The middle ground – current issues faced by the Middle East

Pay TV operators in the Middle East face specific challenges involving piracy, securing content and pursuading the public to pay for services. Rebecca Hawkes looks at the main issues.

A satellite dish sits atop almost every roof in the Arab world, yet paying for content is a concept most living there are, as yet, unfamiliar with.

It’s an irony that hits any television-savvy traveller to the Middle East and North Africa (MENA), though the reason for it is straightforward. The region boasts over 500 free-to-air satellite channels – from the pan-Arab, multichannel MBC to individual current affairs or religious channels and state-run services – combining to provide a huge variety of content beamed direct-to-home without a price tag.

Stealing broadcast and internet content is also rife in the region. “Piracy is the number one issue for pay TV platforms everywhere,” says David Butorac, chief executive officer of MENA satellite pay TV operator OSN. “But many see intellectual property theft here as a victimless crime, which it definitely is not. The real victims are platforms like ours. By not receiving full payment, we can’t reinvest as much in original content.”

Although regional subscriber numbers are not publically available, analysts believe pay TV services currently reach just 20% of Gulf homes, with a far lower penetration rate in the Levant and North Africa. Industry sources estimate two million subscribers in the region are lost to signal theft, while at least 56,000 commercial operations are illegally redistributing pay TV signals.

So, what can providers do to encourage viewers to put their hands in the pockets? “Pay TV operators need to differentiate themselves through premium content and interactive services,” says Hadi Raad, principal of Beirut-based consultancy Booz & Co. “They need to evolve their service offering from a one-way content delivery service to an interactive experience leveraging HD content, social media platforms and companion applications.”

Pay TV may not be prevalent yet, but media opportunities are expected to be plentiful in this emerging market, where 65% of the 330 million strong population of the Arab world is under the age of 35, and half aged below 25. “The MENA region is characterised by a young population, and has a fast growing media market. Leisure and home entertainment consumption is typically high in the region, in many cases driven by the relatively limited outdoor entertainment opportunities,” says Raad.

OSN is attempting to woo the regional audience to its newly secured platform with bountiful offerings of current and enticing premium international and Arabic programming, across multiple genres. “We have to make certain that our content is relevant and appeals to all,” says Butorac. “The average person watches 11 channels, but the reason we have 90 is to ensure there are enough to appeal to a range of tastes.”

To further entice viewers, OSN claims the largest selection of high-definition content in the region across 17 channels, broadcasts 3D movies, and provides subscribers with a DVR. Futhermore, it airs popular content from major Hollywood studios within 24 hours of them airing in the US. It also upped its quota of Arabic programming recently, with the launch of the OSN Ya Hala! channel in October and by sealing an Arabic movie deal with Rotana.

OSN is also embracing a multi-platform approach to distribution. “Our digital media platform will be available in the fourth quarter of 2011 or, at the latest, in the first quarter of 2012, and provide catch-up services to smart phones and tablets,” says Butorac. “Digital media is taking off in the region; unsurprisingly, given the young age of much of the population. We are aggregating onto other platforms but will still offer users the OSN experience.”

IPTV operators

Of course, there are limitations when it comes to interaction on satellite-based platforms, which is where IPTV could step in. Services are already up and running in the UAE (with Etisalat’s eLife and Du TV), Saudi Arabia (with STC’s Invision), and Qatar (with Qtel’s Mosaic) and, by the end of this year, both Etisalat and Du plan to have their next generation IPTV services available to subscribers across the UAE.

These will provide further on-demand high-definition interactivity, catch-up TV, and social networking with Facebook and Twitter, on top of the huge number of both free to air and premium channels which their existing IPTV services carry.

These broadband-delivered TV services are not apparently seen as a threat by existing pay TV providers such as OSN or by the region’s major free to air satellite broadcaster MBC, but rather as another means of getting their brands onto multiple platforms. Both have channels carried by the region’s IPTV networks.

“Telecommunications innovations are helping the democratisation of media content,” says Mazen Hayek, official spokesperson and group director for PR and commercial at MBC. “Other delivery platforms are complementary. As long as you have the right content you can deliver it on any screen. IPTV is gaining ground, as is mobile TV.”

Farid Faraidooni, chief commercial officer, Du, believes that not only is IPTV convenient in that the broadband-delivered service negates the need for satellite antennas; it also provides telcos like his with a huge opportunity in terms of its personalised service. “As IPTV technology grows, interactivity will become an important differentiator. It will enhance the experience for customers, and applications it can provide like social networking will not be available on DTH services,” says Faraidooni.

He concedes that there are limitations for telecommunications operators because of the need to control the IPTV network from end-to-end. Thus IPTV can only be offered where an operator owns a network which, in Du’s case, means delivering the service across new fibre-connected developments in Dubai.

