A. T. Kearney: Middle East Media On The Move


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A. T. Kearney: Middle East Media On The Move

  1. 1. Middle East Media on the Move An emerging growth industry in a pivotal region
  2. 2. A cross the world, media companies are facing an unprecedented combination of challenges. Advertising revenues are shrinking and consumer spending on media and entertainment is declin- ing even faster than the recession-hit world economy. Established players are searching for new ways to identify, attract and retain an ever-more discerning consumer and new media channels continue to provide challenges. However, there is a light at the end of the tunnel— the Middle East. While the media and entertainment industry Jazeera and the Middle East Broadcasting Center struggles worldwide, the Middle East is providing (MBC) to form a burgeoning industry. a bright spot. The pan-Arab media industry is growing faster than the economy in general, at Underpinned by Strong Fundamentals about 19 percent per year, with both online and The pan-Arab media and entertainment industry offline channels expanding and even feeding off has grown faster than that of any other region one another. The appeal of the sector to investors (see figure 1 on page 2). Estimated at around $10 is expected to continue to grow as Middle Eastern billion in 2007, the industry still has tremendous consumers spend more disposable income on potential for growth.1 media and entertainment, and governments invest A reduction of regulatory barriers is the major in the industry, ease regulations and reduce the supporting factor. Middle East governments are barriers to entry. moving their economies away from the economic in the past, media centers emerged in Cairo volatility of dependence on natural resources and and Beirut as places with the required talent base, toward more knowledge-based economies, and more liberal environments and an interface with media is being targeted as a priority sector. Western culture and values. however, as the trend Meanwhile, governments are opening their doors of government investment spreads more widely to at least some liberalization—even saudi Arabia, across the region, “media cities” are being created with its historic 30-year ban on cinemas, has together with a loosening of regulatory environ- launched a film festival. ments, and the media industry as a whole is What makes the Middle East market so spreading across the Middle East. Global media attractive is its potential for growth across all leaders, including the BBC and Thomson Reuters, media segments, without the cannibalization, are joining established regional names such as Al particularly from online channels, that is prevalent 1 All monetary amounts in U.S. dollars. A.T. Kearney | MiddlE EAsT MEdiA on ThE MovE 1
  3. 3. Figure 1 Media and entertainment spending and growth 4% 2003 2007 $566 = CAGR $489 3% 3% 9% 3% 19% $111 $128 $143 $81 $99 $74 $72 $52 $5 $10 Pan-Arab1 China France Germany Japan United States Notes: All monetary amounts in billions of U.S. dollars; CAGR = compound annual growth rate Sources: EIU, PwC - Global Entertainment and 1 Algeria, Bahrain, Egypt, Jordan, Kuwait, Lebanon, Libya, Morocco, Oman, Qatar, Syria, Saudi Arabia and the UAE. Media Outlook 2008-2012; A.T. Kearney analysis in many mature markets. While new media chan- The per capita gross domestic product has also nels have grown at the expense of other media risen rapidly throughout the region: The United channels in mature markets, this trend is not yet Arab Emirates (UAE) already has higher GdP per visible in the Middle East. literacy campaigns capita than the average country in the European have helped to build a base market for news- Union, while the rest of the countries in the Gulf papers, particularly where internet access is not Cooperation Council (GCC) are also making readily accessible, while more established media, steady progress (see figure 4). GdP for the Middle such as television and film, have maintained East and north Africa region as a whole is esti- a strong foothold. mated to grow at 9 percent per year between 2008 Although broadband penetration remains low and 2012. compared to the rest of the world, internet access is growing quickly without yet seriously challeng- ing traditional channels for advertising money. Figure 2 in addition to rising broadband connectivity, the Media penetration in Middle East and North Africa Middle East already has a comparatively high pen- etration of mobile telephones and a competitive Information and Sub- communication Eurozone Saharan telecommunications industry that will drive growth technology and U.S. MENA 1 GCC 2 Africa in new mobile and digital media (see figure 2). Households with TV 95% 95% N/A 18% The region’s growth is driven by a younger, Mobile subscribers 100% 51% 100% 23% wealthier population base that is growing solidly, Internet users 60% 16% 29% 4% boosted by a strengthening private sector. Roughly Broadband 25% 5% 12% – half of the population in the Middle East is under Middle East and North Africa 25 years old, compared to the United states and 1 2 Gulf Cooperation Council (GCC) includes Bahrain, Kuwait, Oman, Qatar, Saudi Arabia and the UAE. N/A = Statistics not available. Western Europe, where only 24 percent and 18 Sources: World Bank statistics, 2007; “World Broadband,” Point Topic, Third quarter percent, respectively, are under 25 (see figure 3). 2008; A.T. Kearney analysis 2 MiddlE EAsT MEdiA on ThE MovE | A.T. Kearney
