In Broadcast - CABSAT 2017 - 60

60

www.inbroadcast.com | CABSAT InShow Guide | 21 - 23 March 2017

A New Wind of Change
The media and telecom landscape is changing globally, writes
Mohammed Al Shawwa, General Manager, Arab Advisors Group,
but the impact must be gauged at a more localised level...

S

takeholders in both media and
telecom industries have been
talking about convergence between
the two industries for a while now.
However, this convergence is now
proving to be more of a potential life
line for telecom operators, than just a
value added service.
Downward Pressure
Telecom operators are currently
facing enormous downward pressure
on their revenues due to the
emergence of OTT applications and
fierce competition, and as a global
trend, are actively searching for new
revenue streams. On the other hand,
these operators still have an edge
over nearly all other industries; their
wide reach. Globally, telcos are among
the most recognised brands in any
country, and each market player has
reach to a very good proportion of the
population.
Meanwhile, the media industry is
also changing. Media companies have
adopted digital channels for enhanced
delivery of their content, and are
putting focus on paid content. This
is further driven by more tech-savvy
viewers who now prefer to have
content delivered to them via digital
means than traditional ones.
These changes have led to the
global trend of convergence between

telecom and media. We have
witnessed the provision of content
by telecom operators in almost every
country in the world, as a means of
enhancing the telcos' offerings.
However, due to the pressure telcos
are facing, they are now getting more
involved in this convergence, and are
becoming a more integral part of the
value chain through the acquisition
of media companies. This has been
the case in the recently announced
potential acquisition of Time Warner
by AT&T, which has also acquired
DirecTV in 2015. Another example is
the formation of a joint venture by
Verizon and Hearst that is aimed at
developing digital video programming
that targets the mobile millennial
audience. The two companies have
also jointly acquired Complex, a
network of sites that is focused on
American pop culture.
Changing Landscape
The list of examples on such global
Mergers and Acquisitions is long,
and is mainly built on the concept of
combining distribution with content.
Which leads us to the question of
where does the MENA region stand in
this aspect? And will we see this surge
in Mergers and Acquisitions between
telcos and media companies in MENA?
A number of challenges lie ahead

of this trend in the MENA region.
First, the region relies heavily on
the free content model, and paid
content is not very common. As an
example, the Arab Advisors Group
has conducted a media survey in
Egypt in 2016. The survey revealed
that a mere 2.8% of the respondents
who watch content watch Pay TV.
Additionally, only 1.3% of respondents
who watch content watch it through
SVOD platforms. This sheds the light
on part of the challenges that will be
faced by telcos in acquiring media
companies; revenue generation. While
all free content providers rely on
advertising as a main revenue stream,
this still represents a challenge for
telcos, which would rather combine
paid content offerings as a fixed
part of their subscription for an
increased ARPU, instead of relying
on continuously varying ad revenues.
This dependence on ads also means
that operators will be operating in
an industry that they don't have
experience in.
Dynamic Players
One important challenge that is
also present is the fragmentation of
the Arab telecom markets and the
relative uniformity in media markets.
The usual media landscape in any
Arab country would involve a number
Convergence is in the air,
but what form will it take?

of regional major players, such as
MBC Group's channels, in addition to
a number of smaller, local channels,
whereas no telecom operators are
present across all countries of the
region. The acquisition of major media
players might not be feasible nor
justifiable by telecom operators due to
the fact that the majority of countries
which have high viewership rates for
these media channels are outside the
coverage of telcos, and they wouldn't
be able to bundle it as part of their
offerings in the majority of countries.
This, in addition to the fact that the
majority of players offer free content,
would result in the telcos paying too
much for a company that they have no
experience in running, without major
benefit in supporting their traditional
operations.
Another issue that faces this trend
is the relevant lack of premium,
localised and exclusive content in the
region on paid content platforms,
which in turn leads to low adoption
rates of paid content.
However, due to the current
dynamics in the telecom market, in
addition to a growing adoption of
broadband services, and evolving
awareness of SVOD and paid media
platforms, telcos are in fact expected
to start forming mergers and
acquisitions within the coming few
years. These mergers and acquisitions
will likely be made between telcos and
local media players that cater to the
localised needs of consumers in their
respective markets. After all, telcos
have a strong brand name and a wide
reach that will be vital in the coming
phase of digitisation.
www.arabadvisors.com


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Table of Contents for the Digital Edition of In Broadcast - CABSAT 2017

In Broadcast - CABSAT 2017 - Intro
In Broadcast - CABSAT 2017 - Cover1
In Broadcast - CABSAT 2017 - Cover2
In Broadcast - CABSAT 2017 - 3
In Broadcast - CABSAT 2017 - 4
In Broadcast - CABSAT 2017 - 5
In Broadcast - CABSAT 2017 - 6
In Broadcast - CABSAT 2017 - 7
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In Broadcast - CABSAT 2017 - 64
In Broadcast - CABSAT 2017 - 65
In Broadcast - CABSAT 2017 - 66
In Broadcast - CABSAT 2017 - Cover3
In Broadcast - CABSAT 2017 - Cover4
In Broadcast - CABSAT 2017 - S1
In Broadcast - CABSAT 2017 - S2
In Broadcast - CABSAT 2017 - S3
In Broadcast - CABSAT 2017 - S4
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