Extracts from a discussion held with mass communications students and faculty at the Adham Center for Television Journalism on March 6, 2000, on the occasion of Gulf DTH/Showtime President and CEO Peter Einstein's appointment as an Associate (honorary faculty member) of the Adham Center.
Peter Einstein: Egypt and the Middle East are going right now through a digital revolution for satellite television, pay television and ultimately for things like pay-per-view, Internet services and other future developments. The Middle East is one of the few markets in the world that has grown as quickly as it has and is developing into a digital television culture much more quickly than virtually any other market in the world. For example, the UK, where there has been a large analog TV market growing for the last 10 years, has just now in the last year started converting to digital. Here in Egypt and the Middle East generally we never really went through a pay TV analog market but went from local television to satellite television in the free and clear immediately into the first introduction of digital pay television. So, conceptually and technologically the Middle East is already ahead of the game in terms of offering digital and what that holds for the future. I think in and of itself the Middle East will become, and is already becoming, a market unto itself like Europe or Asia, or even the U.S. Certainly in terms of commerce we see that things are going private everywhere. Egypt is taking the lead in this in many respects, and entertainment is no exception.
Why is digital so important? Because the offerings you can make available to the consumer is multiplied many times over when you can compress signals into a digital format. With the old way of broadcasting in analog, you needed a full transponder space to broadcast one signal. Now you can compress many signals and not only TV signals but audio signals and eventually all sorts of offerings through the Internet and e-commerce, etc., which will be available via satellite. So satellite capacity is being used in a very different way, in a much more cost efficient way, to bring people from what used to be 10, 20, or 30 offerings to eventually hundreds of options for viewing, interactive services, shopping, banking, and so on. Right now were starting off by delivering entertainment services to the customer, but I think within the next year to 18 months, with the convergence of technology, you will be able to do everything from view entertainment services, send e-mail, log on to the Internet all from one place. That's what we're working towards right now.
Satellite TV generally, and other new technology, is still very much in its infancy in the Middle East, where there are 25-30 million possible TV households from the Gulf all the way across North Africa. Of that, we have a few hundred thousand subscribers, so there's huge growth potential here in the region for all these kinds of services. That's why we're very happy to be here in the beginning, so we can grow along with it as the explosion happens. The digital revolution is happening. People are going out and buying boxes that take digital signals, not only for Showtime but also for Nilesat and free-to-air services that are all available in digital. The whole market is really converting from what was a 8-12 million home analog market to a digital market, and it's happening at a very rapid pace.
Q: Can you talk more on this issue of Internet and satellite, generally, and in particular how Showtime might develop its services?
Einstein: We all hear about e-commerce, e-this, e-that. It's intimidating for a lot of people you see particularly in the U.S. Internet startups where people put together good ideas for doing business over the Internet, do a public flotation and make millions of dollars and people can't understand how this could be but it's been a long time in development. America Online, for example, has been in existence since 1985 but nobody even knew Steve Case's name until maybe four or five years ago. It's mind-boggling what's happening.
But very simply e-commerce is just simply a different way of doing business. Instead of by phone, fax and personal touch you can do business, buy things, sell things, get information about things whatever you want virtually from your home or from anywhere as opposed from having to be in a specific location. Many people in cable operations around the world are investing in high speed fiber optics to deliver that information to the consumers, to be able to offer entertainment, phone services, Internet services, virtually anything they want. The other way to do this would be through satellites on a direct basis. And that's the business that we are in. Already in existence today is the technology where by you can offer everything phone service, Internet service, entertainment options, pay-per-view, video on demand, shopping, banking through one source, one device. What we want to be is a software driven company whereby we're going to be offering services that will use this technology. That doesn't mean we're inventing e-commerce solutions; we're going to be partnering with others to be able to offer these services and bring them to the Middle East as quickly as they are available in any other part of the world.
Q: What about wireless Internet? How will things transition to wireless?
Einstein: Right now you get your Internet through your phone line, and that for a time will be the return path, through an Internet service provider (ISP). But the receiving and downloading of information is definitely already available on satellite. Eventually it will be two-way; there will also be a return path directly to the satellite to bypass phone lines altogether. But the main thing where the consumer is concerned is that it all can be done in one location around your house, which I think is the most amazing thing.
Today, for example, Sky Digital in the U.K. is offering a service through an Open TV platform. Open TV is the technology that enhances your decoder for other service options; the consumer has keyboard that they use to type emails through your decoder on your TV set and send them off. This type of service could virtually eliminate the VCR. Today there are boxes that, although not widely available yet, are commercially viable If you are watching a live movie, for example, and you want to go answer the telephone, you can hit the pause button and the decoder will continue to record the movie. When you come back you can hit the play function, and it will continue recording and streaming the video, acting as a VCR, but through memory as opposed to on tape.
Q: What is the time frame is for this kind of thing here in the Middle East?
