OTT and the Threat to Satellite in MENA

The Middle East has a long been a vibrant broadcast market with strong audiences and demand for content. Some of its major broadcasters such as beIN Media Group, Al Jazeera and Rotana have also become more of a factor on the global stage. We talk to executives at Rotana and beIN about how these broadcasters view satellite and how they see the landscape changing.

BeIN Media Group is not just a sports broadcaster for the Middle East. It has become a global player that is looking to rival the likes of ESPN on the international stage. Israel Esteban, executive director of technology with beIN Media Group, told Via Satellite that the company now uses 15 transponders and will continue to increase this number in line with its increased channel offering and content propositions it looks to deliver to its audience. Given these figures, beIN Media Group is a major acquirer of satellite capacity.

But the company is more than just a sports broadcaster. It has nine movie channels that broadcast the latest movies without any interruption. Four of these are beIN branded channels while the others are globally well known partner brands. “We also focus on what we call point-of-entry marketing. In line with this strategy, we have built a great portfolio of family and kids entertainment,” says Esteban. “We feel that beIN has the best kids entertainment in the region. We want to start attracting viewership as soon as kids start taking interest in TV programs and then continue to grow with them.”

Rotana, another major broadcaster in the region, does not use as many transponders as beIN but is still on the lookout for more capacity. Rotana Free-to-Air (FTA) channels (SD and HD) are available via Nilesat and Arabsat satellite transponders. The broadcaster is also studying the business opportunities of leasing another transponder for distributing it HD channels in Asia. It expects to make a decision by the end of the year.

BeIN has modernized its workflows in order to be more flexible in the way it delivers content. Two years ago, the company designed and implemented a new state of the art broadcast center that Esteban says fundamentally transformed beIN’s capabilities and work flow transformation through every stage of its content life cycle, from acquisition, through production to delivery.

“In very simple terms we transformed a workflow that was cumbersome with many manual interfaces to an integrated end-to-end, file-based workflow that has enabled beIN to realize the very simple, yet effective concept of ‘same content multiple platform delivery.’ The hard work and investment has delivered broadcasting and production capability to beIN that is truly world class and has already paved the way for the rapid growth of our platform on [Direct to Home] DTH and digital, [and] on multiple devices across all genres, including the imminent launch of our new [Video on Demand] VOD and [Over the Top] OTT services and expansion of our existing digital services,” Esteban says.

It is not just major infrastructure investments the company has made. It has consolidated and expanded its operations in Asia and Spain, along with acquisitions of Digiturk (Turkey-based DTH player) and Miramax, which Estaban says makes “beIN a force to reckoned with.”

“BeIN will continue to opportunistically expand in segments where we see opportunities and that are profitable,” Esteban adds.

There is little doubt that satellite TV is under threat in the region. With many places having great telecoms infrastructure, the rise of OTT is happening and all players are starting to have OTT front and center of its strategy. Naser Refaat, CTO at Rotana TV Network says he believes satellite services for FTA channels will still be dominant until 2022 but he believes most FTA channels will start to consider other business models over the next five years, which may or may not include satellite. He describes OTT and multiscreen delivery as “the winning horse.”

Refaat believes the satellite industry will need to be more proactive in order to protect its place in the overall broadcast ecosystem. “Satellite bandwidth technology must step up to compete with fiber-based technology and improve its financial proposition to broadcasters and end users. For example, Ka-band can be utilized for two-way Internet transmission and TV channels concurrently, but due to its narrow beam coverage, multiple transponders are needed for a wider coverage and this hinders operations feasibility except for some limited vertical business application,” he says.

Refaat admits that OTT is now a big focus for Rotana; he says the company is focusing on increasing its OTT revenue presence and international distribution rather than FTA revenue. “OTT is the future, but linear TV will always be there. We have big OTT plans, which are starting to materialize. While there is no doubt that OTT is the future, our greatest challenge revolves around ending content piracy we are seeing on Eutelsat, and online. Rotana will continue with FTA channels but we have started to product different linear exclusive channels for a pay-TV and IPTV platforms,” Refaat says.