  4. 4. Figure 3 Europe and Asia, the Middle East is within touch- Regional population breakdown by age ing distance of the huge consumer bases in southeastern Europe, north and East Africa and 100% 100% 100% 100% 100% south Asia. Additionally, around 70 percent of 19% 25% the world’s Muslims are in or near the Middle 39% 42% 44% 13% East—notable considering that by 2025 one-third 15% 50% under 18% 14% 15% 16% of the world’s population will be Muslim. 25 years old 19% 13% 15% of course, some industry slowdown can 13% 13% 18% 14% be expected due to global economic conditions. 13% 13% 31% 26% however, the fundamentals remain strong — mar- 20% 17% 17% ket demand is growing and the opportunity for Middle United United Western Asia East1 States Kingdom Europe greater penetration remains. increasing internet Age range in years: 0-14 15-24 25-34 35-44 >45 connectivity and the potential opening of the large saudi Arabian market are just two 1 Middle East includes Bahrain, Egypt, Jordan, Kuwait, Lebanon, Oman, Qatar, Saudi Arabia, Syria, UAE and Yemen. factors that bode well for media companies in Sources: U.S. Census Bureau; International database; A.T. Kearney analysis the Middle East. Television: An Expanding Regional Industry Any understanding of the region’s media busi- structural changes are afoot in the Middle Eastern ness must include its position within the global television market. The television and film market media audience. strategically located between in the Middle East was estimated at $1.7 billion in Figure 4 Middle East GDP per capita and spending GDP per capita 2008 (US$) Media and entertainment spending as a percentage of consumer spending (2008) 50,000 7% 6% 6% 6% 40,000 5% 4% 30,000 3% 3% 2% 2% 2% 20,000 1% 0% 10,000 U.S. EU China India MENA 6% 6% 3% 2% 2% 0 U.S. UAE EU GCC Saudi MENA China India Total media and entertainment market CAGR (2008-2012) Arabia CAGR = compound annual growth rate Notes: Gulf Cooperation Council (GCC) includes Bahrain, Kuwait, Oman, Qatar, Saudi Arabia and the UAE. MENA = Middle East and North Africa, including GCC + Algeria, Sources: IMP; CIA World Factbook; PWC 2008 Egypt, Jordan, Lebanon, Libya, Morocco and Syria. Global Entertainment and Media Outlook; A.T. Kearney analysis A.T. Kearney | MiddlE EAsT MEdiA on ThE MovE 3
  5. 5. Figure 5 2007 (see figure 5). in terms of television, the Regional film and television market region is growing as a hub of production and news, and the medium continues to play a significant $1.7 $1.1 $0.01 (5%) role in life across the region, with family viewing Other $0.2 pan-Arab common year-round, particularly during the holy (12%) $0.9 (45%) Maghreb month of Ramadan. Al Jazeera shook up the regional news land- $0.1 scape when it launched its English-language net- (50%) Egypt work in 2006. The first English network to be broadcast from the Middle East, Al Jazeera sought Film1 Television to bring a different news angle to both local and international audiences. $1.5 (88%) $1.5 The UAE has begun to attract major inter- $0.6 Saudi national television companies to the dubai Media (12%) Arabia- owned City, including the BBC, Cnn and showtime, following the MBC, which moved from london $0.9 Other to dubai in 2001 (see sidebar on page 6: Middle (88%) pan-Arab East Media Cities in Focus). Meanwhile, the Gulf region and lebanon are 2007 2007 now emerging as production locations, although The film market includes production spending only. 1 their share of the market remains small. The Notes: Regional market includes countries within the GCC, Levant region and Algeria, Egypt, Morocco and Tunisia. All monetary amounts in billions of U.S. dollars. growth of the Gulf markets is drawing advertisers Sources: Zenith Optimedia; Industry interviews; A.T. Kearney analysis and driving the demand for high-quality localized content, particularly for the large saudi Arabian Figure 6 Broadcast technology penetration Satellite households as a percentage of TV households 93% 93% Terrestial TV viewership as 90% 90% a percentage of households 82% Cable households as a percentage of TV households 76% 55% 55% 50% 50% 47% 45% 47% 47% 41% 41%43% 33% 17% 8% N/A N/A N/A N/A N/A N/A N/A Saudi Arabia Lebanon Jordan Kuwait Qatar Egypt Morocco UAE Bahrain Sources: Arab Advisors Group Media Survey 2007; Middle East and Africa TV (4th Edition); Informa, June 2007; A.T. Kearney analysis 4 MiddlE EAsT MEdiA on ThE MovE | A.T. Kearney
  6. 6. market. in addition, there is a growing demand programming is growing across the board, viewers for local reality Tv—including the Arab adapta- are also looking for specific content that recog- tion of popular Western programs, such as nizes the regional, cultural and language differ- “American idol.” ences throughout the Middle East. This is driving satellite broadcasting is the dominant televi- demand for programming in different dialects sion delivery method across the region, and is and incorporating differing cultural settings, even expected to remain the leader, ahead of cable and as most locally produced Tv series content is pro- terrestrial Tv (see figure 6). duced in Egypt and syria. in terms of advertising revenues and viewers, While television advertising is well devel- free-to-air satellite Tv is providing strong compe- oped, advertising revenues still lag. The lack of tition to the pay Tv sector, driven by quality of a reliable audience measurement system remains content and general programming. Free-to-air one of the major barriers to growth, as channels channels have also introduced themed channels cannot set advertising rates based on credible