dwindling, with the way we watch video content transformed by iPads, YouTube, video-on-demand, Netflix binge watching and the launch of hundreds of channels. Experts tell Arabian Business how these changes are affecting everyone from viewers to advertisers — but the Middle East is breaking the mould
Brash UK television presenter Simon Cowell is often portrayed as the Darth Vader of popular music for his pantomime ascorbic putdowns of wannabe singers on television talent shows. For this reason, tabloid TV reporters recently took an overly obvious joy in reporting that audience ratings slumped for the 12th season of his juggernaut British TV show ‘The X Factor’.
While an average of 14 million people viewed the show in its heyday in 2010, recent episodes have managed just 5.6 million, which newspapers are describing as a disaster.
Cowell claims the overnight numbers fail to include the millions who don’t sit down to watch each episode at its allocated timeslot of 8pm on Saturdays, but watch it later on iPads, playback services or other channels, or record it for when they are free.
He has branded as “meaningless” the current system used by the UK’s Broadcasters' Audience Research Board (BARB), which surveys 5,000 British homes 24/7, to gain an insight into viewing habits of the wider population.
“There is no question of a doubt… people are definitely changing their viewing habits. We are adding two or three million on the week’s figures, which is taking us up to 9½ [million], which in this day and age is a miracle,” Cowell defensively told Radio Times in October.
His theory that viewing habits are evolving is part of a much wider debate taking place across the global TV industry, as broadcasters, advertisers and producers struggle to adapt to the variety of viewing formats now available, and their need to find an economical business model to fit them all.
In the US, another TV legend, Ryan Murphy, the creator of the hugely popular musical television series ‘Glee’ and recently launched ‘Scream Queens’, a horror comedy-drama show on the Fox network aimed at the lucrative youth market, is facing a similar dilemma.
A massive social media campaign and marketing push resulted in the series being one of the most talked about in America this autumn. But after all the hype, it was initially declared a dud upon premiering, with its first episode attracting a disappointing 4 million viewers, one-fifth of the audience for the country’s top rating shows.
Murphy was naturally worried, but as the days wore on, statistics from Nielsen, which monitors viewing figures, found millions more watched it later on streaming, Hulu or other formats, eventually giving it an audience of about 7 million, enough to mark it as one of the most watched shows in its timeslot.
The experience illustrates the predicament facing the evolving industry. In decades past, families sat down to watch popular programmes at a specific time, TV schedules were printed in newspapers, advertisers competed for slots on the most popular shows and the most successful pulled in millions of viewers, eventually earning a spot on cable TV for all eternity.
The model was relatively easy and worked well for everyone involved. That has changed and many commentators lament that the TV market has become so fragmented it is difficult to assess.
In the Middle East, however, the picture appears to be a little more blurred, according to experts who speak to Arabian Business.
While many say the family-viewing model is over and free-to-air TV services are dying out, others say this is a myth.
“Absolutely not,” says Chris O'Hearn, the general manager of the Television Audience Measurement System (tView) in the UAE and who is a passionate advocate of the traditional linear TV model rather than on-demand services.
“[The 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. In the UK, 73 percent of 18 to 24-year-olds say they would rather watch a programme week-by-week than download them all and watch on demand.”
Nick Grande, managing director of Dubai-based ChannelSculptor, a consultancy service that links TV content producers, operators and telecommunications companies, says 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.
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.
Digital options have been expanding since 2009. 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 fastest growing regions in pay TV revenue were the Middle East and Africa (MEA) and Central and South America, which grew at a CAGR of 14 percent and 22 percent, respectively, from 2009 to 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 E&M 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 & 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.”
Saudi Arabia does not have cinemas so it is little surprise TV is so popular. However, Grande points to another model that also plays a factor in the kingdom: “YouTube: 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.”
In a bid to push the trend for on-demand TV, it was announced in August that Telly, a San Francisco-based company with local offices in Dubai that allows users to stream Hollywood and Arabic content on demand, will now be available pre-loaded in all of Panasonic’s latest smart TVs sold in the Middle East. The service is already provided in the UAE, Saudi Arabia and Kuwait.
“As there is a growing technology-friendly youth population who prefer online streaming of content it is vital to cater to this key audience segment, so we decided to tie up with Telly,” says Shimpei Tsujigami, general manager of Panasonic Marketing Middle East & Africa.
“With the Telly pre-installed application, our customers can instantly watch as many TV episodes and movies as they want, as often as they want and anytime they want. You can even airplay videos to your TV. The application, which is extremely user-friendly, even allows you to get recommendations of what to watch from your friends.”
