Report originally presented by Nick Grande at CABSAT 2009 (Dubai WTC 4th March 2009) The report was subsequently published by Arabian Business (see http://www.arabianbusiness.com/551725-the-silver-bullet-for-mena-hdtv), Broadcast Middle East magazine and the Inside Satelllite TV newsletter

1. Email- info@channelsculptor.com
FIFA World Cup 2010:
The Silver Bullet for MENA HDTV
A ChannelSculptor Report
All Rights Reserved
Nick Grande
Managing Director
ChannelSculptor FZ LLC
PO Box 502829
Dubai Media City
United Arab Emirates

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HDTV is a certainty. It’s not a question of whether, but of how it will succeed - and who will
take the spoils.
This report asserts that the FIFA World Cup 2010 is the only stimulus in the MENA region
that can prevent HDTV broadcast over satellite from being consigned to the history books
within 5 years by the regional Telco’s.
With over 98% penetration, pan-regional satellite TV is currently the only game in town.
By contrast, less than 1% of MENA TV households watch digital broadcast provided by
domestic broadcasters (such as Etisalat’s Evision and QTel’s Mozaic). Things are ripening
for a change though: aggressive domestic Fibre and DTT initiatives around the region
mean that digital broadcast bandwidth (including HD broadcast) will be readily available
in most domestic markets in a matter of a 3-4 years.
Why is HDTV important?
What’s extraordinary about HDTV in the MENA region is that so few in the regional TV
industry have acknowledged how strategically significant it is. SD Satellite channels
currently have a monopoly over the viewership, but more and more of those viewers have
invested in HD-ready flat screens. Maybe viewers haven’t yet figured out what they are
missing, but it’s only a matter of time: How long did it take for digital cameras to replace
film, CDs to replace cassettes or for colour TVs to replace black and white?
22 million US Households* now regularly watch HDTV channels – that’s an increase of
over 40%* from a year ago. Europe still lags behind a little, but an internet search will tell
you that there are now 186 High Definition TV channels being broadcast by satellite over
Europe, including several dedicated movie and sports channels, as well as channels from
Disney, Discovery, Viacom and the BBC. The number is expected to rise to 600 by 2013 **
Zooming in on the MENA footprint, we see a different picture: HDTV has been at a virtual
standstill. Last year, there were three lesser-known channels being broadcast on BADR4
in MPEG4 HD. At the moment we are down to only two - Luxe.TV and Oman TV (not yet
launched but slated to broadcast in MPEG2).
I don’t want to sound too critical of the incumbent satellite broadcasters – having headed
up Strategy and Business Development for Showtime Arabia from 2000 to 2007 I am
familiar with the problem: HDTV has been sitting in the “important non-urgent” pile.
Priority goes instead to the instant growth opportunities / survival threats posed by
content bidding wars for football, movies and series franchises. HDTV is expensive to
implement and doesn’t deliver an immediate return: not an appealing combination,
particularly in the current economic climate.
The problem for MENA FTA and Pay-TV operators is that not dealing with HDTV opens the
door for a sea change – a move from the pan-regional satellite model to a domestic IP /
DTT model championed by profitable, government-backed and cash-rich regional
Telco’s.
Current MENA TV Trends
Over the past 5 years the number of MENA free-to-air TV channels has grown from 80 to
almost 400 and the price of programming rights has spiraled - but net regional TV
advertising revenue has failed to keep pace. A back of an envelope calculation indicates
that few if any regional FTA channels make a profit – the majority are funded by external
(often governmental) capital sources and are competing primarily for viewership and
status.
The regional pay-TV networks are also well funded, but they are private organizations and
historically have been more profit-oriented. The recent FTA explosion has changed this:

