TV MEA MIPCOM 2015

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TVMEA

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OCTOBER 2015

MIPCOM EDITION

Pay TV / OSN’s David Butorac

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CONTENTS

Open Sesame In 1990, in the midst of the Gulf War, the Kuwaiti studio being used to film Iftah Ya Simsim was heavily damaged. The educational kids’ show ceased production as the war raged on—and stayed off the air for another 24 years. Now it’s back.

Ricardo Seguin Guise Publisher Anna Carugati Group Editorial Director Mansha Daswani Editor Kristin Brzoznowski Executive Editor Joanna Padovano Sara Alessi Associate Editors Joel Marino Assistant Editor Victor L. Cuevas Production & Design Director Phyllis Q. Busell Art Director Simon Weaver Online Director Dana Mattison Alberto Rodriguez Sales & Marketing Managers Terry Acunzo Business Affairs Manager

Ricardo Seguin Guise President Anna Carugati Executive VP Mansha Daswani Associate Publisher & VP of Strategic Development TV MEA © 2015 WSN INC. 1123 Broadway, #1207 New York, NY 10010 Phone: (212) 924-7620 Fax: (212) 924-6940 Website: www.tvmea.ws

Iftah Ya Simsim was one of the first international versions of a show that is an American preschool institution: Sesame Street. An entire generation of kids grew up watching Iftah Ya Simsim—it had been on the air since 1979. Today, one of those viewers, Cairo Arafat, is bringing a new incarnation of the Arabic-language series to audiences across the region via her company, Bidaya Media.

The potential reach of the show is 45 million preschoolers.

There have been several other exciting developments in Arabic-language content as of late. TLC is launching its first regional original, Nida’a, this October, fronted by activist Zainab Salbi. With Bill Clinton and Donna Karan as initial guests, the show “aims at inspiring, supporting and empowering young Muslim and Arab women to achieve their full potential in society,” Salbi said when TLC announced the production. Meanwhile, TLC’s parent company, Discovery Communications, has partnered with Image Nation Abu Dhabi for Quest Arabiya, a new free-to-air Arabic-language factual channel.

Drama dominates Arabic-language content production at present—and apparently viewing too. During the month of Ramadan this year, a time generally associated with higher ratings for broadcasters, dramas accounted for almost 60 percent of all Arabic series aired. Middle Eastern research firm and consultancy Arab Advisors Group says that of 22 channels it studied over the Ramadan period, only one didn’t air any drama series.

Arabic-language content is a key growth area for panregional pay-TV platform OSN, CEO David Butorac tells us in this edition of TV MEA. He also discusses working with industry partners to tackle piracy, the importance of shortening the windows on imported content and pursuing opportunities in the nonlinear space.

This edition also includes an extensive report on the overall pay-TV landscape across the Middle East and Africa. As Jay Stuart reports, major global pay-TV brands are stepping up their presence via expanded channel portfolios, new nonlinear services and content investments. OTT platforms, among them icflix, are also starting to shake up the market, especially in places like the UAE, which has the fastest broadband speeds in the Middle East.

—Mansha Daswani

FEATURE

6 OPENING DOORS

Increased local content spend and the entry of new players are expanding pay-TV businesses across the region.

INTERVIEW

12 OSN’s

David Butorac The CEO of the Middle Eastern pay-TV platform talks Arabic-language content, day-and-date premieres and other growth strategies.

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FremantleMedia International Simply Nigella / Soundbreaking / To Tell the Truth Easy recipes and the history behind them are presented in Simply Nigella, which FremantleMedia International is promoting for the Middle East and Africa (MEA) this MIPCOM. “Audiences in this region love food, and Nigella [Lawson] is a huge name over here already,” says Anahita Kheder, the company’s senior VP for MEA and Southern Europe. “Simply Nigella is more than just a cookery show—it also tells the story behind each dish and what it is about the ingredients that makes them her favorites.” FremantleMedia International is also offering up Soundbreaking, a documentary series spotlighting the history of the music industry, and To Tell the Truth, a format that asks a celebrity panel to guess which of three contestants is really who they claim to be.