and offered access to the latest Western content. numbers. Buyers cannot execute targeted strate- The launch of MBC2, which screens Western gies with the degree of accuracy they desire, which blockbusters, is one such example. in addition, affects advertising rates. Advertising revenues traditionally free providers are launching sub- are consequently significantly below those in scription channels, such as Al Jazeera sports, other regions of the world (see figure 7). nielsen’s which is distributed through pay Tv providers. recent announcement of its intention to launch Competition among pay Tv players is also a viewer metering system in the UAE is, however, heating up, with profit margins under pressure as providers try to gain an edge. Pay providers are also battling piracy in some parts of the Middle East, Figure 7 which is further eroding their market position. TV advertising per household and per capita high-definition television (hdTv) has yet to take off in the Middle East as there is still a limited 626 India Germany China United Kingdom supply of quality hd programming. in addition, Pan-Arab United States the strong competition between free-to-air and pay 277 France Tv is restricting the development of this sector. 229 Television content is heavily focused on series and dramas, which account for around 40 per- 162 157 cent of all production, with news following at 113 about 20 to 25 percent. documentaries and reli- 62 71 47 gious programming follow with shares of between 16 16 5 7 5 and 15 percent. Business, children’s programs 2 and reality Tv all exist within the region but with Per household Per capita Spending in U.S. dollars much lower budgets. Across the region there is an increasing Market’s relatively small value reflects the low advertising rates rather than short airtime demand for local content, catering to regional and Source: PWC 2008 Global and and Media Outlook, Arab Advisors Group Media Survey; cultural differences. While demand for Arabic A.T. Kearney analysis A.T. Kearney | MiddlE EAsT MEdiA on ThE MovE 5
  7. 7. a positive sign that this is improving (see sidebar: Film: An Emerging Sector Advertising in the Middle East on page 9). The Middle Eastern film sector is growing beyond overall, though, the outlook for the television its traditional base. Egypt has historically been the industry in the Middle East is bright. The industry leading location for regional film production, is projected to grow at 14 percent per year through thanks to cost advantages and the ability to 2012, driven by a 20-percent-per-year increase in produce quality on minimal budgets. With the advertising revenue, with pay Tv expected to grow advantage of being an early mover, it has devel- at nearly 6 percent per year. Broadband penetra- oped a deep talent pool that has allowed it to tion is approaching the levels required for a viable cement its positioning as a regional leader. internet Tv sector, and the high penetration of however, other locations are emerging as modern mobile phones means that many Middle filming locations for internationally marketed Eastern markets are ripe for mobile Tv. movies. Celebrated filmmakers from around the Middle East Media Cities in Focus The emergence of media cities to build on Egypt’s track record as a of doing business, combined with throughout the Middle East region film and television production center financial incentives and support for will continue to be a major compo- and help it become the “hollywood foreign investors. nent of the expansion and liberaliza- of the Middle East.” EMPC has Dubai Media City (2001). dubai tion of the region’s media industry. successfully attracted major Tv and launched the region’s largest media several countries have made long- film production companies from the city as part of the broader dubai term investments in media as part Middle East and abroad. EMPC’s Technology, Electronic Commercial of a push for more diversified, success comes in part from its first- and Media Free Zone (TECoM). knowledge-based economies. mover status, the availability of local it was set up to be a regional center The successful media cities across talent and strong infrastructure, and for media content creation and broad- the globe share some common traits, the ease and low cost of doing busi- casting, and it has been successful in most notably a high level of govern- ness in the zone, including 100 per- positioning itself as the regional hub ment commitment and support for cent ownership, visa support, freedom for international media companies, creating attractive media environ- from customs restrictions, protection with the BBC, Cnn and Reuters ments through loosened regulation, for foreign investors, and an expe- all tenants. new media activities are incentives and access to financing. dited business registration process. supported through both the media other important factors include Jordan Media City (2001). Jordan city and its sister zone, dubai internet proximity to a strong local market, was next in line. Although only one- City. it has a development budget of access to a deep talent pool, the abil- tenth the size of EMPC, Jordan Media more than $800 million and roughly ity to secure high-profile anchor ten- City has provided a viable alternative 2,500 companies registered. Regula- ants, cost competitiveness, proximity for Tv production. Major tenants tion concessions and incentives, to clients, quality infrastructure and currently include ART, Rotana, including 100 percent foreign owner- lifestyle (see figure). Jordan Tv and Arabsat. its draw is ship and tax-free status, have played Egyptian Media and Production a low-cost environment—lower than an important role in the success. City (EMPC) (2000). The region’s first Egypt—with quality infrastructure, Abu Dhabi twofour54 (announced dedicated media zone was designed available talent and the increased ease in 2008). The second media-focused 6 MiddlE EAsT MEdiA on ThE MovE | A.T. Kearney