Tsujigami says the rise of digital platforms does not necessarily spell an end to live TV, nor reserved for news, sport and popular competition shows such as Cowell’s The X Factor.
“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.
“Studies in the US have shown that the people who watch the most content on second, third and fourth screens, which is often on-demand, are also the heaviest consumers of linear TV. The best phrase I’ve heard to describe this is ‘new markets of time’. You’re watching it on the train, in a café, etcetera, where you weren’t watching TV before. In fact, most people, given the choice, prefer to watch TV, and one of the most common reasons given for using other devices is simply that they don’t have access to the main screen. So the 17-year-old boy watches on-demand in his bedroom while his sister or parents are using the living room TV.
“The discussion shouldn’t be about on-demand ‘killing’ TV, it is augmenting TV.”
Nielson data suggests that 85 percent of US television viewers are using a second device while watching TV, whether they’re looking up film and TV data, commenting on Twitter or surfing websites for information about the show they’re watching.
This trend has led to numerous startups built around the multi-device format. Egypt’s Gyrolabs has developed Remotak, a social digital TV guide that allows users to check which shows their friends are watching, interact with them and even get reminders to watch shows or view them later. Users also can receive recommendations from friends and track the viewing preferences of their social media community.
Another changing trend is the speed at which Middle East viewers can watch their favourite shows from abroad. Previously, the Middle East had to wait weeks, or months.
David Butorac, CEO of OSN, a Dubai-based direct-broadcast satellite provider serving the Middle East and North Africa (MENA), says that has been cut to 24 hours in many cases. With 154 channels and contracts with major networks and studios including Warner Bros, Paramount, HBO, Fox, Disney, Sony, MGM and Universal, OSN prides itself on bringing small screen blockbusters such as ‘Game of Thrones’ and ‘Downtown Abbey’ to the Middle East quickly.
“What we have done in the last few years to keep ahead of pirates is, we get shows within 24 hours of it airing in the US. Seventy-seven of our programmes were [broadcast] within the first 24 hours of airing in the US. So instead of downloading a dodgy quality [version], you can watch it on HD in your living room. The consumer is responding to that,” Butorac says. “The next step is minute-to-minute with the US.”
Butorac says this also has repercussions for the TV show itself, with producers needing to accommodate a wider global audience. “Twenty years ago, the TV market was probably 80 percent revenue from the US and 20 percent international. It is now more like 60 percent international and 40 percent in the US,” he points out. “So the international markets have taken a much bigger significance in terms of the revenue role for producers.”
In April, Starz Play Arabia, a joint venture between the US entertainment company Starz Inc, and Parsifal Group, a developer of platforms for video on demand services, launched in 17 countries in the Middle East. Already a major premium content provider in the US, it marks the first attempt by Starz Inc, which is the majority shareholder in the venture, to tap into markets outside its home base.
However, the big story for the region is news that Netflix is due to launch in the Middle East next year.
But Grande says the impact will be less profound than expected. “There is a big expectation in the market that something dramatic will happen when it enters towards the end of the next year. From what I see, Netflix is very cautious about this market as they already have a significant number of subscribers [here].”
Existing users in the region access Netflix using a virtual private network (VPN), which tricks the system into believing Middle East customers are actually based in the UK or US. Grande says this is why it is unlikely to cause an initial surge in business.
With Netflix and similar formats comes the advent of a new type of viewership: binge viewing, where a viewer can watch an entire series back-to-back. Although O’Hearn does not believe binge viewing will become an industry standard.
“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?” he 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.”
The plus side is that TV has never been more popular.
“People are spending more time watching TV than they used to,” Butorac says. “Everyone wants to write us off, but I have the privilege of going to the LA screenings each year where the new US material is showcased and you see what is coming in seasons ahead. Two or three years ago you went over there and there were about seven pilots, last year there were 16.
“If you look what is happening in the creation of television content, great big movie producers, directors and actors are now doing it. Kevin Spacey did ‘House of Cards’, Martin Scorsese did ‘Boardwalk Empire’ and Steven Spielberg also did television. Matthew McConaughey did ‘True Detective’ and did an amazing job that is being done at a filmic level of investment. This investment is going because there is still a thriving industry in television [and] the amount of money being made is increasing.”
With the big stars putting their faith in TV you could assume the industry remains a viable business model, and one that the likes of Cowell and Murphy will be hoping is a sign that it is far from dead. Just don’t mention the audience ratings!