“Since expanding the remit of the Dubai office in March 2014, our business [in MEA] has gone from strength to strength.”

—Anahita Kheder Simply Nigella

SPI International FilmBox / FilmBox Arthouse / FightBox There are a number of channels from the SPI International bouquet that are available across the Middle East and Africa.

These include the movie channel FilmBox; FilmBox Arthouse, showcasing independent, arthouse cinema pieces; FightBox, featuring fighting sports such as mixed martial arts and kickboxing; and DocuBox, airing documentary features. Also available in the region are FashionBox, dedicated to fashion; Fast’nFunBox, an extreme-sports channel; 360TuneBox, a music network; and MadScreenBox, an interactive offering for gamers. Berk Uziyel, the director of new media for SPI International, says that there are discussions about launching a local African channel, but that it is too soon to reveal any more details.

“We have been discussing the potential launch of a local African channel.”

—Berk Uziyel FightBox

Televisa Internacional The Tempest / A Shelter for Love / Abyss of Passion The love story Abyss of Passion takes place in a picturesque Yucatán village dedicated to growing the spicy habanero chili, a background that provides the heat for the inhabitants’ passions. The title, one of Televisa Internacional’s telenovela highlights for the MENA region, follows four village youngsters whose destinies and happiness are seriously damaged by the resentment, ambition and betrayal that rules the adults’ world.

Other novela offerings are The Tempest and A Shelter for Love, along with new titles such as I Dare You to Leave, Anything but Plain and Shadows of the Past. Televisa is also presenting several entertainment formats for MENA buyers, among them Little Giants, according to Mario Castro, the company’s director of sales for Asia, Africa and the Middle East.

“Our telenovela productions continue to find success in the Middle East and North Africa.”

—Mario Castro The Tempest 610 World Screen 10/15

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Power on STARZ Play Arabia.

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OPENING

DOORS

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Increased spending on local programming and the emergence of new OTT players are reshaping the pay-TV business across the Middle East and Africa.

By Jay Stuart

sure sign that a region of the world is coming into its own as a television market is when international channel operators start producing local content there.

In October, Discovery Communications will start showing its first local production on TLC in the Middle East and North Africa—a chat show for Arab women called Nida’a. TLC is carried on the OSN platform, where the channel launched exclusively in March 2014.

An even bigger indication of a region’s emergence is when international companies invest big bucks in launching premium services. In April, Starz launched STARZ Play Arabia, a new direct-to-consumer multiplatform SVOD service (and its first branded offering outside of the U.S.) in 17 countries and territories throughout the Middle East and North Africa (MENA).

This is very possibly the hottest growth market in the world right now, along with sub-Saharan Africa, where pay TV still has plenty of head room for growth.

Free-to-air television in MENA generated about 63 percent of total television revenue last year at $1.52 billion, according to global consultancy firm A.T. Kearney, followed by DTH pay TV at 29 percent with $711 million, IPTV at 7 percent with $167 million and OTT video at less than 1 percent with $21 million.

STARZ GAZERS “We wanted to become more international, and build on the great progress we’ve made in the U.S.,” says John Penney, Starz’s chief strategy officer. “Over the past three years, we have produced the equivalent in original hours of HBO or Showtime. We are using this content as an anchor tenancy in the new STARZ Play Arabia.”

One of Starz’s partners in the venture is Parsifal International, headed by Peter Ekelund. Parsifal is also a partner in HBO Nordic, which has a multiyear licensing deal with Starz Worldwide Distribution.

“They came to us while we were doing the analysis of our options internationally and proposed the idea of rolling out a service for the OTT and bundled markets in the Middle East and North Africa,” Penney says. Starz and Parsifal are the majority partners in STARZ Play Arabia.

“We saw the attractiveness of having a branded subscription service in a big region of 380 million people where there was a lot of demand but the [landscape] was not as competitive as in

more developed markets,” Penney says. “There are infrastructure limitations around broadband and the providers in the satellite market are at price points too high ($50 to $75 per month) to hit the sweet spot of the consumer market. We saw an attractive market with a growing middle class and sophisticated audiences able to enjoy English-language programming and pay a reasonable price.”