“The IPTV share of pay TV is still nascent in most MENA markets with an overall average of 3-4%,” says Raad. “It will grow at varying rates in different markets, depending on penetration rates of high speed broadband, and the ability of local operators to differentiate with targeted content and personalised interactive services. Overall, IPTV could capture around 35% of the pay TV market in the next three to four years.”


The energy-rich urban areas of the Gulf may be enjoying speedy broadband capable of delivering HD television either on screen or, for mobile subscribers in the UAE and Saudi Arabia, also very recently by 4G mobile. However, the majority of the region’s population are still consuming free-to-air broadcasts in a more traditional manner.

“TV is still the dominant source of entertainment – the entertainment par excellence – in a region which outside the large cities still has a high illiteracy rate, poverty and a low PC penetration per capita. There is low broadband penetration in much of the region, and where it is available it is often expensive,” says MBC’s Hayek. “Many of these are still obstacles to the quick development of new media.”

MBC’s popularity certainly seemed unshakable. Becoming the first private free-to-air Arabic channel broadcasting to the Arab world from London in 1991, MBC1 has since grown into a Dubai-based 10-channel operation, in addition to running live online video streaming.

“We have the best international formats, the best locally-produced shows, the Hollywood blockbusters and series, and Turkish soaps – which we turned into a genre in the Arab world, beginning with Noor. We also have news with Al Arabiya,” says Hayek.

In terms of formats, the ‘Arabised’ version of the Fremantle Got Talent franchise aired on MBC earlier this year to mass pan-regional appeal, and Arab Idol will premiere on December 9 ,with the first live show on MBC1.  When that show ends in April 2012, MBC4 will be ready to go with the second series of Arabs Got Talent, to help sate the appetite for TV talent shows across the Middle East and North Africa.

Such popular programming and dense audience reach attracts advertisers – indeed Hayek believes “the MBC Group has the lion’s share of the TV advertising pie in the Arab region.”

The Middle East and North Africa is thought, however, to account for less than 1% of the global yearly television advertising spend, at an estimated US$1.2 billion-US$1.4 billion (?865 million-?1 billion) per annum.

“The region’s ad market has a huge potential to grow by double, by triple or even quadruple, but I would currently describe it as an emerging market,” says Hayek. The low ad spend is, he believes, down to a combination of factors, including the lack of an audience measurement system, the economic and product distribution differentials in each country and also the infancy of local brand marketing.

The Arab Spring could help grow the latter, and breathe life into the markets of Libya, Tunisia and Egypt, hopes Hayek.

As for television audience measurement, two systems are currently in-development for the UAE and Saudi Arabia, which will join Lebanon’s people meters as the first ‘modern’ methodology for obtaining accurate viewing figures in the entire pan-Arab region.

“They are needed to put order into the industry. They are not going to solve all the problems but will help advertisers see more clearly. However, we need them more than advertisers do. They are make or break in terms of successful scheduling and programming,” says Hayek.

OSN also welcomes the initiative. “We applaud the actions of the governments in the UAE and Saudi Arabia to provide a proper industry currency in developing audience measurement systems, and we will invest in them,” says Butorac. “[As a subscription based service] we are not driven by the need to have a modern advertising market, however, we will all benefit if there is accurate data measurement, and if advertisers know who’s watching what with any reliability.”


The available viewing figures (obtained by market researchers, through computer assisted telephone interviews), regularly highlight the popularity of sports broadcasting in the region.

For example, the last football World Cup final, between Spain and Holland in 2010, was watched by 162 million viewers across MENA – representing the single largest TV audience ever recorded in the region, according to Al Jazeera Sports, which operates a mix of free to air and pay TV channels from its base in Doha.

More recently, some 43 million viewers in the Middle East watched the AFC Asian Cup held in Qatar in January 2011 – the broadcast rights for which were held by World Sport Group. Its president for west Asia, Pierre Kakhia says: “Middle Easterners and North Africans, the youth in these regions in particular, are hugely passionate about sport. Without a doubt the top sport is football and fans in the Middle East are fiercely loyal and passionate about their national teams and clubs.”

Football related TV rights are, like elsewhere in the world, a hotly contested property. Al Jazeera Sports, which is backed by the Qatar Government, now holds rights to broadcast the prestigious UEFA Champions League and FA Cup football tournaments across the MENA region, as well as the FIFA World Cup in 2014, 2018 and 2022.
Meanwhile, its Gulf rival, Abu Dhabi Sports – owned by Abu Dhabi Media (ADM) – holds the sought-after regional broadcasting rights for the English Premier League (EPL), in a three-year deal beginning 2010, which was variously reported to have cost between US$150 million-US$300 million.