BeIN also sees the age of watching liner content “is coming to an end,” Esteban says, with the exception of live sports and news. “To cater to this reality and customer trend, beIN will be taking various actions. Today’s customers expect to watch content whenever they want and wherever they want. So beIN will continue to make its OTT platform beIN Connect stronger,” he says. “We also plan to continue to push for being the pay-TV platform of choice for the whole family.”

Mohammed Al Shawwa, general manager at Arab Advisors Group, a locally based consultancy, which puts out many reports on the communications and broadcasts market in the region, says OTT is definitely a growing market in the Middle East region. He notes the expansion of many OTT players into the region, such as Netflix and Starz Play, in addition to the launch of locally based OTT players.

“Here again, the limitation is the access speeds offered in the Middle East, which limit the experience of the viewer and prohibits them from watching HD content with ease. However, once access speeds improve, this will encourage more adoption of OTT. In this regard, I also believe pay-TV players will enter the OTT market. One example of this is the entrance of OSN into this market. I believe pay-TV operators will put more focus on this in the future,” Al Shawwa says.

Mark Billinge, CTO of OSN, which has also started to look at OTT, still predicts a bright future for DTH. “I think in this region, DTH distribution still has a long life and a long way to go. We can’t and don’t ignore the digital distribution and potential benefits that this can bring. We have to see it as an opportunity to embrace new digital platforms. We are looking at those opportunities that OTT distribution can bring to us. We look at OTT as an opportunity to deliver even greater value to the customer rather than a threat,” Billinge says.

Refaat, however, does not exactly point to a positive future for satellite in the region. “OTT will overtake FTA and pay TV in the next 10 years. Satellite delivery will be decreased and will be used more for TV and data back up,” he says.

For beIN, the growth of its OTT product is changing its business model, “The revenue mix is changing for us in so many different ways. This is a reflection of the evolution of our product offering. We see more customers taking up our combined sports and entertainment packages. We are also experiencing healthy growth for our OTT product,” Esteban adds.

A lot of broadcasters are now looking at 4K — even if they are just trying to figure out exactly what their 4K strategy is. Refaat admits Rotana at this stage, has no plans for 4K on satellite, citing bandwidth limitations as the main reason. However, he expects a fast rollout once it does happen. “I think the rollout of 4K will be twice as quick as HD in the region. HD has taken us five years, but I think in another three years, 4K will be a major force. Most of TV content producers the Middle East are starting to produce their content in 4K. And in four years time, broadcasters can even be thinking of 8K,” he says.

Refaat says Rotana has now kicked-off an aggressive infrastructure and play-out upgrade project to be able to better bring 4K and 8K content to audiences. The company is currently distributing 4K and HD content to its international distribution VOD partners and he says Rotana is considering launching its first Arabic Films 4K Linear TV channels on pay-TV platforms with various potential partners. Refaat believes this will likely materialize next 2017.

“4K in the Middle East is still in its infancy; market demand for 4K needs to be created. We have now reached the stage where an ‘A’ class MENA viewer can afford 4K, but from a broadcasters point of view, FTA 4K transmission is not feasible, but on pay-TV, it probably is,” he says.

Earlier this summer, beIN started delivering a 4K service to its viewers, Esteban says. To enhance its exclusive Euro 2016 UEFA Championship coverage and to provide even greater choice to its viewers, it broadcast 4K coverage of every match. Esteban says this was possible thanks to the launch of a new range of Set Top Boxes (STBs), and media servers, which are 4K capable. However, it’s not all without challenges.

“The main obstacle right now is the availability of 4K content. The technologies are ready and the consumer pricing for 4K TVs is becoming more affordable so we anticipate a steady increase in available content and consumer interest in the next 12 to 18 months,” Esteban says.

Al Shawwa says an analysis Arab Advisors made in March 2016 revealed that there was only one satellite TV channel broadcasting in 4K at that time. However, he sees change in the horizon.