The STARZ Play proposition, priced at $13.99 a month, targets wealthy Gulf markets such as Saudi Arabia, Kuwait, the UAE and Qatar. The venture has a team in Dubai, headed by Maaz Sheikh, which is driving forward the regional priorities of having the technology in place, licensing the content and getting the marketing rolling.

BUYING TIME The platform needed thousands of hours of programming on top of what Starz provided. This was available through deals with the likes of Disney, Sony and Warner Bros. While Penney does not see direct investment in local production on the cards at this point, he says STARZ Play Arabia could certainly become the “go-to partner” for local producers. The service has been in a soft-launch phase of targeting the direct-to-consumer market via the internet.

“The first phase is about getting people to try our product and like it, and it’s also about learning how to improve what we’re doing,” Penney says. “Then we will be going to the telcos and seeking to integrate what we have with their marketing. If a company is rolling out 4G, for example, having our content to offer will give them a new rationale to attract consumers.”

Penney notes that Starz first put money into the venture in Q4 2014 and the service had gone live by the spring of 2015. He acknowledges that the speed had much to do with getting into the market fast and establishing a first-mover advantage.

“We have studio deals that gave us a long runway, so we didn’t have to rush in terms of being sure we had the content.

We wanted to get in front of the consumers fast, so that we could improve quickly and develop our knowledge of the market. That’s critical in enlisting partners.”

The potential of the OTT space has pushed a flurry of recent activity in the market. Leading pay-TV company OSN launched Go by OSN for non-pay-TV subscribers. Free-toair satellite leader MBC partnered with Samsung to launch its

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HISTORY commissioned a South African version of Pawn Stars for its regional feed.

popular Shahid app on smart TVs. Sports channel leader beIN SPORTS re-launched its OTT service and began selling multiscreen subscriptions.

Mideast OTT platform icflix has enjoyed very strong growth in this new space. “Since our launch two years ago we have already had over 350,000 subscribers across the MENA region, growing by around 25 percent month on month,” says Carlos Tibi, the company’s founder and CEO. “With mobile devices readily available and screens becoming larger with every new release from the major mobile manufacturers, consumers are more inclined to leverage their devices as their personal video viewing instruments. As a result, we are seeing a big jump in access from mobile devices. To broaden accessibility further, icflix will soon be available on Xbox One and PS4.”

GOING OVER THE TOP Nearly 40 percent of the subscriber base is in the UAE, Tibi notes, followed by Saudi Arabia and Morocco. Egypt, Algeria and Tunisia are also important markets for icflix.

One of the most positive signs is that the region is already addicted to online video. Saudi Arabia is already the number one YouTube country in the world in terms of views per capita, according to consulting firm A.T. Kearney. Also in the Gulf countries, fiber optic and xDSL connectivity is widespread. That said, pay-TV penetration in the region is less than 11 percent.

The Middle East has strong similarities to the African market, where newer digital platforms also offer huge growth potential.

“The Middle East is similar to Africa in that there are big incumbents—OSN in the Middle East and MultiChoice in Africa—with a number of innovative and disruptive new entrants to the markets that could provide incremental business opportunities for us,” says Kiaran Saunders, the VP for Europe, the Middle East and Africa at A+E Networks. “There is also a parallel between the two regions in that the original incumbents went after the higher end of the market while the others aimed at the growing middle class with much lower-priced offerings, basing their model on a high volume of subscribers rather than a high price. The big difference between the regions is that the

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new competitors in the Middle East are not all small guys.

Saudi Telecom is now getting into the television market.

Etisalat, the UAE-based telco, is also coming into TV. This represents a very different kind of threat for the incumbents.”

PHONING HOME “Convergence has made its mark in the Middle East, especially in the GCC region with the telcos emerging as key service providers,” says Sanjay Raina, the general manager of FOX International Channels (FIC) Middle East. “Today, besides telephony and internet, they’re also distributors of video content. And with pipelines established, it’s easier for them to scale up their offerings, provide added value and glean incremental revenues from subscribers. Pay TV through the telco distribution model is very popular, especially in UAE and Qatar, and we are on all these platforms.”

