Dramatic changes loom as TV faces oversupply

More than 140 free-to-air television stations in the Middle East shared just US$80 million in advertising revenue according to a report from business consultants Booz Allen Hamilton.

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By  Tim Addington Published  December 18, 2005

More than 140 free-to-air television stations in the Middle East shared just US$80 million in advertising revenue according to a report from business consultants Booz Allen Hamilton. Based on figures for 2004, it says net advertising revenues were US$410 million, of which US$330 million went to the top eight channels, including MBC, LBC, Saudi TV and Dubai TV, while 147 free-to-air stations shared US$80 million — an average of US$544,000 each. The ad revenue figures are based on Booz Allen’s own analysis as well as data from the Pan Arab Research Centre. The report, which was produced for pay TV provider Showtime, said that the region’s broadcast industry is “coming to a crossroads, with potential dramatic changes ahead”. The study, which looked at the core markets of Egypt, Saudi Arabia, Kuwait and the UAE, concluded that the free-to-air sector’s long-term future was “unsustainable” and smaller niche stations would be likely to close down or move on to Pay TV platforms. The report stated: “Oversupply and sometimes irrational commercial practices, most notably in advertising sales and programming costs, are negatively affecting the economies of the Middle East TV broadcasting industry. “The probable scenario is that only a handful of leading free-to-air broadcasters are marginally profitable at present, whilst thematic channels are loss making for the most part.” The number of free-to-air stations, particularly themed channels, is expected to “diminish significantly” according to the report, as a greater emphasis on financial profitability will “reduce the level of irrational competition amongst broadcasters”. In relation to pay TV, the report found that there were one million subscribers, mainly with ART, Orbit and Showtime, reaching 5% of the overall market in the four markets examined. Booz Allen Hamilton claims that, based on research from TNS, market interviews and its own analysis, pay TV operator ART has 52% share of subscribers in Saudi Arabia, followed by Orbit on 26% and Showtime at 22%. In the UAE, ART comes out on top again with 56%, Showtime has 27% and Orbit has 17%. Pay TV penetration remains uneven across the region, with high levels in Kuwait and the UAE and lower levels in Egypt and Saudi Arabia. Karim Sabbagh, partner and vice president at Booz Allen’s communications, media and technology practice in Dubai and Riyadh, said: “The combination of massive investments, oversupply of free-to-air channels, greater financial transparency and objectivity imposed by shareholders and capital market authorities post-IPO, and discontinuities in technology and regulations will most likely drive fundamental changes in the industry’s landscape and economies.”

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