Local broadcasters are scrambling to form strategic alliances in a bid to add greater depth to their content inventory and scale their audience reach. In a broadcast industry that is characterised by low advertising rates, little or no transparency on audience figures and offering only a limited customer experience, the convergence between broadcast platforms, content and technology is promising to rapidly re-shape the entire competitive landscape in the region.
To survive such a tough environment, broadcasters are looking to manage cost and competition through strategic partnerships. “Competition is a big word… and where you need to compete needs to be identified,” said Fadel Zahreddine, group director of brand management and digital businesses, MBC Group.
“If you [compete]… in every single sector of your business, you end up doing nothing. Where we can benefit each other must be worked out. This is where egos shouldn’t be applied—benefit to the business is essential,” he added.
Other broadcasters are following a similar partnership approach to protect their user base. Throughout Q1, pay TV satellite operator, OSN made a string of content partnership announcements with the likes of Netflix and Disney.
“Scale is now essential for media companies to be able to compete for content and audiences, and consolidation of power in media and broadcast has become unavoidable,” said Nick Grande, managing director, ChannelSculptor.
“The spate of mega-mergers and acquisitions in the US demonstrate the change in the media industry that has been created by the internet,” he added.
At the moment, another fascinating contest is playing out between Disney and Comcast for control of European broadcasting behemoth Sky. At stake is a battle for global dominance of entertainment eyeballs, between traditional broadcast companies and OTT streaming giants like Netflix, Amazon and Hulu.
Creating Win-Win Content Partnerships
MBC Group is putting partnerships with local broadcasters, streaming players and content producers at the core of its plan to develop Shahid, its long standing, advertising-based video on demand (AVOD) platform. Initially designed to be a complementary catch-up service to the group’s linear TV services, Shahid has matured into a standalone business unit within the group.
However, if Shahid is to evolve into a premium Arabic content platform with broad regional and global appeal, it must expand its content inventory and extend its reach through partnership agreements with other broadcasters, content production houses and OTT players.
“Shahid is for Arabic-speaking audiences, wherever they sit around the planet,” said Zahreddine.
“[Our content] is skewed to pan Arab users at the moment, because it is based on the footprint of satellite television in the Middle East and North Africa (MENA)… yet we are working on expanding our local content in specific territories since the content is not 100% skewed to them,” he added.
Previously, Shahid has had agreements with the likes of Alhayat and Dream TV, and it is currently working to ‘open doors’ with other local broadcasters.
“[If] any other broadcaster would like to monetize their content on Shahid, we are open [to] that… Shahid is not a MBC catch-up service, it is for premium content online in Arabic and beyond,” said Zahreddine.
“The partnership relationship with other broadcasters and content producers to move towards Shahid as their content platform is one of the programmes that will be in the market [soon],” he added.
Given the historic relationship between MBC and Shahid, convincing other broadcasters to sign up, could prove a struggle. In effort to change market perception, Shahid is working on a business model for other broadcasters, including MBC. At the time of going to press, details of the plan were unavailable. The initial focus is on educating potential partners about the value of consolidating content on Shahid.
“The educational part is [on] going… we will see some doors open in the future… the broadcast relationship[s] are getting better… We deal with MBC as we deal with any other broadcaster. There are no special privileges to MBC from Shahid,” explained Zahreddine.
MBC’s desire to strike partnerships extends to the OTT players that have entered the market over the last three years. Although details are scarce, it is investigating distribution and content co-creation opportunities. “We will announce something soon… we are working with the main streaming services,” commented Zahreddine.
Investing in Content: the piracy question
The idea of co-productions with some of the global streaming giants offers intriguing possibilities, even if the results may be some years away. Currently, there are plans to create programmes specifically for Shahid Plus, the subscription-based video on demand (SVOD) platform, MBC launched in 2016.
Although details are under wraps, the senior team started looking at concepts in 2017, and hopes to broadcast shows in late 2018 or early 2019.
“There is a plan to start launching [content for] Shahid Plus,” said Zahreddine. “We believe creating content specifically for Shahid [Plus] could lead to high subscriptions, if we are able to control piracy,” he added. This important caveat has hampered investment in the region.