In the Middle East, FIC’s portfolio of channels straddles both pay and free-to-air segments. Pay channels across the region are largely accessible via DTH on OSN and free satellite through both Nilesat and Arabsat. FIC channels are accessible on DTH (OSN and My-HD), and on IPTV. Its blue-chip factual and series content can also be seen on icflix and eLife.

“The Middle East is the only region in the world where we have a free-to-air National Geographic Channel branded after a city—National Geographic Abu Dhabi (NGAD),” Raina says.

“We work very closely with SVOD operators that have recently started operations in the region. Moving ahead, we will develop offerings for OTT devices.”

The average mobile penetration in the region is between 75 and 80 percent. “With higher time spent on such devices, it’s natural that most service providers vie to get a share of that attention and entertainment services think no differently,” Raina continues. “Currently there are at least ten video products, besides YouTube, that are available as apps on OTT devices. We estimate this is set to increase in the coming period.”

“The emergence of OTT video provides a window of opportunity for new players to enter the Middle East, whether as

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regional players or global contenders,” says Christophe Firth, a senior manager at A.T. Kearney in Dubai. “Absolute subscription and penetration numbers are still low. One reason is that piracy is a very big issue in the region. Premium content is available for those who know how to find it and there is not the same stigma as in Europe or America.”

Online piracy remains a common problem. According to A.T. Kearney, about 27 million homes across the Middle East and North Africa have access to pay-TV services, but only about a quarter of them (under 7 million) actually pay for the services.

“There is reluctance on the part of premium content providers to make content available to OTT, partly because they fear that it will expose them to possible piracy and because the pure OTT companies do not enjoy the same status as Netflix, the company they are trying to emulate,” Firth says.

OSN, which has come into the OTT market, is a very different beast, being a big satellite pay-TV operator. Its OTT is bundled with pay TV and now it has a stand-alone OTT offer. OSN has the reputation and it can get the content.

Another problem is that broadband penetration is low outside the GCC. Furthermore, credit-card penetration is low, so payment can be difficult.

“Our goal is to integrate into as many consumer touch points as we can,” says Starz’s Penney. “One of our first tasks is to give people more options to pay, so we are not dependent on creditcard payment. Some people will even want to pay cash, so we need to have the mechanisms in place.”

In late 2014, A.T. Kearney conducted a series of in-depth surveys of industry leaders across the region, including 45 executives from most of the leading international and regional broadcasters and content providers, pay-TV operators, telecom operators, pure OTT providers, advertising companies and technology providers, plus 6,400 consumers.

The survey asked: Who is best positioned to win in the OTT video market? The results put the pure OTT providers in first place (40 percent), followed by satellite pay-TV providers (30 percent), telecom operators (15 percent) and freeto-air broadcasters and content producers (also 15 percent).

How fast will OTT streaming grow? A full 35 percent of respondents predicted growth of over 50 percent annually, which would put the total market size at over $1 billion in 2020, with a 25-percent share of the estimated $4.4 billion total TV market. More moderate growth of 25 percent to 50 percent would push the revenue to $329 million in five years.

Are the new OTT services a competitive substitute for traditional pay TV or are they complementary? At present, the answer is the latter, according to icflix’s Tibi. “icflix sits alongside traditional pay TV. We are not here to take away anyone’s business; we’re simply here to provide an affordable form of entertainment on people’s time rather than allowing viewers to be dictated to about what they should watch. We’re giving flexibility to the user.”

This reality is reflected in the acquisitions policy. “We will not have exclusivity, unless it’s an original production,” Tibi says.

“We don’t believe in acquiring anything exclusively on icflix and the reason for that is because today in the digital era, as soon as movies are out they are pirated in high quality and become available across thousands of sites. Therefore the word ‘exclusivity’ doesn’t make sense from a streaming perspective unless it’s an original production.”

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OTT is beginning to gain traction in the Middle East thanks to services like icflix.

