EMPC: poisened chalice or jewel on the Nile?

Chris Forrester reports on the criticism directed at EMPC, and find the installation a mixture of good and bad.

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By  Daniel Anderson-Ford Published  February 6, 2002

Curit's Egg|~||~||~|On the one hand, Cairo’s giant Media Production City (MPC) has to be judged a success. After all, it exists! Some 35 million square meters, or as Egyptians put it “more than 600 feddans” in area, comprising new studios and sound stages as well as fixed outdoor sets that reflect all aspects of Egyptian life from ancient times to present day Cairo. The Islamic shooting area also shows different Islamic ages with Ottoman and Mamlouk palaces, houses and gates. Life in Cairo’s old and popular districts like the Khan Al Khalili bazaar and Gamalia, both integral parts of Egypt’s history and cultural scene, is well depicted in special shooting areas. Scenes of famous shops and houses transform you to the sort of locations featured in the works of Egypt’s Nobel-prize novelist Naguib Mahfouz.

MPC is also a success in that, thanks to some fiscal help from Egypt’s minister of information, Mohammed Safwat Al-Sherrif, key Arab-language broadcasters like Middle East Broadcasting Centre (MBC), Beirut’s LBC and Qatar’s Al Jazeera as well as pay-bouquet Orbit have all taken space at MPC, of which more later.
Impressive standing sets have been built, not least those left after the filming of “Nasser 56”. The film covered the tumultuous year in which the late president, Gamal Abdel Nasser, nationalized the Suez Canal, an act that prompted the tripartite invasion of Egypt by Britain, France and Israel. A facade of the old Alexandria stock exchange was constructed at the site for Nasser’s momentous balcony speech of July 26, 1956, announcing Egypt’s take-over of the Suez Canal. That movie, and others like it were made without the help of the sound stages at MPC, which came later.

On 21 January 1997 a UK-based consortium led by Sony Broadcast & Professional Europe, partnered with Kvaerner Construction, and announced a major $314 million contract from Egyptian state broadcaster, ERTU, to build a digital production studio complex at the Media Production City. MPC is based at 6th October City, some 25 km south-west of Cairo, and one of the many ‘new towns’ built around Cairo to help relieve the capital’s overcrowding. The new 420,000 sq.m studios were to be the central feature of the MPC. It is that Sony/Kvaerner work that is now kicking in for MPC’s benefit.

The aim, according to initial project director Sami Mohamed Badawi, was to boost Egyptian film and television production to previously unimagined heights, of achieving 3,500 hours of indoor studio production, 5,000 hours of programmes and outdoor production. It is on this level that some have argued the project should be considered a failure.
Simply put, they argue the project has failed to get even close to its target output, and this has created its own basket of problems amongst the project’s backers, the investors in Media Production City, the joint-stock company registered on the Cairo stock exchange.
||**||Potemkin Facade|~||~||~|
A holding company was set up to run the MPC, with three subsidiaries, one for production, another for services and maintenance and a third for tourism. The company has an authorised capital of £E2 billion, and a paid-up capital of £E1.7 billion, making the venture Egypt’s second-largest capitalised project (only the Egyptian mobile phone company was larger). Initially 50% of the company’s paid-up capital was taken up by the Egyptian Radio and Television Union (subsequently reduced to 44%) and 10% by local banks, while 25%, amounting to £E400 million was floated for public subscription.

Egypt’s government has always been firmly behind the MPC concept. Safwat Al-Sherif says: “Our plan includes Nilesat and the Media City, and we want to see current and future media prosper. Egypt wants to continue leading in information, in media, and Arabic production. Today, in this new century we have these tools with the Production City and Nilesat, allowing our people to use the Internet, to watch TV and more importantly to see education available for all. As for the future, then the Internet, TV on demand as we want also to see services for the media grow.” Initial public interest in MPC was phenomenally strong and the stock offering was well over-subscribed.

Upon floatation (in July 2000) the £E10 stock soared, to an impressive £E75 within six months but then, like the West’s dot.com bubble stocks, quickly collapsed as word filtered out that all was not well at MPC. Local media analysts complained they could not forecast profit, as MPC company officials withhold details on Media City’s income, costs and future activities. Cairo brokerages and securities houses have issued ratings of “no opinion” for lack of basic data.

The stock continued to slide, throughout 2000, falling through the £E37 mark by May 2000.

“The fundamentals of this company are not so good. All profits come from interest on deposits,” said Alaa Al Ghandour, a trader at Cairo’s Falcon Portfolio Management, talking to a Cairo newspaper last year. By last November shares were standing at E£14.08 - after weeks of ups and downs, as company representatives confirmed rumours that “several Arab investors have shown interest in buying a large stake of MPC.”

The rumours were just that, rumours. In late August 2001, the company had disclosed a net profit of £E19.41 million for the first half of the year with shares languishing at an all-time-low of just £E7. By November 2001 that had grown to an audited net profit of £E25.81 million. By January 2002 the share price had recovered somewhat to £E12 they still show zero yield for their investors and according to brokers EFG-Hermes in January are still classified as “High Risk” stocks.
||**||Success neverthless|~||~||~|
However, MPC has had some major success in winning broadcasters. Orbit has used facilities at MPC for some years, producing talk shows and variety events from the facility. In April 2000 Al Jazeera rented a couple of small studios at MPC, and more recently Middle East Broadcasting has taken production space at MPC. MPC’s chairman Abdel Rahman Hafez on Dec 23 2001 announced the establishment of a joint venture with two internet companies, under the name of the International Digital Media Company with an issued capital of £E10Mn that will reach £E50Mn within the first year. Perhaps Dubai’s influence has percolated up to Cairo!

