ADD ups the ante

The fierce competition in the Middle East's Pay-TV market continues. David Cass examines ADD's moves to offer Star Select content and slash prices

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By  David Cass Published  February 6, 2002

AED 59 per month|~||~||~|Now the dust has settled on the holiday season viewing it’s time for the burgeoning pay-TV operators to resume their competition in earnest for the coming year. It looks very much as though Arab Digital Distribution (ADD) has been the first to strike a blow, with full encryption of its regional channels and a big offer on its major prize – the Star Select bouquet.

You may remember that Hong Kong-based Star announced that it was abandoning the Orbit platform last autumn. That move actually happened in January, with Star’s eleven premium entertainment channels, STAR World; STAR Movies; Granada UKTV; National Geographic; FOX Sports; Fox Kids; Adventure 1; CNBC Europe; SKY News; [V] International and The History Channel, moving from Orbit to ADD.

The Saudi-owned operation claims that the new full encryption of Star’s eleven channels and ‘merger’ with FirstNet, Pehla and Al Awael has created both the region’s largest line up of premium pay-TV channels seen to date and the largest pay-TV audience. Together with the STAR channels, Al Awael, FirstNet and Pehla will be offering nearly 70 channels.

Evidence of the cut-throat nature of the market can be seen in its offer of the lowest entry price ever offered in the Middle East by a single pay-TV operator — a starting price of just AED 59 a month. That came into effect at the start of February once the complimentary access to unrestricted STAR channels offered to FirstNet and Pehla clients expired.

The pay-TV platforms are playing for huge stakes here – and we are not talking about the expatriate market. As the President of Showtime, Peter Einstein, reminded me last year, the Arabic language market eclipses the English sector by a massive number.

We are talking about a combined population for the GCC, Egypt, Levant, North Africa and Europe of around 249-million. That’s nearly the population of the United States, the world’s biggest and wealthiest single market in media terms.

This population boils down to over 33 million TV households. It does not take an Einstein (either Albert or Peter) to work out the subscription and advertising potential of such a reach!

Einstein’s views were echoed when I spoke with ADD’s chief cxecutive officer, Dr John Tydeman. “The Arabic-speaking Arab market, as opposed to the westernised Arabs, have been ignored for too long,” he says.

“Now everyone has realised the numbers and potential involved and we are all trying to penetrate it. In 2002 I believe we’ll see a strengthening of bouquets for these viewers. I see that our competitor Orbit is now re-inventing itself very much with this in mind. It is clearly now seeking that middle ground rather than the elitist audience which it first sought to attract,” Tydeman continues.

He is also very much aware of the sizeable niche markets involved across the region. There are more than six million Asian expats spread across the GCC alone in approximately 750,000 TV households. These are particularly important to ADD’s strategy and a major reason for courting STAR for at least the past year.

Indeed, it is fairly safe to say that STAR is where multi-lingual, multi-culture satellite TV began outside of the USA. The Murdoch-owned operation was a pioneer of satellite television in Asia and helped catalyse explosive growth in the media industry across the entire region.

Launched in 1991 with five television channels, today STAR broadcasts more than 30 services in eight languages, providing viewers with a wide range of sports, music, movies, news, entertainment and documentaries. Star reaches around 300 million people in 53 countries across Asia, India and the Middle East, and over 70 million people are estimated to watch STAR everyday.

It also controls over 25,000 hours of original programming, a rich content asset that gives it a strong position in today’s marketplace. STAR’s reach and the diversity of content on offer creates big opportunities for partners.
||**||Action and quality|~||~||~|
It is clear from ADD’s acquisitions programme over the past year that Dr Tydeman sees action and quality as the major factors in the battle for subscribers. He says, “Exclusive and quality events include Formula One, the [football] World Cup, African Nations Cup, Cricket, Confederation Cup and numerous World Boxing Championship title fights. Premium sports and movies are the backbone of a pay-TV proposition and our bouquets offer several specialised sports and movie channels.”

It is interesting to see cricket included in his list of premiums and it demonstrates that he is entirely in touch with the Asian expat market. Or perhaps it’s simply a matter of him being an Antipodean, where ‘the great game’ is just as important! Just go into any of the (usually) western bars in Dubai when India, Pakistan or Sri Lanka are playing and you’ll see what I mean. Oh yes, the old ‘white flannel game’ is big business in this market.

The combination of Fox Sports and Pehla Plus will offer them the largest range of cricket available on any platform today. “In addition,” continues Tydeman, “ADD plans to eventually localise channels such as the National Geographic Channel and STAR Movies, which will further enhance the television experience for Arabic viewers too.”

It looks as though 2002 will be a critical year in the satellite and Pay-TV business. “Oh yes,” he says, “this is going to be a year of rationalisation and common sense coming into the Middle East market. I see prices falling, the number of channels on offer rising, much in line with what’s happening in the rest of the world.”

I point out that ‘rationalisation’ usually means ‘consolidation’, which in turn means contraction rather than expansion. Tydeman doesn’t see it that way.

“We have three main players here and lots of smaller operations, including free-to-air channels, around the periphery. What I do see is that the main players will get stronger and improve their offerings while many of the free-to-air channels, apart, possibly, from some of those propped up by governments, will have to charge or merge. They will certainly have to begin to think carefully about the costs involved,” he says.

“As to the larger operations, ADD and Showtime already share quite a lot in technical terms. We share a card, encryption, SMS and many other things. So why not share other things like dealerships? There are several moves that would create quite an economy of scale.”

He also points out that two of his bouquets, the Hindi Pehla service and Al Awael are already close to break even in terms of income covering operating costs. He believes that Al Awael will be the first in the region to hit the magic break even point within the next few weeks. Watch this space!||**||

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