Einstein: It's very hard to say. In some places this technology is available today. Within the year we will introduce some form of it to the marketplace; it will be software driven by Showtime, but also the hardware has to be available through dealers and distributors. We'll develop this over the next 18 months to 3 years. Consumer usage of this type of service is something that will grow over time, as people become more comfortable with it and understand the huge benefits it has for them. Basically our goal is to push the hardware and software into people's homes by making it affordable and easy to understand, and I think we have a long, long way to go before we get any kind of penetration that has any real significance.
Not everybody is going to participate in this. I think you need to get to a reasonable critical mass across the region to be able to make a business out of it. Egypt is one of the countries that will be adapting this early, and countries in the Gulf will offer the same thing. I think once that happens everyone else will follow; there is a huge potential.
Q: How is a concept like pay-per-view taking shape in this region?
Einstein: Right now we're offering of course great pay television products' movies and sports and general entertainment programming and I think that what we have been doing over the last few years and what we need to continue to do is to educate the market. There are different levels of TV enjoyment and entertainment that are worth paying for. I think a lot of people have started to understand this process by buying their first dish or decoder; people are becoming more familiar with the fact that with recent movies or high-profile sporting events they are going to have to pay a little something. That education in any market in the world, not just here in Egypt, takes a long time.
Q: Is there any kind of programming restrictions or regulations on your channels? Can you show any station you want?
Einstein: Yes, because we broadcast from the U.K. We're technically under the ITC regulations, but given the fact that no one in the U.K. can see us, we abide them as it relates to our marketplace. We do our own customization of our programming so it's appropriate to the region. We look at local sensitivities, what we think is appropriate for the whole family, what may be appropriate for children and what may be appropriate just for the parents. We do more scheduling appropriately for times of heavy viewership of the particular types of audiences as opposed to censoring.
For us our position is very clear: we bring the best of western entertainment to the Middle East. We want people to understand that we are scouring the world finding the best possible western programming there is, but that we are tailoring it for the Middle East. We subtitle most of our programming in Arabic so people can understand and participate, even if their level of English isn't very high. Most of our promos are in Arabic; even if the show is in English with Arabic subtitles, people will understand what the show is about so they can make their viewing decision. We try to make western programs feel comfortable for people who live here in the region. We schedule appropriately; we're not just beaming programming in from Asia or from the United States but acquiring the programming, assembling it and airing it at times when we know people want to be watching.
My time with MTV was very helpful in learning particularly about cultural diversity. With MTV in the States you're dealing with a diverse market, but still it's basically the U.S. I think the best experience was when I came to be part of the original MTV Europe team. When we went from just a few countries to over 37 countries, we had to be able to adapt MTV to bring the best of western music but also to adapt to the local markets and cultures throughout Europe. So that was a very good training ground. My goal has always just been to hire the best people to do the job and certainly we have an excellent team of people that run the Showtime organization, particularly out here in the region our regional general manager Cliff Nelson, who manages our whole Middle East operation, and equally important here in Egypt, our general manager Khaled Abou Zeid. They are doing an excellent job taking the Showtime product and making it relevant for those who live here.
We understand the viewing habits of our audience; we talk to them often and we understand their likes and dislikes and viewing habits. So we really do more appropriate scheduling of our programming than anything else. For example, during Ramadan we change our entire prime time to much later in the night; the traditional prime time might be 8-11 while prime time during Ramadan becomes 11-2 in the morning because people stay up later. We offer them the same programming they're used to enjoying at 8 or 9 o'clock in the evening, but later, because that's when they're watching TV. We had a very good response to that. We're more in tune with the market than doing any kind of censoring or restrictions.
Q: Who owns Showtime?
Einstein: Showtime is a partnership between KIPCO and Viacom (which owns MTV and Paramount) but the majority, about 75-80 percent, is owned by KIPCO, which is the Kuwaiti Investment Projects Company, the investment wing of the Kuwaiti royal family of Al Sabah. It's a happy marriage which serves everyone's purpose. Viacom has a pathway into a region where it can sell its products and service, and KIPCO partners with a powerful entertainment company to be able to bring whatever is available to the region.
Q: You mentioned that Egypt is one of the important emerging markets in this region. Have you considered opening studios here?
Einstein: I get asked that question all the time, but we don't do a lot of production. We could never spend the kind of money it takes to make great shows like from America or from the U.K. Most of what we do is acquisition and packaging, and this will probably be the case for the foreseeable future. I think eventually we will get more heavily into production, and at that point there is no reason why we wouldn't do it here in the region. As we say, our main goal is to be able to offer to our customers the best of western entertainment, including new and emerging technologies. That's more key for us than spending lots of money on production.
Q: Since your main market is the Middle East, wouldn't it make more sense, and be less costly, to transmit from here rather than from the U.K.?
Einstein: No, because we're partners with Viacom; it's very inexpensive for us to do the business in the U.K. If we had to transmit from certain countries we would be subject to censorship.
Q: Any plans to do a Middle East MTV?
Einstein: We do a music show called MTV Mashaweer. We can improve upon it but we need to have more market penetration before we can do that.