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Pay-TV networks now have to compete not only with each other, but also with FTA
operators who are aggressively acquiring the premium content rights normally reserved
for subscription services.
The result is what can best be described as Irrational Competition: regional broadcasters
(particularly FTA broadcasters) are pouring money into the market in the hope that their
capital resources can outlast the competition, and nobody is prepared to quit.
FTA operators will drive HDTV services but not viewers
Ironically, in an environment where FTA channels are haemorrhaging money, it’s actually
more likely that HDTV channels will be launched by them.
Outside of the cost of content itself, the main HDTV cost hurdles for FTA channels are:
1. Upgrading head-end infrastructure, and
2. Securing Satellite Capacity
HD/MPEG4 head-end costs have reduced considerably. Satellite costs may not have come
down, but they have remained reasonably stable. High definition infrastructure suddenly
looks like a bargain compared with the huge cost of movie and football rights!
It’s reasonable to assume that the wealthier MENA FTA networks (particularly
government-owned networks) will see the early launch of HDTV services as an
opportunity to enhance their status. As soon as one major network has launched in HD, all
the other major networks will be forced to follow.
The prospect of five or even ten major FTA channels operating in HD within 18 months
sounds rather positive for HDTV, but there is a catch: nobody will be watching them.
The Set-Top Box Issue
One of the first things to explain to newcomers to the MENA TV industry is that there is
almost no cable or terrestrial market here. There is instead a single satellite footprint, with
two largely equivalent satellite providers, covering 23 Arabic speaking countries and
delivering the same channel line-up to 300 million people.
TV viewing is homogenised from Morocco to Kuwait not only by channel options, but also
by reception technology. For over 90% of MENA households, television is a free
commodity acquired using a cheap set-top box purchased from the local souk. Such low-
end set-top boxes are incapable of running an electronic programming guide, let alone
MPEG4 HD channels. Even the 5% or so who subscribe to pay-TV services tend to use
their favoured brand of set-top box rather than accept the box supplied by the network.
This means that any HDTV channel launched on Nilesat or Arabsat is broadcasting to an
audience who cannot see it. For the average viewer to be able to watch HDTV, the cheap
MPEG2 box he purchased five years ago needs to be replaced with an HD-compliant STB:
Broadcasters somehow need to raise the lowest common denominator of regional set-top
boxes.
Pay-TV is the driver internationally for HDTV
MENA consumers don’t yet understand HDTV or its benefits. They are willing to be
educated in same the way they were about the merits of CD players or Camera Phones,
but this requires an example to follow. As with any consumer product, the HD-ready
MPEG4 set-top box has to achieve a critical mass in the marketplace before it can gain its

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own momentum. The first million set-top boxes to receive HDTV services in MENA homes
will seed the demand for next twenty million.
Here in the MENA region we are one of the late developing HDTV markets, which gives us
the advantage of seeing how it has developed elsewhere. The story is the same the world
over – subscription television is driving the growth of HDTV.
Euroconsult cites Pay-TV as the key driver for HDTV consumption in Europe, with over 38
million Pay-TV households receiving HDTV by 2013 - twice the number of FTA HDTV
households. The reason? Pay-TV providers have a direct two-way relationship with their
viewers, giving them the opportunity to supply and install HDTV hardware in viewers’
homes.
FIFA World Cup is the crucial stimulus in MENA Pay-TV
Orbit, ART and Showtime Arabia have all been operating for over 14 years in the region,
and yet they still haven’t achieved double-digit penetration between them. After a steady
period of growth in the early 2000’s, their development over recent years has been
largely checked by the expansion of the FTA sector.
If Pay-TV is the only way to drive take-up of HDTV services then on the face of it none of
the incumbent operators have the market influence necessary to support the technology.
However, there has been one extraordinary event in the otherwise mediocre history of
MENA Pay-TV. It not only electrified the regional market, but also set a new precedent for
Pay-TV operators around the world.
The FIFA World Cup is the most valuable television programming on the planet: so
essential that for many it is considered a basic human right, the television equivalent of
food. In 2006 ART did the unthinkable, and successfully encrypted it. Initially there was
outrage and disbelief, but this quickly turned into a buying frenzy. ART’s subscriber base
more than doubled with over a million new subscriptions in the 6 weeks leading up to the
knockout stage.
Sadly for ART, the World Cup 2006 only lasted for a month. Despite attaching the viewing
rights to a 12 month subscription package, ART were unable to convert the majority of the
surge of new customers into long-term subscribers.
Irrational Competition leads to Stagnation
By June 2007, when ART’s World Cup Subscribers were coming to the end of their 12-
month subscriptions, the competition amongst regional networks for programming rights
had reached epic proportions.
The most significant development was FTA network Al Jazeera’s move into traditional Pay-
TV territory by acquiring (for record sums) the rights to the Italian Serie-A, The Spanish
League and Formula 1. Al Jazeera’s the non-financial agenda was underlined when (in
order to comply with their content rights agreements requiring encryption) they charged
a nominal annual subscription: the price of a smart card. Showtime Arabia, itself facing
stiff competition in Movies and Series from FTA giant MBC, also stepped into the sports
rights war and acquired the English Premier League for an estimated $120m. ART was left
with the UEFA Champions League - which it lost to Al Jazeera the following year for
another record sum.
It’s hard to see how any of the regional operators can be benefiting, but these content
bidding wars look set to continue for the foreseeable future - both the regional FTA and
Pay-TV networks seemingly have bottomless pockets when it comes to programming

