Netflix and a chill? As U.S. giant circles, ‘shakeout’ seen in Arab TV
The Middle East pay-TV and online video space has seen a flurry of new entrants – but not all players will survive, experts say
The rise of the euphemism ‘Netflix and chill’ is certainly testament to how the video service has become a household name in the West.
But as the U.S.-headquartered Netflix confirms its intention to launch in the Middle East, experts say the arrival could coincide with a very different kind of chill, as regional rivals struggle to compete in an increasingly crowded market.
There has been a recent flurry of announcements from pay-TV and online video operators looking to expand in the Arab world, a region traditionally dominated by free-to-air satellite TV.
The U.S.-based Starz in April said it was launching in 17 countries in the Middle East and North Africa, in what is its first such venture outside its home territory. Starz Play Arabia offers TV shows and Hollywood movies on laptops, smartphones and tablets to subscribers paying $7.99 a month.
In October, the Qatar-backed beIN network – already well established in sports TV – said it was moving into entertainment and movies, to compete with what it called the “over-priced” existing offerings in the Middle East and North Africa. It plans 24 entertainment channels in HD at “affordable prices”, it said in a statement.
And it also emerged last month that Netflix – which, aside from its euphemistic association with casual sex, is also famous for original series like ‘House of Cards’ – is launching in the region. The streaming service is currently blocked in the Middle East, but many residents access it by using a virtual private network (VPN).
But a proper service is planned in the region, said Joris Evers, Netflix’s head of communications in Europe, the Middle East and Africa. “We plan to complete our global expansion by the end of 2016… Of course the Middle East is part of those plans,” he told Al Arabiya News in an email.
Some in the industry say however that all these new arrivals will overcrowd the market – and inevitably lead to consolidation or closures.
The region already has a large pay-TV satellite operator – OSN, which was formed after the 2009 merger of Showtime and Orbit – as well as a band of smaller ‘over the top’ (OTT) streaming services like IcFlix and Istikana, as well as Telly, launched last year by a San Francisco-based startup.
David Butorac, chief executive of the Dubai-based OSN, said there won’t be room in the market for so many OTT players going forward.
“Many of the individual OTT players… Will struggle to survive in this region, because they don’t have scale,” he said. “I believe there will be consolidation.”
Butorac said he was confident that OSN – which also has its own on-demand streaming service – would retain its position in the market in both satellite and digital distribution.
He is not concerned by rival beIN’s venture into the entertainment space, which he said was targeting a “different market segment” to OSN, which typically broadcasts TV shows and movies within hours or days of the release in the United States.
“Their product is not a premium service – they’re essentially a library service. If you look at the movie channels they have launched, they’re mostly old movies,” Butorac said of beIN. The Qatar-backed broadcaster did not respond to a request for comment.
Nor is Butorac fazed by Netflix’s expected launch in the region – something he said would be complicated by the fact that OSN already holds the regional rights to much of the content that Netflix broadcasts elsewhere, including some of the U.S. player’s own shows, like House of Cards.
“Much of the content that they’re able to aggregate in other markets we already own exclusively for [this] market – so they can’t show it,” said Butorac.
‘Rebalancing of power’
Some commentators however see the arrival of more operators as a challenge to OSN’s dominance over the pay-TV sector.
“OSN has had a period of effective monopoly on the premium pay-TV entertainment side of things… Now they have credible competition in the region,” said Nick Grande, Managing Director of the Dubai-based TV consultancy ChannelSculptor.
“I don’t think that’s going to lead to consolidation, I think that’s going to lead to a rebalancing of power.”
An increase in the number of players in pay-TV will also have an impact on broadcast-rights sales, Grande added. The arrival of beIN’s entertainment channels is “good news” for content producers, he said, as in recent years only one big pay-TV operation – OSN – has been willing to buy premium entertainment content in the region.
“From the point-of-view of premium content owners… there’s been a collective sigh of relief. Because suddenly there’s more than one entity to sell to,” said Grande. “Now potentially the monopoly might be broken.”
Too much Hollywood?
Samer Abdin, the co-founder and chief executive of video-streaming service Istikana.com, which specialises in Arabic content, said the arrival of the new players in pay-TV shows the Middle East market has potential.
But he agreed that the market was becoming crowded, especially among those players offering Hollywood content – namely OSN, IcFlix, Starz, beIN and, in the future, Netflix.
“I think there’s going to be some kind of shake-out… It’s too crowded for five premium Hollywood players – even the U.S. doesn’t have that many,” Abdin said. “Something’s got to give.”
Istikana, which charges users $7.99 a month, currently has more than 10,000 hours of online content available, although Abdin declined to specify how many subscribers it has.
Though much of its content is made up of older Arabic shows, Abdin said the service was looking at moving into newer content to target a younger audience – even with the possibility of partnering with YouTube stars from Saudi Arabia.
And it is the boom of YouTube in the Middle East that Abdin sees as a potential precedent. Saudi Arabia has the world’s highest per-capita usage of the Google-owned site – so could a similar growth be seen in paid-for online video?
“The translation of that into premium OTT hasn’t happened yet. If that happens quickly, then there will be space for all of these players to do well,” said Abdin. “But the longer that it takes for that hyper-growth to trigger, the sooner we’ll see either dropouts, or mergers.”