  8. 8. world have worked in the UAE, Egypt and the UAE, such as the Middle East Film Festival Jordan, among other locations, to produce recent in Abu dhabi and the dubai Film Festival, have hollywood movies such as “syriana” and “in the also brought hollywood to the region. valley of Elah.” national Geographic Films The Maghreb region of Africa, including recently announced its intention to set up oper- Morocco and Tunisia, has captured an increasing ations in Abu dhabi with the creation of a share of the global market. These countries are $100 million fund with the Abu dhabi Media using their geographical proximity to produce Company to produce $500 billion worth of films content for Europe as well, rather than for Middle over the next five years. This follows a $1 billion Eastern audiences alone. Government incentives production deal with Warner Brothers struck in have again played a critical role in the develop- 2007, and another $1 billion deal with three ment of the industry, and the successful creation companies in 2008. high-profile film festivals in of production sites has provided moviemakers Figure: Keys to media city success Media ecosystem Domestic Proximity to Infrastructure Access to Incentives and Local talent Regulatory market clients quality financing ease of pool Costs environment and doing business lifestyle • Media • Advertising • Transportation • Public subsidizing • Fast and easy • Foreign and local • Raw materials • Identified regulators consumption agencies • Tailor-made, • Strong financial visa, registration talent and workforce • Simple and explicit • Advertising • Media buyers state-of-the-art system and and licensing • Plans to train costs censorship rules potential media facilities venture funding procedures local population • Rental costs • PR agencies • Transparent licens- • Cultural • Specific • Competitive taxes for media industry • Standard ing procedures • Festivals and and duties media events infrastructure funding laws of living • Audience • Commercial • Other costs (such measurement disputes as communica- facilitation • Rights protection tion, energy and water) • Ownership rules Source: A.T. Kearney • Lifestyle zone in the UAE was announced considerations are expected. The media that will serve local and broader with the launch of Abu dhabi’s two- project could generate 20,000 jobs Muslim and non-Muslim consumers four54. Created by and for Arabs over the next five years. by attracting the best talent from and encompassing both traditional Saudi Arabia King Abdullah Eco- around the world. There will be and new media, music and anima- nomic City (KAEC) Media City a strong emphasis on talent incuba- tion, twofour54 is in line with Abu (announced in 2008). The most tion, through partnerships with other dhabi’s goal of being a regional recently announced regional media cities devoted to education and infor- center for culture. Major differences city is still undergoing a feasibility mation technology. in the Abu dhabi initiative include study, but its plans promise high- significant regulatory change a dedicated education arm and access quality infrastructure, a positive will be required for success, but the to funding and industry expertise regulatory environment and, impor- potential is great for media compa- that support innovation and growth. tantly, access to the large and poten- nies of all sizes to gain access to the other incentives have not yet been tially lucrative saudi Arabian market. largest population base in the GCC formally announced, but a favorable KAEC is also positioning its media and one of the wealthiest nations in regulatory environment and lifestyle city as a center for high-tech digital the Middle East. A.T. Kearney | MiddlE EAsT MEdiA on ThE MovE 7
  9. 9. with attractive sets that replicate well-known first saudi Arabian Film Festival in dammam in Middle Eastern locations. 2007 and the lifting of the ban in december 2008 overall film production in the Gulf states is for the limited showing of a locally made film, still very low, with a greater focus on television. to sell-out audiences, indicates that this market Although a number of recent films have shot may become more accessible soon. scenes in the UAE and other locations, these areas are still considered expensive, with high studio Newspapers and Magazines: A Uniquely rates and higher costs for accommodating crew. Vibrant Market The lack of skilled local talent adds to these costs. The Middle East is one of the few markets in the dvd sales remain low—only around 5 per- world in which both revenues and demand are cent of movie revenues in the region—and piracy still growing for traditional newspapers. Estimated at around $3.7 billion in 2008, the Middle East newspaper mar- ket is growing around 7 percent per year, and the industry has What makes the Middle East generated another $500 million in associated printing revenues.2 market so attractive is its Base readership is expanding as new titles have introduced healthy potential for growth across all competition. At the same time relatively low internet penetra- media segments, without the tion means online channels