WHAT’S HOT The A.T. Kearney survey showed that when it comes to Western imports, drama series account for 34 percent of viewing, followed by thriller/crime series (29 percent), comedy (21 percent), action (15 percent) and animation (1 percent). For Arabic programming, drama series account for 43 percent of viewing.

For Western films, comedy takes 35 percent of viewing, the same as for Arabic-language movies made in the Middle East.

For movies made in North Africa (outside Egypt), action is slightly preferred over comedy. Interestingly, Arab respondents said they actually prefer to watch movies in English (47 percent) rather than Arabic (45 percent). But for TV series, they want Arabic (81 percent).

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360TuneBox is among the portfolio of pay-TV channels that SPI is rolling out across the Middle East and Africa.

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FIC acquired a package of first-run programming for Africa that includes FOX’s hit series Empire.

“Local content is very important for us,” says FIC’s Raina. “Our factual channel NGAD’s latest production was Every Emirati Son, a documentary about the UAE army. Our entertainment channel FOX Movies features local adaptations of popular international formats; the versions of So You Think You Can Dance and Dancing with the Stars have been performing extremely well. We’re currently working on Tropic of Cancer, another local production for NGAD. In the coming financial year we have about six new local productions lined up for NGAD.” While producing local content tends to be an ambition of many players, first-run imported content can be more important.

Recently, FIC bought first-run content from Twentieth Century Fox for Africa for the first time. That includes The Strain, Tyrant and the breakout hit Empire. “Our strategy was to become more relevant to platforms and viewers and that means having new and fresh content,” says Adam Theiler, FIC’s executive VP for Southern Europe and Africa. “One way to do this is to have a deal with a U.S. studio for first-run content. Another way to be new and fresh is to produce. We have a production pipeline for FIC including The Walking Dead, Outcast and Wayward Pines. A third way is to produce locally.

We will definitely be producing locally in 2016.”

AFRICA RISING “Africa has caught everyone’s interest,” says A+E’s Saunders.

“The sheer numbers and the growth potential are huge. It’s estimated that there will be over 25 million pay-TV homes in Africa by 2020, and that’s not far away. Nigeria is the big one in sub-Saharan Africa. It has grown so fast. It will have 6 million pay-TV subs in five years, about the same as South Africa. Kenya is another big growth market.”

Saunders says that local production is central to A+E’s strategy. “There is a lot of local creativity in Africa and we want to be in production, as we are in South Africa. The local version of Pawn Stars [on HISTORY] is in its second season in South Africa. We also have a local version of Four Weddings on Lifetime. Local is a big part of what we do. With any new channel in a new country, production will be part of the future.

Taking a generic U.S. channel and plopping it down in other markets doesn’t work.”

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In the Middle East however, A+E is offering its panEuropean feed. “We are not there yet in terms of localized content,” Saunders says. “Localized channels would be part of our ambitions. The Saudi market is the big driver.”

HISTORY and CI are the flagship channels. They are exclusively on OSN. A+E has now launched H2 on My-HD in Dubai, one of the emerging new players. “So we have split our offering between competitors,” Saunders states. “In Africa, too, we have our flagship channels on MultiChoice and other channels on other platforms. We are seeing creative ways to package and bundle telephony with the television offering.”

FIC’s Theiler notes, “Anybody in the media business in Africa is going to have a relationship with MultiChoice. We also have relationships with every other pay operator and as new technology grows with OTT and GSM [mobile phone] delivery, we will have others. We seek full distribution on all platforms and that means dealing with all operators. We want people to see our brands. You can’t continue for the next five years to deliver linear pay TV without also doing OTT and GSM and TV Everywhere. We are adapting to this reality with our partners, and in some cases without them. We want to control rights and utilization. If there is going to be a nonlinear component, we need to provide that.”

Theiler continues, “Things never happen in Africa as fast as you think they will, but you need to be prepared. We would never undermine our current partners and pay TV as it exists.

We want to reinforce the status quo and the operators that exist, as well as support what’s coming. Current operators are doing a good job of adapting. When operators want to offer OTT or GSM, we’re there too. It’s not just about content but also about know-how.”

He says Nigeria is far and away the place to be in Africa. Kenya is also growing and he adds Rwanda, Zimbabwe and Angola to the list of emerging markets.