In the Middle East, pay TV accounts for only 5% of the total TV audience, compared with 30% elsewhere in the world. The comparatively miniscule market share of pay TV service providers is attributed to a number of factors; from content piracy, to the difficulty of collecting monthly charges, to low bandwidth and meagre credit card penetration.
“Piracy is the main competitor to any paid business in the region,” warned Zahreddine.
“We are trying to grow the business. I think that the appetite is there among certain segment[s] of users when it comes to pay [TV]. But with [pay for TV] you need to educate the market and this is the really difficult part,” he explained.
Despite the increasingly tough stance on content piracy from local authorities the situation isn’t likely to be resolved in the near future. Although in certain countries, such as the UAE, the authorities are more committed to stamping out the issue, the effort is not uniform throughout the region.
“We work with Google and the anti-piracy companies and they really help us to make it difficult to find the content. But it is not 100%… there are certain areas where piracy is connected and we cannot touch it, like the occupied territories,” said Zahreddine.
“There is a certain amount of education that is necessary about piracy in MENA,” said Max Signorelli, analyst, home entertainment, technology, media and telecom, IHS Markit, in an interview with Digital Broadcast in December.
However, the low cost payment model championed by streaming services, such as Shahid Plus, Starz Play, IcFlix and iFlix may also prove more effective in combating content piracy.
“iFlix’s very low pricing strategy has proven quite successful in the face of piracy. People see this low price and they think ‘I get guaranteed quality and the content will work.”
Online video in MENA: the arena heats up
MBC’s ambition for its pay TV service has been dampened by the rampant piracy in the region. Although it declines to discuss specific subscriber figures, Zahreddine admits adoption is “not as we expect.” However, “[Shahid] Plus is a great, complementary business. We see distribution of Shahid is more important”. MBC ‘s SHAHID app has made a promising start, and was named by technology giant Apple as one of the best apps in it’s app store of 2017.
By comparison to the paid service, the uptake of the free AVOD service is in the ‘millions’ and growing at 13% year on year, said the MBC executive.
In an indication of where the market is going, according to an IHS Markit study, online video subscriptions grew 48% year-on-year. The analyst puts Starz Play as the leader in terms of MENA market share. The SVOD player accounts for 26% of the regional OTT market, compared to Netflix’s 16%.
IHS Markit’s research also shows that while online subscription video currently accounts for 25% of the pay TV market in MENA, the share is set to increase to more than 50% by 2020. The stakes are rising and the competition is getting fiercer by the day, with new entrants like Vuclip’s Viu, OSN’s Wavo and STC’s JawwyTV, all vying for a share of the online subscription video market in MENA.
Thus far, streaming vidoe service providers in the region seem to have developed a winning playbook focused on: building telco and operator partnerships, pricing that varies depending on region, and a content offering that has high relevance. These strategies look to be the most effective ways to compete for market share.
MBC Group has been able to leverage is sheer size and scale to partner with local telecom operators; enabling customers to pay Shahid’s US$4.99 monthly subscription fee directly through the operator. Local telcos acting as payment middlemen build trust and add convenience to the service.
“Today, it is much easier to go through the telecom [operator] to subscribe, [and] this is where we are trying to grow the business,” commented Zahreddine.
“People are more comfortable paying via their mobile payment. What is increasingly happening is if people have their credit cards online, to pay for things like iTunes then they are happy to pay [with their credit card]. But this is not mass and I don’t think it will happen for the next two years. I believe telecoms [operators] will [lead] because of user convenience,” he added.
The pending rollout of 5G over the next two years is also likely to have a further transformative impact on the ‘streaming’ service of broadcasters. While internet connectivity in core markets, such as Saudi Arabia and Egypt is improving, it can still be a struggle to find an internet connection to sustain the video on demand service.
“Technology is definitely our partner. Every time it is improved, we get better,” said Zahreddine. “Any progress on this front will help us,” he added.
In a region dominated by free-to-air media consumption, the glacial shift towards paid for viewing, coupled with low ad rates has contributed to the low risk, low cost content strategy among many broadcasters. That has only started to change very recently—in part fuelled by the advent of various streaming players and their low consumer price points, convenient payment models and (in some cases) ambitious content strategies.
With 5G likely to arrive swiftly, the pressure on broadcasters is mounting to find viable business models for a post linear TV world. Partnerships will be key.