Arab TV industry set for major change: study

Despite the rapid increase in the number of satellite TV channels in the Arab world and a gross TV advertising spend estimated at close to US $1.2 billion, Booz Allen Hamilton research warns that the industry is moving towards some crucial financial performance challenges.

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By  Vijaya Cherian Published  July 13, 2004

Despite the rapid increase in the number of satellite TV channels in the Arab world and a gross TV advertising spend estimated at close to US $1.2 billion, Booz Allen Hamilton research warns that the industry is moving towards some crucial financial performance challenges. There are now over 200 satellite TV channels in the region and around half of them are general interest and movie channels. While thematic channels like Rotana, Melody and Mazzika are likely to launch new variants to cater to narrower music tastes among their viewer segments, privately owned TV channels that target niche local markets are said to be further expanding consumers’ choice and competition in the market. In this environment, the research firm sees three broad strategic trends emerging among regional TV broadcasters. A few players like Rotana and ART are starting to establish themselves as the regional gatekeepers to must-have and exclusive TV content in the areas of music and sports respectively. Both are integrating backwards into rights acquisition and content creation to secure a continuous supply of differentiated content on their screens. The second group of players like MBC is creating bouquets of TV channels to capture the attention of the entire Arab household and generate a continuous flow of audiences throughout the day. Lastly, pay-TV providers such as ART, Showtime and Orbit are rallying to become super servers for a large variety of niche viewers through subscription and pay-per-view channels. Regardless of this strategic positioning, Ahmed Galal Ismail, associate with Booz Allen Hamilton says most TV media players are facing financial performance challenges. “On the revenue side, TV advertising is mostly sold during prime time and at deep discounts reaching sometimes up to 95%,” he says. “The absence of advertising regulation guidelines have allowed broadcasters to expand their prime time ad inventory in an attempt to grow revenues and to compensate for the low unit prices. The resulting clutter could be counterproductive in the long term as it warrants further discounts on the now less effective ad spots. The overall outcome is low, and, in many cases, decreasing marginal net revenues for broadcasters over the near term with limited net revenues growth potential over the longer term”. Booz Allen believes that current players will revise their operating models, consolidate and perhaps also segment further to keep their viewers. The research firm adds that the Arab TV viewer will stand to gain the most from these market conditions as competition for more viewers will generate higher quality programming and more innovative offerings on TV and other media platforms.

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