Dominated traditionally by free-to-air-channels, supported more latterly by PayTV, the MENA region is now seeing the emergence of OTT players with the arrival of Netflix and Amazon, as well as local players such as Starz Play Arabia. Andy Fry reports.
Historically, Middle Eastern and North African (MENA) TV audiences have primarily watched free-to-air channels, delivered territory by territory or via pan-regional satellite broadcasters such as MBC.
Over the past two decades, this has been supplemented by steady growth on the part of PayTV platforms including OSN and beIN. Today, PayTV reaches about 5 million homes in a market of 380 million individuals.
In the past couple of years, there has also been significant growth in the online video market (SVOD and VOD), which consultancy IHS Markit estimates generated US$500 million in revenues in 2016.
While 65% of this total came from advertising, with YouTube especially strong in the region, IHS Markit (IHSM) senior analyst Constantinos Papavassilopoulos is bullish about the growth prospects for subscription-based services.
“Subscription services in the region saw 137% growth in 2016,” he says, “spurred by the launch of Netflix and strong performance from local players”. He is forecasting subscription’s share of MENA’s fast-growing online video pie will increase to 45% by 2020.
IHSM’s upbeat assessment is echoed by new figures from Digital TV Research (DTVR), which expects OTT revenues in MENA to rise from US$428 million in 2016 to US$1.75 billion in 2022 (DTVR’s figures cover Turkey and Israel, which are not always included in MENA summaries). “SVOD revenues will reach US$1.23 billion by 2022 (70% of the OTT total),” according to DTVR’s MENA OTT TV and Video Forecasts report, “nearly US$1 billion more than the 2016 total (56% of OTT revenues)”.
Against the backdrop of such forecasts, it’s no surprise that a large number of local and international players are seeking to establish a foothold in the region’s OTT business.
In a report published earlier this year, consultancy firm Frost & Sullivan estimated that there are about 15 OTT video services active in the market – though it stressed that not all are subscription-based. Some, it observes, are seeking to establish themselves as AVOD platforms with a view to moving towards a hybrid “freemium” model as their services gain traction (echoing a similar trend being experienced in mainland China).
As alluded to by Papavassilopoulos, a key player in MENA’s emerging SVOD market is global giant Netflix – which launched in 2016 with a monthly fee of circa US$8. Although the company doesn’t provide a breakdown of subscriber numbers in the region, anecdotal evidence suggests it is number one or two in those MENA territories, with a sufficiently strong broadband infrastructure to accommodate such a service. DTVR’s view is that Netflix will have 3.26 million MENA subs by 2022.
As in other regions of the world, a key part of Netflix’s appeal is that it offers high-quality content at a much lower price point than PayTV. But an additional advantage in the Middle East is that it is less regulated than traditional TV services.
Broadly speaking, the service is similar to what is available in other territories – subject to rights availability. So, for example, shows like Jessica Jones, Making a Murderer and Masters of None are all available in MENA homes. But House Of Cards, a flagship Netflix show in most markets, doesn’t appear on the MENA version of the service until after it has aired on PayTV platform OSN, which controls first run rights to the show.
While Netflix’s US shows are generally a big pull around the world, the SVOD firm has come to realise that subscribers are also attracted to content originating in their local market.
Netflix chief content officer Ted Sarandos is on record saying he’d like to see original Arabian content on the service (though as yet there’s no evidence of major investment in high-profile shows). Speaking ahead of the service’s launch at the Dubai International Film Festival, he said: “What’s missing is a really great scripted series about contemporary life in the Middle East. Most depictions outside of the Middle East are either historical or almost caricatures of what someone from the Middle East would be, and I am very enthusiastic to find great storytellers, filmmakers and actors from the region, to tell scripted stories about contemporary life in the Middle East.”
A key rival for Netflix is Starz Play Arabia, which reckons to be adding around 2000 new customers a day. CEO Maaz Sheikh says: “When we launched two years ago, people said there wasn’t much potential for SVOD in MENA, but that has proved to be wrong. People are attracted by the option of paying US$8 for premium content instead of US$60 to US$70 for PayTV.”
Although backed by Starz/Lionsgate in the US, Sheikh says a real strength of Starz Play has been “having a local management that understands the nuances of the region”. Key strategic decisions included making the service available on telco platforms like Etisalat (echoing Netflix and Liberty Global in Europe), allowing customers to subscribe to content at higher and lower bandwidth levels, and making it possible for people to pay via their mobiles.
“A lot of people in the region don’t have credit cards so payment is a challenge,” says Sheikh. “But by integrating with mobile operators across the region we have seen the rate of take up of Starz Play grow significantly.”
Maaz Sheikh will be speaking at TV Connect MENA at the C-Level Leaders Debate: Broadcasters, Telecom Operators and OTT players: Where are We at?
Content includes day-and-date Hollywood movies, box sets of iconic dramas (there is, for example, an output deal with Showtime in the US) and an increasing amount of Arabic content – selected in a way to distinguish Starz Play from free-to-air players like MBC.
One example of how local knowledge helps Starz Play is “that we understand differences within the region, such as the fact that customers in the Gulf want sub-titles whereas North Africa is, like France, a dubbing market.”