are cannibalization that is prevalent less of a threat. The end of 2007 saw the in many mature markets. launch of Emirates 24/7, the first English daily in the region, which was focused on business and eco- nomic news. shortly after, the launch of The National in Abu remains a problem despite World Trade organ- dhabi in 2008 was the biggest launch of an ization (WTo) membership. As a result, produc- English-speaking newspaper in the Middle East. tion companies rely heavily on box-office revenues, The new publication was striking, considering which account for half of total revenue. Television that it came at a time when traditional newspapers makes up the balance. elsewhere were battling eroding business, declin- one market with untapped potential is saudi ing advertising revenues and competition from Arabia, which has shown a large appetite for film. online media. it drew experienced media profes- Until recently, the saudi Arabian cinema market sionals with track records from publications such was completely closed, which limited demand for as the U.K.’s Daily Telegraph and the U.s.’s Wall Gulf-specific films. however, the advent of the Street Journal. soon after The National opened, 2 PWC; Sharq Al Awsat; A.T. Kearney analysis. 8 MiddlE EAsT MEdiA on ThE MovE | A.T. Kearney
  10. 10. The Financial Times unveiled a Middle East edi- approval in this part of the Middle East. While tion that increased coverage of the region and these restrictions make saudi Arabia’s market opportunities for regional advertisers. appear almost prohibitive, there is potential in Certain newspaper markets in particular have the new, semi-autonomous economic cities with been thriving. The creation of dubai Media City designated regulations to speed up the licensing helped drive a 50 percent increase in daily news- process, which could open up opportunities for papers in the UAE from 2003 through 2007. in media organizations to succeed in saudi Arabia. 2006, laws that banned the launch of new news- The regional magazine market is smaller, esti- papers in Kuwait were overturned, leading to six mated to be worth roughly $1.2 billion in 2008 new titles in 2007. Bahrain also experienced 50 with 5 percent annual growth. This lower growth percent growth in the number of dailies. reflects an already-developed market in some coun- As in much of the rest of the world, ad-funded tries, such as the UAE. Companies there serve free newspapers have proved a resounding success much of the Middle Eastern market with localized across the region. in oman, for example, The international titles and regional publications. Week became the most-read newspaper in the While challenges do exist, obtaining licenses to country within three years of its 2003 launch, distribute or publish magazines is easier than for leading to a fourfold increase in the number of newspapers. The largest opportunity in magazines advertisements. rests in Egypt and saudi Arabia, where there is still Many of the Middle East’s markets do, how- room to tailor international publications to the ever, remain underdeveloped from a circulation region’s readers. The saudi Research and Marketing per capita perspective. With the exception of the Group announced in March 2009 the launch of UAE, Bahrain and Kuwait, many other countries eight new magazine titles in saudi Arabia, on topics remain below the world average (see figure 8 on including home improvement, islamic finance and page 10). parenting. similar to newspapers, this growth in securing a newspaper license remains one of the Middle East stands in contrast to the situation the greatest hurdles media companies face in in developed markets, where publishers are shut- launching new publications, particularly in saudi ting down magazines at an unprecedented rate due Arabia. Even changing a format requires formal to falling readership and ad revenues. For example, Advertising in the Middle East The growth of the region’s media nues, followed by magazines and round out the top five. sector is demonstrated by the growth newspapers. While the overall forecast for in advertising revenues. Pan-Arab Consumer goods has been advertising revenue is still positive, advertising spending has increased the leading spender, followed by the market for advertising is likely to around 20 percent annually over telecommunications and utilities. cool off—particularly in the UAE, the past six years. Television makes Food, beverage and tobacco is where the driving force of the real up almost 90 percent of these reve- third, and government and media estate sector has slowed considerably. A.T. Kearney | MiddlE EAsT MEdiA on ThE MovE 9
  11. 11. Figure 8 Newspaper development and circulation Literacy rates (2005)1 Total newspaper circulation Number of dailies per 1,000 inhabitants, 2006 95 Japan 542 90 United Kingdom 303 Germany 259 85 UAE 201 80 Bahrain 196 75 United States 186 Bahrain Kuwait Oman Qatar Saudi UAE France 159 Arabia Kuwait 130 Per capita GDP (US$) World average 90 Qatar 87 60,000 China 75 50,000 Oman 64 40,000 Lebanon 64 30,000 Saudi Arabia 58 20,000 Egypt 37 10,000 Jordan 21 GCC country 0 Bahrain Kuwait Oman Qatar Saudi UAE Arabia 1 Data refers to national literacy estimates from censuses or surveys conducted Sources: World Association of Newspapers; IMF; EIU; between 1995 and 2005. Human Development Report 2007/2008, United Nations; A.T. Kearney analysis single-copy U.s. magazine sales were down 11 per- Abu dhabi, and Random house plans to create cent in the second half of 2008, with the number of an Arabic publishing division. ad