Seeking hard financial news on MPC is near-impossible. Some lease-holders, and the commitment to MPC, are known. For example, El Ahram Studios, a production company, has paid E£2.1m per year for a 20 year lease at MPC. Cinema City Studios, another production outfit, has contracted to pay more – for larger space - E£5.4m per annum for a 20 year lease.

This is all good news, and helps redress the dismal picture of about 18 months ago when local reports claimed that out of “three complexes housing 29 studios, only one is complete and operational, the Mubarak Studio Complex B—and the income trickling in from the working studios is significantly too small to register any real progress”.

Minister Al-Sherif’s idea was straightforward: boost local production in order to counter the influence of Beirut – and even Dubai – as production centres. Back in the 1940’s and 1950’s Egypt once led the Middle East in terms of movie output, and those happy days would be repeated. In February last year the minister announced that Egypt would back the development of new thematic channels, additional to those already in place.

Speaking before the People’s Assembly, Al-Sherif stated that launching these new channels was a key part of Egypt’s national security, and that MPC was a crucial link in this chain of new Egyptian creativity. The widespread access to foreign satellite channels has introduced Egyptians to information and ideas, which in the past were not available, he said. The minister, in a show of pragmatism, said he believed in facing facts, and that people have the right to information in a democratic society. However, to preserve Egyptian identity, it was vital that Egypt launch new channels to compete with foreign programming. “Egyptian media has to possess the ability to deal with new elements, which we face now,” said Al-Sherif.

President Hosni Mubarak’s government chose the chunk of desert between the Media Production City and nearby Nilesat as their designated ‘media free zone’. According to TBS Cairo correspondent , it created a specific environment where new private satellite TV stations would benefit from tax exemptions and customs under the Egyptian Investment Law #8 of 1997. “Benefits for investors also include the resources and facilities of Media Production City: the studios, labs for editing and post-production, and human resources—technicians, actors, anchors, and TV personalities..”

||**||Pay off|~||~||~|
These elements, says Abdel Rahman Hafez, chairman of MPC, are now beginning to pay off handsomely. And as for the share price roller-coaster: “The share price is poor for two reasons. The first is that we have barely started in business. Our project is still in its early days and while much of our work has gone into creating this infrastructure, it is only now that people are able to move in.

The second reason is that some investors want to simply speculate in the share price, and are not really interested in the project on a real level. They have speculated and not waited to see the results come through. We are Egypt’s best company, with the best future, growing rapidly and attracting more and more talent and interest.”

Hafez updated the building work thus: “MPC has 17 working studios, and we are planning for another 4 studios operating in February and a further 3 in early March, and finally another 4 in early April. We have only one sound stage and that will also be ready in April. In other words by mid-2002 I fully expect 95% of the site to be occupied. Our clients look to us to be able to provide all the usual support, not least edit suits, graphics, animation, sub-titling and the like. Our sizes range from 1062 sq m, a huge space, down to 100 sq m, so there’s plenty of variety. We also have all the open areas for outside shooting, and deliberately designed to replicate the sort of locations our clients want. The hotel is also almost finished, which is 5 star, and where the first 260 rooms will open in March, with another 140 rooms opening later. The theme park is also open and is a massively popular.”

That’s a major slice of occupancy, and others are knocking on Hafez’s door. “MBC is already on site using one studio, and they will occupy the second in a few weeks. Their second studio is ready but is being used by LBC to record ten episodes of a very popular series for LBC’s WOW channel. MBC will then move in, and again this shows how intensive our use of studio space has been. It means we will convert some of the older studios not originally part of the Mubarak complex.”

One problem few at MPC could have imagined is the secrecy between rival broadcasters. Initially it was envisioned that MPC’s skilled body of carpenters, set-builders and decorators would work from one central location. Not so. Hafez: “We have some old large halls which we use for set-building and decoration and many of our clients don’t like their competitor broadcasters to see how this or that set is being built. They want to keep their best ideas private. So, we are refurbishing and re-equipping these areas for studio use, not simply as construction halls. What we will end up with are studios with simpler carpentry, set-dressing and finishing almost as part of the studio.”

Hafez is not at all ashamed about the production output, for film and TV although the vast bulk of usage has been for television: “It is now millions of hours. If we consider a company like Orbit who have 5 studios, one of which they use for a three-hour daily show, and another that they use for a 1 hour show. Now how do we calculate that usage? Do we say it is 20 hours a week, or do we say they are leasing 5 studios for a potential 200 hours or more worth of output? They can use the studio 24 hours a day, but even counting just the physical transmission, it is already much higher than our plan.”

He’s right. Even allowing for a simple ‘back of the envelope’ figure with each studio producing one hour a day, and allowing only for a 5 day week, it still comes to an impressive 8400 hours, and Hafez says it is much, much higher than this.

So what about profits? “We predict major profits will start flowing after another 4 or 5 years. We expect to be making further investments in some outside areas, and creating fresh zones in accordance with our client’s needs. We are also negotiating with Kuwait who want a studio here. I can tell you we are speaking to everyone because they all know that the Arabs love productions out of Cairo, and if they locate here they will have a success. Here they can access the Egyptian writers and directors and creative people we have on hand and then pipe their signal next door to NileSat for distribution everywhere.”

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