Underlining USPs compared to free TV, Sheikh says: “There are no ads, the content is more up to date and it isn’t edited.” On the subject of origination, he says the company is figuring out how to distinguish its offering from MBC and is thinking about areas such as shorter episodes and edgier editorial content.
Sheikh says the way the service is consumed varies between markets: “Overall it’s split between large screen and mobile. The Gulf has invested in fibre to the home, so in this region, you have high-quality and high-speed fixed broadband. But in some other countries/regions, mobile broadband is leapfrogging fixed. North Africa is so big, for example, that it makes no sense to lay fibre – so here (and in Saudi Arabia) mobile is more dominant.”
Another important player in the market is Dubai-based Icflix, which launched in 2012 and is now available for US$7.99 a month (following an initial one month free). Speaking at MIPCOM 2016, CEO Carlos Tibi stressed that a big part of the platform’s success to date is down to getting the right mix of content.
Although the company acquires a lot of US and Bollywood programming, it has also invested significant sums in shows produced in the region. Examples include Moroccan and Egyptian movies (Icflix takes the view that movies are more popular in MENA than series) and Dunia, an original action animation series, about “Arabia's first teen female superhero”.
Like Starz Play, Icflix has emphasised simple billing solutions (for example via a partnership with Saudi Telecom Company) and also sought alliances with platform partners that can carry its service (a recent example being Kuwaiti telco Viva).
Some of Icflix’s new partners are companies with mobile capabilities such as Zain in Bahrain and Orange in Egypt – which DTVR principal analyst Simon Murray regards as a significant regional trend: “A handful of mobile operators such as Orange, Zain, Ooredoo, Etisalat and Vodafone have assets across several countries,” he says. “SVOD platforms can gain considerable economies of scale by signing distribution deals with mobile operators. Deals between mobile operators and SVOD platforms in MENA offer an example for the rest of the world.”
While Netflix, Starz Play and Icflix have all established themselves as leaders in the MENA OTT/SVOD market, they face further significant challengers. One of these is Amazon Prime Video, which officially launched in MENA at the end of last year, offering a mix of acquired and original content (for example Grand Tour).
To promote its arrival, Amazon Prime offered an introductory price of US$2.99 for the first six months before switching to its regular price of US$5.99. Underlining the seriousness with which Amazon views growth in the region, it then acquired the Middle East’s largest online retailer Souq.com in March 2017 for an estimated US$650 million.
Another new addition to the MENA region is Iflix (as distinct from Icflix). Having spent two years building its business in Asia-Pacific, the company has just opened up a regional HQ in Dubai and launched Iflix Arabia in Saudi Arabia, Jordan, Iraq, Kuwait, Bahrain, Lebanon, Egypt and Sudan.
In order make this possible, it raised US$90 million in funding from Liberty Global and Zain as well as existing investors Sky, Catcha Group and Evolution Media Capital. Commenting on the decision to enter the MENA market, Iflix co-founder and CEO Mark Britt said: “MENA is one of the fastest-growing and most exciting online markets in the world with data-savvy consumers who share a passion for entertainment.”
Echoing developments in other parts of the world, PayTV players like OSN and beIN are not sitting back and letting OTT/SVOD firms erode their market position. Instead, they are building their own complementary on-demand offerings. The same is true for MBC, which is well-placed to build some kind of PayTV/VOD business on the back of its free TV business.
The company’s main activities in the VOD arena are AVOD service Shahid and ad-free SVOD service Shahid Plus. IHSM’s Papavassilopoulos says one tool that is likely to be important in MBC’s long-term pay distribution strategy is GOBX, a hybrid STB launched by the broadcaster in Saudi Arabia in November 2016, offering free and encrypted satellite channels (including HD) and supporting a broadband connection.
Rollouts in other MENA countries are likely, though not confirmed. GOBX customers are required to purchase the box, which retails for about US$70, but MBC does not charge any subscription fees. “With the launch of GOBX,” he says, “MBC is seeking to gain ownership of its viewers by collecting valuable information about their habits, with a view to taking a more targeted approach to advertising; and potentially build its SVoD subscriber base by distributing Shahid Plus on the platform.”
MBC’s attempt to establish itself as a key player in the SVOD arena saw it form a strategic partnership with Samsung in 2016. The collaboration enables Samsung customers to benefit from three-months of the Shahid SVOD service across a range of Samsung smartphones, tablets and Smart TVs for free.
There are infrastructure limitations on the speed at which OTT platforms can expand, points out Frost & Sullivan in its report, especially outside the Gulf region. However, with National Broadband Plans (Egypt, Jordan, Qatar) and other digital transformation initiatives in the pipeline, it expects OTT services to gain momentum and subscriptions by 2021.
Qatar, for example, has earmarked US$550 million to accelerate the rollout of nationwide high-speed broadband. The aim is to have 95% high-speed broadband penetration in five years, which would coincide with the arrival of the FIFA World Cup in 2022.
DTVR forecasts that six major players, Netflix, Amazon Prime Video, Icflix, Starz Play, Iflix and Shahid Plus, will account for 78% of MENA SVOD subscribers by 2022 – down from 88% in 2016 (excluding Israel and Turkey figures). Murray stresses, however, this is nothing to worry about. He says the decreasing share is a result of “PayTV operators upping their games and new platforms launching. However, the whole market is growing, so the main players aren’t losing subscribers.”