pages in consumer magazines down 12 percent, according to the Magazine Publishers of America. New Media: Making the Leap While there are not as many regulatory due to a large youth population that is open to hurdles for magazines, fewer than 40 percent of technology, new media is very much an emerging the nearly 700 pan-Arab titles are distributed in segment in the Middle East’s media landscape. saudi Arabia, and only 30 percent of them are it is a dynamic, high-growth industry in which distributed in Egypt. The biggest gaps in locally entrepreneurs are prospering and major media produced genres include travel and children’s— and telecommunications providers are trying to subjects that would likely face few restrictions in secure their share of the future growth. For news- any market and where foreign content and exper- papers and Tv, there is the attraction of rapid tise would be appealing to end consumers. growth, and although it is not yet a reliable reve- The increasing focus on literacy and educa- nue source, the medium- and long-term prospects tion is opening up opportunities for international are bright. book publishers, specifically those that target edu- Many U.s. portals now have a local presence, cational and children’s books. harperCollins and with Google opening a base in the UAE and Random house recently opened operations in Microsoft operating in Cairo through a franchise 10 MiddlE EAsT MEdiA on ThE MovE | A.T. Kearney
  12. 12. agreement with a subsidiary of Egypt-based in this sector, to develop multi-player online orascom. Along with the growing popularity of games for Arabic consumers. non-regional websites—Facebook had nearly 4 Although it is growing, household broadband million users in the Middle East in February penetration remains low, at just 12 percent across 2009, according to the company—many regional the GCC region, according to the international sites have proliferated, such as Maktoob.com, Telecommunication Union. Two major factors with 15 million unique users, and onkosh, a search engine dedicated to the Arabic world. in just one example of major tele- communications providers’ commit- The Middle East is one of ment to this sector, saudi Telecom Company recently entered a joint the few markets in the world venture with saudi Research and Marketing Group and Malaysia-based in which both revenues and All Asia networks to open a new content company in the Middle demand are still growing for East. Based in dubai Media City, traditional newspapers. the company is set to commence operations this year to acquire and manage worldwide content for saudi Telecom customers. Additionally, future media cities are likely to are, however, driving broadband growth. First, be based on the principle of integrated, techno- mobile communications and the internet are con- logically world-class “smart cities.” The Media verging, with tech-savvy users using their phones City in King Abdullah Economic City in saudi as the primary Web connection because connec- Arabia has announced its intention to implement tivity remains low in many areas. Relatively high the latest technology available to position itself adoption of smart phone and 3G technology is as the first digital media city in the Middle East. supporting this growth — 4 million iPhones were This will go hand-in-hand with its smart city sold in the region in the first half of 2008 — concept, in which the estimated 1.5 million and telecommunication providers, handset manu- inhabitants will have home access to the latest and facturers and other online players are aiming to fastest technology. capture this market. Access to affordable, reliable broadband secondly, the rapid growth in the number of internet will be vital to the mass adoption of broadband-ready internet cafes is a substitute to new media products in the region, particularly home access, and is proving to be a popular social media platforms that require high bandwidth, destination for the young users driving the growth such as streaming video and online social net- of new media. As witnessed elsewhere in the world works that require uploading files. MBC and over the last decade, strong growth in new media Chinese firm CdC Games signed an early deal across the Middle East is inevitable. A.T. Kearney | MiddlE EAsT MEdiA on ThE MovE 11
  13. 13. Regulation Paving the Way tory barriers in the region. in some countries, Regulatory changes have had a profound influ- newspaper editors must be approved by the gov- ence on the growth of the media sector in the ernment. Fortunately, these challenges are easing, Middle East. From the consequences of saudi due to media cities and other economic zones. Arabia’s entrance into the WTo to the establish- The development of sector-specific media ment of multiple media zones, the regulatory cities has had the most profound impact on the playing field is paving the way for growth. industry in the Middle East. These government- WTo membership and pressure from inter- sponsored ventures have drawn international news national corporations has led regional govern- and media organizations to the region and fostered ments to address intellectual property rights and an environment that overcomes historic challenges the piracy of media content and software. such as licensing, visas and infrastructure. Regulatory change in telecommunications has overall, the region is moving toward a reduced barriers to entry for telecom operators in friendlier operating environment for the media. a number of regional markets, driving competi- increasing