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rights. There have been several failed attempts at consolidation in the Pay-TV industry,
but the participants consistently fail to agree on each other’s valuations.
In this hostile environment, the strategic long-term development of HDTV over satellite
cannot take place and the satellite industry as a whole will gradually stagnate and
weaken.
The Prognosis for MENA TV
The development of HDTV in other markets demonstrates that viewership can only be
driven by subscription services.
In the coming 5 years, Pay-TV over fibre and DTT networks will become more accessible
in the region, but the content they carry will remain similar to that already offered by
satellite networks. HDTV provides the much-needed differentiator: Given the choice
between SD over satellite and HD over fibre, it’s easy to see how consumers with 42” LCD
screens could be persuaded to make the switch.
Once Pay-TV services are being consumed in HD over fibre or DTT, it’s only a matter of
time before domestic FTA services start to take shape, and we begin to see a more
permanent move away from pan-regional satellite TV.
The Solution for HDTV over satellite: Rational Cooperation
Nobody in the pan-regional broadcast industry stands to gain if HDTV over satellite
doesn’t penetrate the market, but the only way it will happen is through cooperation.
ART once again has the rights next year to encrypt the FIFA World Cup 2010. As we have
seen, this content will not necessarily secure ART’s position. However, through
cooperation on HDTV with other operators, the FIFA World Cup could serve a far greater
purpose - as a catalyst to bring the MENA Pay-TV industry as a whole out of its current
malaise.
Using the right HD packaging and pricing, supported by an effective marketing
campaign, ART could easily roll out a base of 500,000+ households using HD-capable
MPEG4 boxes – all pointing to a range of satellite frequencies carrying HD content.
The FIFA World Cup creates the critical mass required for HDTV take-up, but this gives
way to a sudden void at the end of the month-long competition. Premium content must be
available to fill that void – and that means commercial cooperation with the likes of Al
Jazeera, Showtime Arabia, Orbit and perhaps even MBC.
The barriers to cooperation are not confined to the egos of the parties, or to commercial
negotiations involved in rights sharing. There are technical hurdles as well, such as ART’s
move to Viacess encryption and away from the Irdeto system currently used by the other
Pay-TV operators. These issues are complex, but they are all surmountable if the parties
choose to work together now to solve them.
Conclusions
HDTV has been overlooked by regional broadcasters, but all the international evidence
suggests that they need to wake up fast. It’s not enough simply to broadcast channels in
HD (although some FTA players will) – HD-capable set-top boxes need to reach critical
mass in the market, and the only way to achieve this is through a Pay-TV network
packaging compelling HD content with the hardware needed to receive it.

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Through its rights to the World Cup 2010, ART holds the best opportunity to introduce
HDTV to the region. By bundling a MPEG4 set-top boxes into a range of World Cup HD
packages, ART could introduce 500,000+ HDTV viewers in the MENA region, and break
the seal on the market.
ART does not have sufficient premium programming rights by itself to support a high-end
HDTV package, so it would need to find a way to break the regional deadlock and work
with other regional content owners for the initiative to succeed.
Time is short, and the World Cup comes but once every 4 years. Unless this opportunity is
seized and a critical mass of MPEG4 boxes is introduced into the MENA market, HDTV
over satellite and even perhaps pan-regional satellite TV itself will be usurped by new
methodologies such as IPTV and DTT, controlled by Telco’s and domestic governmental
entities.
* In-Stat
** Euroconsult
Nick Grande is the Managing Director of ChannelSculptor FZ-LLC, a Strategic
Consultancy working on behalf of new and existing regional and international
television businesses. Clients include the Government of Ajman and Abu Dhabi’s new
Media Zone, twofour54. Nick was the Launch Director for MTV Arabia in 2007, the first
channel of the award-winning Arabian Television Network (ATN). Prior to setting up
ATN, Nick was Strategy Director at Showtime Arabia (1999-2007) and Network
Production Business Manager at MTV Networks Europe (1996-99).
For further information relating to ChannelSculptor, please contact
info@channelsculptor.com
Except where noted, the contents of this article are proprietary to ChannelSculptor FZ-
LLC

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