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What’s the state of play in the MENA market?

Mon 15, 01 2018

IABM, the international trade association for suppliers of broadcast and media technology, has recently published a business intelligence update on the Middle East and North Africa region to keep our members up to speed with what’s going in this diverse market, so they can get the most out of the forthcoming Cabsat show. Here’s a taster of its findings; IABM members can read the full report on the IABM website.

A diverse market in transition

The Middle East and North Africa is a diverse region made up of countries at varying levels of economic development. While GCC states boast living standards comparable with those of North America and Europe, other countries in this region are less developed. This diversity translates into different levels of broadcast and media development. While the Middle East is already home to some UHD offerings, North African broadcasters remain focused on long-standing technology transitions such as the upgrade to digital broadcasting.

While the Middle East is already home to some UHD offerings, North African broadcasters remain focused on long-standing technology transitions such as the upgrade to digital broadcasting - State of play in the MENA market - IABM Journal Click To Tweet

Piracy – doing the right thing

Despite these differences, piracy remains a common issue for both the Middle East and North Africa, with the cost estimated to be about $750m by IDC. According to a recent survey carried out by Irdeto, more than half of the residents in MENA admitted to watching pirated content, with millennials being more inclined to do so – under-24-year-olds represent about 50% of the population in this region. It is therefore no surprise that media companies have been adopting initiatives and technologies to counter piracy and better monetize their investment in content.

OSN has launched a “Do the Right Thing” campaign against piracy and has been one of the advocates of the Anti-Piracy Coalition, a task force of broadcasters, content owners and satellite operators. beIN has adopted various anti-piracy technologies including a live watermarking service which protects its OTT content by shutting down subscriber accounts that are stealing and retransmitting the feeds.

OSN has launched a “Do the Right Thing” campaign against piracy and has been one of the advocates of the Anti-Piracy Coalition, a task force of broadcasters, content owners and satellite operators - State of play in the MENA market - IABM… Click To Tweet

Declining oil revenues impact media technology spending

Although the high piracy rates in the region have prompted local media companies to boost their investment in anti-piracy technologies, general media technology spending in the Middle East and North Africa has been negatively affected by the decline in oil prices, another common issue in this territory – 80% of its GDP is generated by oil-exporting countries.

In fact, in this region and particularly in the Middle East, most media companies are either state-owned or backed by private companies that heavily rely on oil revenues. The fall in oil prices has caused a decline in their revenues and a consequent cut in broadcast and media technology spending; notably, Al Jazeera, a state-funded broadcaster, has cut about 500 jobs (10% of its workforce) worldwide in 2016.

Despite the recent cuts in world oil production, analysts have forecast that oil prices will remain around the $50-$60 mark, way below the levels observed before their collapse in 2015. Therefore, while most governments strive to diversify their budgets away from oil revenues, local media companies should continue to drive efficiencies in their operations in the foreseeable future to remain competitive.

Despite the recent cuts in world oil production, analysts have forecast that oil prices will remain around the $50-$60 mark, way below the levels observed before their collapse in 2015 - State of play in the MENA market - IABM Journal Click To Tweet

Political tensions have contributed to worsen this picture. Aside from the ongoing political upheaval in some North African countries, the recent Qatar-Gulf crisis has had an impact on some major broadcasters that operate in the Middle East – beIN sports channels were blocked in the UAE for six weeks in June before authorities reinstated them.

Transition to digital and HD still driving spending

As mentioned earlier, a large share of technology spending in the region is still driven by the transition to digital and HD, particularly in less developed North African countries. Only Saudi Arabia, the UAE and Morocco have completed their transitions to digital broadcasting with the rest of the region still investing in technologies to enable the upgrade to digital operations.

Increased HD channel growth has been driven by the expansion of satellite, which is the dominant transmission technology in the region. Recent research shows that both the number of HD channels and HD equipment penetration have grown significantly in recent years, with GCC countries showing greater than average HD adoption due to their higher level of disposable incomes. However, HD remains a differentiator relied on by Pay-TV operators to attract new subscribers.

The adoption of UHD in the Middle East and Africa region has been limited to some rare cases so far. These include major Pay-TV broadcasters in the Middle East and North Africa looking to have a further competitive edge over their rivals. OSN and BeIN have been particularly active in this area with a number of initiatives launched between 2016 and 2017. For example, beIN has covered some sports events in 4K – sports content is highly popular in this region.

Pay-TV and OTT on the rise

Free-to-air linear television remains largely dominant in the region – making advertising the most widespread business model – although Pay-TV penetration has been slowly rising in recent years, particularly in the GCC states where it now reaches about 60% of the population. OTT has been growing significantly in recent years although its penetration is still at low levels due to constraints such as poor broadband and payment infrastructure.

Free-to-air linear television remains largely dominant in the region – making advertising the most widespread business model - although Pay-TV penetration has been slowly rising in recent years, particularly in the GCC states where it now… Click To Tweet

As mentioned earlier, piracy also remains a major challenge for both Pay-TV and OTT operators in the region, which should continue with their efforts to tackle it. In this challenge, lies an opportunity, particularly for OTT players, to convert the younger, mobile-first audiences to legal streaming.

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