focus on intellectual property protec- tion. Telecom operators see mobile content as tion and the option for international companies a main component of their growth strategies. to operate from free zones have increased the however, the general regulatory environment attractiveness of the region. still has room for improvement. Continued improvements in the transparency of content What Does the Future Hold? regulation will support further growth in credibil- The underlying regional demographic structure ity and circulation. holds plenty of opportunity: a young and grow- securing licenses for broadcasting and print- ing population that has money to spend and ing remains one of the most challenging regula- a healthy appetite for new technology and associ- Major Trends Shaping Regional Media As technology spreads throughout prospects should the saudi Arabian Mobile technologies are emerging the Middle East, there will continue market open up. as a more prevalent channel than to be changes across the media land- Print and publishing. Better in the West. scape. here are the leading trends for licensing processes and increased Advertising. Emerging measure- each industry segment over the next readership will drive continued ment systems will help advertisers several years: growth in the newspaper industry. and providers, both online and off- TV. satellite will remain the domi- A move towards online channels for line, with better consumer data, nant platform in Tv. The fragmented content distribution will increase, which will in turn drive more pay market may consolidate to com- although still more slowly in the advertising spending. pete more effectively against free-to- short term than in the West. air Tv. Internet. new destinations and Film. The cinema market will services will meet increased demand continue to grow with even brighter for online media and commerce. 12 MiddlE EAsT MEdiA on ThE MovE | A.T. Kearney
  14. 14. ated media and entertainment offerings. The act as a natural landing point for international increasing success that regional and international investors and facilitate regulatory change and media companies are enjoying in terms of devel- transparency. They are also essential for providing oping products and services for this market bodes international awareness and credibility to the well. The potential opening up of the large saudi Middle East’s media sector. The major trends in Arabian market provides opportunities for first the Western media sector will become increasingly movers where competition has yet to mature. in evident in the Middle East, and will shape the addition, marked improvements in the business future development of the sector: and regulatory environment provide a solid plat- Convergence. Traditional media organiza- form for growth. tions are collaborating with and competing against The major challenges that have inhibited a widening range of players that include online investment and growth in the region are now companies, telecommunication firms and even finally being overcome. Recent investments in individuals producing their own content. new technology, with the capability to accommo- New consumption trends. The range of date the latest online and mobile media products, formats is growing across many platforms and have made the region more attractive to investors. devices, and changing the way consumers con- Central authorities are improving governance and sume media. licensing procedures. new legislation is addressing Dynamic consumer relationship. The inter- the challenges of internet protocol protection and net has blurred the line between provider and piracy and, although not always enforced at this consumer, with a proliferation of blogs and user- point, the renewed focus should build confidence generated content. Web 2.0 has spurred the in the market. Media measurement systems, growth of fragmented communities, allowing including the development of a “people-meter” in companies to tap into groups of consumers that the UAE, should help advertisers, and investments were previously unidentifiable or unattainable. to improve local talent will produce the next gen- More sophisticated advertising. Consumer eration of media professionals (see sidebar: Major data is improving, especially online, leading to Trends Shaping Regional Media). more effective advertising possibilities based on Experience shows that markets that start with demographic, geographic and behavioral targeting. a clean slate can be a platform for remarkable Growth of online. As elsewhere, online chan- progress and innovation. For example, installing nels are proliferating in the Middle East through a fiber-optic network where no other infrastruc- social networking and other social media sites. ture exists is easier than building a network over decades-old copper wire, and it also leads to a sub- The Light at the End of the Tunnel stantial technological move forward. While the global media and entertainment indus- While some Middle Eastern countries are try is facing a multitude of challenges—decreasing certainly ahead of others across these dimensions, readership, dropping revenues, online threats— there are clear signs of a broad trend in the right the Middle East is offering many glimmers of direction, which will stimulate growth in the hope for local, regional and global players across sector. Media cities will be pivotal ecosystems that the media spectrum. The important steps are to A.T. Kearney | MiddlE EAsT MEdiA on ThE MovE 13