“We are strong in West Africa, especially in Nigeria, but Ghana and Namibia are catching up,” says Loni Farhi, the president of SPI International, which distributes eight pay channels across Africa, including services for movies, fashion and lifestyle, documentaries, music, combat sports (featuring live events),

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extreme sports and interactive gaming. The launch of an ultraHD channel in 4K is around the corner. Meanwhile, his company is moving into free TV too.

“The pay-TV business is slowly but surely improving,” Farhi says. “New platforms are being launched while some of the old ones are gaining subs and others are doomed to disappear. We are supporting every platform to the best of our abilities. Our bouquet of channels operates in the basic pay or premium tiers. We are in the process of creating additional free-to-air channels that will be advertising-driven in the fourth quarter of this year. We are currently discussing this with a number of platforms in Africa.”

Local content, not yet part of SPI’s offer, is also just ahead.

“We are planning to offer a couple of channels with local content in the fourth quarter to make our bouquet even more in demand than it is now.”

LOCAL WINS In March, Viacom International Media Networks (VIMN) celebrated ten years in Africa by taking its regional portfolio to ten channels with the launch of a localized BET to sit alongside the international feed, BET 2 (formerly BET International), adding to a slate that also includes Nicktoons and Comedy Central. VIMN Africa’s channels reach more than 100 million viewers in 50-plus territories in sub-Saharan Africa. The company has its own ad-sales operation (unlike other international channel operators), and produces locally in South Africa and Nigeria.

“We have some blocks on free to air and these have always been a key strategy for us to drive viewership and adverting revenue in markets that are important but with relatively lower pay-TV subs, such as Nigeria,” says Raffaele Annecchino, the executive VP and managing director for South Europe, the Middle East and Africa at VIMN. “Our MTV and Nickelodeon blocks have proven to be very strong, as they enable us to connect to Africa’s mass population, which is very young, and drive these people even to pay TV as well.”

Local activation on the ground is just as important as local content on screen. VIMN runs events like the MAMA (the MTV Africa Music Awards) and the Nick Festival for kids. It also does the Comedy Central Roast and lots of stand-up comedy showcases for new local talent.

“We need to continue to invest in local content with the objective of growing our portfolio,” Annecchino says. “We already have a lot of channels in Africa. We want more.

We want to build free-to-air scale. This is important for cross-promotion.”

In MENA, VIMN opened a Dubai office three years ago. A Nickelodeon Shop has even opened in Saudi Arabia and others are coming. In January, VIMN launched Nickelodeon, Nick Jr. (in Arabic and English) and MTV Live HD on OSN’s satellite pay-TV platform. Nickelodeon is also distributed via all the OSN platforms. There is a new Nick App and My Nick Jr. is in the pipeline.

Local production in the Middle East is also being explored.

“The Middle East will show double-digit growth over the next five years,” Annecchino says. “We are looking at Egypt, which is big market with over 80 million people. We are already present but want to be doing more. That will be a target over the next 24 months. The same goes for Lebanon.”

Will new global players come into the increasingly hot Middle East? “There have been rumors about OSN being sold,

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but I would be surprised,” says A.T. Kearney’s Firth. “OTT is interesting. The recent launch of STARZ Play Arabia is really the first media disruptor in the market. The elephant in the room is whether Netflix is coming. If you look at their global ambitions, you would have to think so. They said not long ago that they want to be in 200 countries by 2017. You can’t do that without the 20 countries of this region.”

THINKING BIG The fact that Netflix has been advertising for Arabic-speakers on their website is a bit of a giveaway.

Firth remains bullish on pay TV in the Middle East. “If you [look at a] market like India, which has had similar obstacles to the Middle East, you see that they are by no means insurmountable. India’s pay-TV penetration is up to 80 percent. That’s largely because the operators are very imaginative in their packaging and pricing, and because they have found ways to distribute widely and collect their fees from people who [don’t have bank accounts or credit cards]. They go door to door.

There is certainly lots of upside potential. Operators need to be more innovative in their packaging, price properly and find ways to distribute to the unbanked.”