“I believe that we will have to wait two or three years before there is any noticeable adoption of 4K in the region. I believe early adopters of the technology will be pay-TV platforms, in addition to significant channels across the region. Less popular channels will not be eager to support this technology, given that the investments needed might not be feasible,” he says.

One of the major challenges for broadcasters and media groups is providing content to the Millennial generation. According to Esteban, in the Middle East and North Africa (MENA) more than 65 percent of the population is below 30 years of age, making this audience a key target market for broadcasters. “We are operating in a region which is very young. When it comes to content, there are two types of content that are most attractive for youth: one, they love sports and specifically football,” he says. “Football is a major passion point for youth and beIN has that covered from all angles. Besides football we have a strong position in various other sports like tennis, athletics, swimming, handball, cycling etc,” he says.

The second area of content that Esteban cites is the entertainment side. “Movies are a big driver for pay-TV operators globally as well as in MENA. BeIN has 9 movie channels that broadcast latest movies without any interruption. Four of these are beIN branded channels while others are globally well know partner brands,” he says.

Al Shawwa says watching content online is definitely a major trend in the region and globally. He cites some recent Arab Advisors research to underline the point. “A survey of smartphones and mobile applications usage we conducted in Jordan revealed that around 84 percent of mobile application users use video applications. Expectedly, YouTube was by far the most adopted platform, with nearly all of the respondents who use video applications using it. This supports the fact that mobile is the new go-to place when it comes to video. Consumers, especially Millennials, find it very convenient to watch video on their mobile handsets. This is further driven by the continuously decreasing data rates offered by the telecom operators,” he says.

Arab Advisors is in a unique position to assess the market as one of the few locally based consultancies that looks at the dynamics of the pay-TV market in the region. Al Shawwa said it is hard to assess pay TV via satellite throughout the region, as the pay-TV market status varies widely across the region, with some countries such as those in the Gulf Cooperation Council (GCC) — Bahrain, Kuwait, Oman, Qatar, Saudi Arabia and the United Arab Emirates — having much higher penetration levels than other middle eastern countries. Al Shawwa says this this is of course expected, given the difference in the income levels between the GCC countries and the rest of the region, and the ability of consumers to pay for TV access.

“Having said that, I believe pay TV is set to grow in the region in general; consumers are now more open to paying for premium TV services than they were a few years ago. In this aspect, sports play a major role in the adoption of pay TV. As an example, beIN has been able to secure a large number of subscribers due to the exclusivity it has in broadcasting global football events,” he adds.

Al Shawwa believes that pay-TV operators are being very clever when thinking of their pricing structure and what value-added services it can offer. “In many countries across the region pirated content is quite popular, and consumers need to see the real value in paying subscription fees to a pay-TV provider instead of getting their hands on pirated content. I believe VAS and content is key here,” he says. “The Middle East might be a very promising region, taking into consideration the low penetration level of pay TV, but operators need to understand the de facto competition they face from illegal players.”

Al Shawwa also talks of the importance of inclusion of premium, region-specific content in their offerings. As an example, the Arab Advisors Group conducted a survey in Egypt in March and April, 2016 about the media usage patterns. The survey revealed that around 57 percent of the respondents who were not subscribed to pay TV at the time, were not subscribed due to the lack of “interesting” content on pay-TV platforms, he says.

Regarding the means in which pay-TV operators will be broadcasting in the future, Al Shawwa expects more adoption of pay-TV over IPTV.

When looking at the prospect for IPTV, Al Shawwa says telecom operators have been under a lot of pressure when it comes to revenues recently, and that they are starting to diversify their portfolio of services to include offerings such as triple play. “I believe more deployments of IPTV will take place in the future. This is further driven by consumers that are more tech savvy. The element that has been holding this trend back so far is the limited access speeds that are generally offered in the Middle East. However, with fiber optics being deployed regionally, and the bandwidth restraints decreasing, IPTV will soon be feasible,” he says. VS