  15. 15. understand the consumers and establish a local tunity to gain a lead in mobile Tv, not just in presence; to think across the value chain; to collab- the Middle East but also outside the region. orate where necessary; and to measure success Filmmakers should seek to meet the surging properly. The favorable demographics and the top- appetite for regionally produced and foreign films down structural changes across the Middle East by continuing to enter into production and dis- media sector have put it in position for continued, tribution deals. accelerating and attractive growth. Print and publishing. seize the opportunity Early movers can still secure attractive and as licensing and distribution regulations are profitable opportunities across the range of media relaxed to gain an advantage in one of last grow- segments: ing regions for publishing. Western publications are penetrating the market, but there is still room for foreign titles to produce more local edi- tions. Building brand loyalty and Facebook has nearly 4 million an online presence in tandem with offline publications will users in the Middle East, and minimize the loss of readers to alternative internet channels. many regional sites have appeared, increased focus on education and English language training also such as Maktoob.com, with 15 presents many opportunities for million users, and Onkosh, an publishers in the region. New media. The ever- Arabic search engine. improving data available on the region’s internet users can be used to better understand, segment and target the online audience, and develop tailored online TV and film. Producers and content distrib- media. Companies should not be afraid of innova- utors should forge relationships with an eye on tion, as Middle Eastern consumers have a strong the consolidation that will inevitably take place record of adopting new technologies. From the between broadcasters, and the impact it will internet “first-timers” looking for basic news and have on production and content acquisition. email services to the young, tech-savvy users at the Broadcasters should take advantage of new media downtown dubai internet cafes, already well- measurement systems to improve strategic deci- versed in online gaming and social networking, the sion-making and enable more effective advertising local consumers will not accept anything short sales. The potential of video-on-demand and of the latest offerings in products and services. internet television will be realized once the tech- Finally, media companies operating in the nology reaches a wider market. The proliferation Middle East should not view their activities in the of mobile phones and smart phones is an oppor- region as a standalone venture. Media is becoming 14 MiddlE EAsT MEdiA on ThE MovE | A.T. Kearney
  16. 16. an ever-more global industry, so the strategy for While still relatively small, the Middle East this region should tie into a company’s overall media sector is growing rapidly and is reaching global strategy. innovations and new products a scale that presents an attractive opportunity should be brought to the region in tandem with for those media companies prepared to invest. their launch elsewhere, and indeed innovations While the media industry in developed countries arising in the Middle East should not be confined struggles, the Middle East is a light at the end of to the region. the tunnel. Authors Dirk Buchta is a partner in the Dubai office and can be reached at dirk.buchta@atkearney.com. Martin Fabel is a partner in the Berlin office and can be reached at martin.fabel@atkearney.com. Matthieu De Clercq is a consultant in the Dubai office and can be reached at matthieu.de.clercq@atkearney.com. Rebecca Hall is a consultant in the Dubai office and can be reached at rebecca.hall@atkearney.com. Christophe Firth and A.J. Dunklau also helped write this paper. The authors wish to thank Gillis Jonk, Mohamed Lahlou, Peter Munro, Etienne Muselier and Bahige El-Rayes for their contributions. A.T. Kearney | MiddlE EAsT MEdiA on ThE MovE 15
  17. 17. A.T. Kearney is a global management consulting firm that uses strategic For information on obtaining insight, tailored solutions and a collaborative working style to help clients additional copies, permission achieve sustainable results. Since 1926, we have been trusted advisors on to reprint or translate this work, CEO-agenda issues to the world’s leading corporations across all major and all other correspondence, industries. A.T. Kearney’s offices are located in major business centers please contact: in 36 countries. A.T. Kearney, Inc. AMERICAS Atlanta | Boston | Chicago | Dallas | Detroit | Mexico City Marketing & Communications New York | San Francisco | São Paulo | Toronto | Washington, D.C. 222 West Adams Street EUROPE Amsterdam | Berlin | Brussels | Bucharest | Copenhagen Chicago, Illinois 60606 U.S.A. Düsseldorf | Frankfurt | Helsinki | Kiev | Lisbon | Ljubljana 1 312 648 0111 London | Madrid | Milan | Moscow | Munich | Oslo | Paris email: insight@atkearney.com Prague | Rome | Stockholm | Stuttgart | Vienna | Warsaw | Zurich www.atkearney.com ASIA Bangkok | Beijing | Hong Kong | Jakarta | Kuala Lumpur PACIFIC Melbourne | Mumbai | New Delhi | Seoul | Shanghai Singapore | Sydney | Tokyo MIDDLE Abu Dhabi | Dubai | Manama | Riyadh EAST Copyright 2009, A.T. Kearney, Inc. All rights reserved. No part of this work may be reproduced in any form without written permission from the copyright holder. A.T. Kearney® is a registered mark of A.T. Kearney, Inc. A.T. Kearney, Inc. is an equal opportunity employer.
  18. 18. PDF ATK409079