Penney of Starz mentions that there is also a large and tantalizing opportunity that might arise if geo-political winds shift—the chance to add Iran, the biggest and most advanced market in the region, to the pay-TV picture.

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VIMN’s local-content endeavors include the Comedy Central Roast of South African businessman Kenny Kunene.

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scribers who want to keep up with the latest Hollywood content. In fact, on a VOD basis, we’re offering content immediately off the back of a cinema release now.

When it comes to third-party channels, it’s the key brands that we have exclusively and are very proud of— Disney, Nickelodeon, Discovery, National Geographic—that drive subscriptions and viewership. Perhaps the biggest change we’ve seen over the last few years is that the success of our Arabic-language entertainment channels is driving our growth. In 2011 we launched our first owned-andoperated Arabic-language entertainment channel, OSN YaHalaHD. As it stands today, that’s our number one channel. It’s gone from new to number one on our platform of 150 channels in the space of four years. We’re extremely proud of the performance of OSN YaHalaHD. TV MEA: In what other ways are you localizing your services?

BUTORAC: The English-language content tends to be localized through subtitling, because most markets don’t want to see that content dubbed. We’ve invested in Arabic-language content and Turkish drama series, which are of high appeal in the region. We dub the Turkish series into Arabic.

DAVID BUTORAC OSN

By Mansha Daswani

Pay TV has never had an easy path in the Middle East and North Africa (MENA). In a region dominated by free satellite channels and rampant piracy, OSN has emerged as the leader of the pay-TV pack with its emphasis on top-quality entertainment and sophisticated technology. The operator carries a number of key international brands exclusively, and has been investing in Arabic-language entertainment for its suite of owned-and-operated channels. On the heels of OSN’s strong profit gains in 2014, CEO David Butorac shares with TV MEA the strategies that have allowed the platform to succeed in a challenging landscape.

TV MEA: I read that OSN’s profits were up by 66 percent in 2014. What drove those gains?

BUTORAC: Pay TV has come of age in the MENA region. The faster we grow the subscriber base, the faster the revenues increase at the company. And we’re ensuring that we keep a tight rein on our cost base. So the business is accelerating rapidly. Pay TV has had a long gestation period in this region. Since the merger in 2009 between Orbit and Showtime we’re seeing strong growth and that’s being reflected in the financial performance.

TV MEA: As you expand your channel lineup, what are the sorts of things you look for?

BUTORAC: Any piece of content, whether it’s a channel or programming we put into our channels, has to deliver one of three things. It’s got to drive subscriptions, it’s got to drive viewership, or it’s got to be an anti-churn device. Ideally, any channel will deliver two of those three. At minimum it has to deliver one.

One of our core strengths is our portfolio of movie channels. We aggregate the very best movies and we run them in the shortest window possible. That’s a strength for sub-

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Any service needs to be personalized and localized. Even with our new agreement with Viacom for the Nickelodeon services in this market, a lot of their children’s content is being dubbed. We actively encourage third-party channels to invest in local content because it just adds to the success and the stickiness of the platform.

TV MEA: How important is HD for OSN today?

BUTORAC: We’re evolving our owned-and-operated services to being in HD. All of our movie services are now HD. It’s a real driver. You can’t buy an SD TV in the market, and the consumer wants to be able to watch true HD content. We’re the only broadcaster [in the region] delivering true 1080i HD with full Dolby surround sound. Of the 150 channels and services we now have on the platform, about 59 of them are being delivered in HD and they are our core driver channels. HD is important to us and we’ll continue to expand the lineup. We’ll have a UHD 4K reception device in the market in 2016. That takes us to the next generation of ultra high definition.

TV MEA: Tell us about your nonlinear services.