“In recent years, sports media rights costs have soared because of the demand for premium sports content. Because of these high costs, broadcasters are now finding it difficult to achieve a reasonable return on investment that justifies their spend,” says Kakhia. “Advertising revenues alone do not cover the rights fees for some of the most in-demand, premium sports programming. The challenge for broadcasters is to find a balance between the properties with high rights fees and those which are reasonably priced, and yet which offer a high ROI.”

The regional TV rights to the EPL were, up until the 2010-11 season, held by Showtime Arabia which subsequently merged with Orbit to become the Orbit Showtime Network (OSN) in 2009. It could no longer compete with ADM, which had financial backing from the UAE Abu Dhabi Government for EPL rights.

“The reality is large meaningful football rights, like for the English Premier League or the UEFA Champions League, now command uneconomic figures which sovereign-backed sports networks are willing to pay without demanding a return on investment. We can’t bid money that we can never recover,” says OSN’s Butorac.

Interestingly, Karim Sarkis, executive director of ADM’s Broadcast Group agrees that broadcast rights to the EPL and other high profile football tournaments are so costly in the MENA region they no longer present an opportunity for a return on investment.

“Our region is doing itself a dis-service by escalating the cost of rights through bidding. In the long term, this approach is limiting the growth of pay TV and therefore limiting revenues for content owners,” says Sarkis.

Although it is the most popular, football of course is not the only sport broadcast in the region. OSN has four sports channels, which among other events have brought Ashes cricket to the region plus both this and the next Rugby World Cup. AD Sports, meanwhile, also carries Formula One (F1) motor racing, and tennis among its sporting attractions.

Cricket is well represented in the region on the South Asian Pelha package carried by pay TV platform Arab Digital Distribution (ADD), through channels Ten Sports, Neo Cricket and CricOne. ADD has an eight-year exclusive regional TV rights deal with the International Cricket Council (ICC) to televise all the cricketing body’s major events.

Of course, keeping all this premium sporting content secure to maximise returns remains an ongoing battle in a region where piracy is rampant.


In December 2010, OSN “switched off illegal reception” having secured the platform with new conditional access, explains Butorac. “We invested US$55 million to swap every subscriber [set-top] box, which worked brilliantly to eradicate reception piracy, and also led to a subscriber increase. Our sales are three times what they were this time last year. However, illegal re-distribution remains a problem that requires the assistance of governments to tackle.”
ADD has also provided subscribers with new MPEG-4 decoders free of charge this year in a bid to stamp out reception piracy.

Sarkis of ADM explains that “cable piracy, code sharing via IP-connected decoders, over spill from other satellite operators, and torrent downloads are all major issues [in different parts of the MENA market]”.

Code sharing has been a particular problem in Saudi Arabia, the UAE and Egypt, while cable piracy is a major problem in Egypt and Lebanon. “In some countries, cable piracy has entirely replaced legitimate subscriptions to the extent that consumers do not realise they are paying pirates rather than legitimate rights holders,” says Sarkis.

In addition, compounds and apartment buildings in a number of Gulf Cooperation Council (GCC) countries reportedly continue to redistribute pay TV channels to individual units, and industry sources indicate 1,500 coffee shops, restaurants and hotels  illegally broadcast pay TV channels to their patrons.

Sarkis adds that although cable piracy is difficult to fight due to the lack of enforcement of IP protection laws, ADM has so far been “immune” to code sharing through the deployment of a secure silicon paired card-and-decoder solution from Irdeto and Humax.

ADM, like OSN and member studios of the Motion Picture Assembly (Disney, Warner Bros, Sony Pictures, Fox, Universal and Paramount), is working with the Arabian Anti-piracy Alliance (AAA) to combat the problem.

“In the UAE and Kingdom of Saudi Arabia raids are still being conducted by the AAA through the authorities, and continual effective lobbying is also required in Saudi Arabia and Kuwait,” says Scott Butler, chief executive, Arabian Anti-piracy Alliance. He adds that within the UAE, those convicted of intellectual copyright infringement have all been imprisoned for their crimes.

Although fighting to maximise commercial returns on its premium sports content by keeping it secure from pirates, ADM distributes most of its channels free-to-air simply because, says Sarkis, it is the predominant method of television reception around the MENA region.

Traditional satellite TV services, whether free-to-air or subscription based, are likely to remain as the key broadcasting distribution method in the foreseeable future in the Arab world.

“Yet, as high speed broadband penetration increases, coupled with the advancement in content discoverability software and smart recommendation engines, over the top TV could grow to disrupt the traditional media value chain, ultimately diminishing the traditional aggregator role,” concludes Booz & Co’s Raad.