BUTORAC: Consumers want to be able to experience content on devices when they are away from the TV set. We have two products. OSN Play is our OTT service for subscribers— it’s free for them to use. Go by OSN is an untethered OTT platform that allows us to aggregate fantastic library content from some of the major studios and offer it to the consumer, as well as a wealth of premium Arabic content. The uptake has been very, very strong. We have over 250,000 subscribers using our OTT platforms. The services expand our engagement with customers, which is the key opportunity presented by digital. We continue to invest heavily in

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We pay a lot of money to be the legitimate licensor of content in our region. We should be protected in terms of government action to clamp down on the illegal use of these boxes. Ultimately, the companies that are entering this market—legitimate companies in their own jurisdiction—need to take action. You can’t watch Indian DTH platform DishTV in the Middle East without DishTV having switched you on. It’s illegal actions on their behalf that are eroding the share of other platforms in the market.

Investments in Arabiclanguage shows like Indama Yuzher Al Khareef present a key growth opportunity for OSN.

the growth of our linear platform, but allied to that, and this will always be a core strategy of the business, is expansion on nonlinear platforms as well.

TV MEA: How are you tackling the piracy problem?

BUTORAC: Piracy exists in a number of different forms, and some are unique to this region. There’s a coalition of broadcasters, including OSN, and other companies in the industry.

Chaired by MBC, the group is targeting the illegal redistribution of channels that have been created by pirates, broadcasting content they don’t have the rights to. So far we’ve taken about 43 channels off the air. The satellite industry is aligned with this. When we can prove the content is not owned by the channels, the satellite operators take the channels down. We’ve had huge successes in the region in getting rid of satellite-based piracy.

When it comes to online piracy, we are starting to get strong engagement from governments in the region. In UAE, governments are identifying websites that are illegally distributing content and allowing the telcos to shut those down.

We’re also having some significant success with governments in relation to the distribution of illegal satellite receivers. Particularly in UAE and Saudi Arabia, premises that are selling illegal services have been raided, fined and, in some cases, shut down.

The final plank in addressing piracy is recognizing that there are legitimate platforms elsewhere, principally in India and South Asia, that are purposefully selling their set-top boxes into our region. We are engaging with governments and the police to have the distribution of these services diminished. We’ve had some successes in the courts in recent months. In the UAE, Saudi, Bahrain and Kuwait, the governments are starting to engage. They realize there’s an economic impact of intellectual property piracy—and not just on companies like ourselves. Piracy is eroding economies and stopping broadcasters from investing in jobs.

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TV MEA: Let’s talk about sports. I know rights costs continue to rise, and it is an increasingly crowded landscape. How are you adjusting your sports strategy against this backdrop?

BUTORAC: Sports is an important part of what we do. We have a very strong portfolio.

But I’m not prepared to pay uneconomical rates for content, particularly in an environment where we have a couple of sovereignbacked broadcasters that are not driven by economic motivations of profitability. It’s very difficult to compete.

That said, OSN has a very proud record. We have recently retained the ICC cricket rights for the next eight years—that’s huge, particularly for the South Asian and expatriate markets. We exclusively own all rights to all the golf tournaments, including the majors. We have a very strong position in wrestling—being the exclusive home of all WWE content—rugby and a lot of the other core broadcast sports.

I won’t pay exponential amounts, and those tend to revolve around football. I can’t compete with someone who is going to pay an uneconomical rate. In any other mature business jurisdiction, there would be anti-competitive pricing regulations that would allow a company such as ours to appeal against broadcasters who knowingly operate at a huge loss. That doesn’t exist in this region.

TV MEA: What are some of your strategic priorities for the year ahead?

BUTORAC: One of the key things is making certain that we can offer a compelling and immediate service for all the strong content we have. This year with Game of Thrones— and we’re doing it with other products as well—we not only launched it day and date with the U.S., we actually launched it at the same minute as the U.S. We take away any imperative for a consumer to pirate the show because it’s available in glorious high definition on your OSN subscription the same minute as the U.S. That means it’s an early morning broadcast here, and then we rebroadcast it later in the day. Keeping our service fresh and current, with premium content, is a high priority. And continuing to invest in high-quality premium Arabic entertainment is also a high priority. Ultimately the vast majority—over 85 percent—of our audience is Arabic speaking. It’s therefore important that we continue to expand our Arabic-language content and indeed our South Asian and Filipino content for those large diasporas that exist in the Middle East, particularly in the Gulf states.

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