The problematic posed by the organizers of this colloquium pose a number of issues to consider when looking at the economic feasibility of specialized and general channels. But first let me clarify the points from which I draw my own perspectives on this issue—and it is not from comprehensive research, the data for which barely exists anyway.

Despite my title as director of a university center devoted to a branch of broadcasting, namely television journalism, broadcasting research is not my academic concern. I teach young people how to practice TV journalism, not how to research it as a quantifiable social phenomenon. Instead, my perspective is shaped by two experiences and an ongoing association: a sabbatical year spent as managing director of ART's broadcast and production center in Avezzano, outside of Rome; my role as a founding member of the board of directors of CNE (Cable Network Egypt); and my association with a number of participants in this colloquium, either in the course of placing our graduates in the industry or by virtue of being an editor of the biannual electronic journal TBS (Transnational Broadcasting Studies), which frequently provides me with opportunities to interview leaders in our field.

As the problematic implies, the pioneers of pan-Arab and transnational specialized channel pay-TV broadcasting, ART and Orbit, have been paying a heavy price in ongoing financial losses for their pioneering role. Certainly pay-TV in the Arab world faces some very severe social, cultural, and political hurdles. In the Saudi and Gulf markets as well as Egypt (and from a demographic perspective this is the heart of the Arab market), there exists a market culture (in contrast to that of America and Europe) that is rather antipathetic to pay-TV. Saudis, Kuwaitis, and Emiratis by and large do not pay for culture, education, or even medical care. At a qualitatively smaller level the same is generally true, or has been true, for Egyptians.

So why pay for something like television, particularly in its mode as entertainment, that one is already getting for free within the context of a broad welfare state culture? Even in the United States when cable, the first form of pay-TV, was introduced experimentally, the superior sound and picture quality of existing free terrestrial channels that cable provided wasn't enough. Even Americans wouldn't pay unless they got something more for their money than what they got for free. That subsequent rush to quickly come up with cheap, easily available, easily assembled programming to save the cable experiment was the defining moment in the birth of the MTV and Nickelodeon channels.

The first of the privately owned Arab satellite channels was of course MBC, a general channel launched from London within a year of the Gulf War. It was CNN's coverage of that conflict, from August 1990 when the Iraqi army rolled into Kuwait to February 1991 when Kuwait's allies rolled the Iraqis back, that unleashed satellite dish fever in the Arab world, which until then had been an arcane, almost esoteric hobby of the very wealthy, the well traveled, and—at least in Egypt, which was seizing any dishes that showed up at Cairo International Airport pending legislation—the very, very well connected.

What is now frequently overlooked is that MBC had a resounding success in terms of quickly acquiring a significant share of the market, not because it was a general channel but because it offered something different, something extra, something specialized within the overall appearance of a general channel. That something different was news coverage, field reporting, real television journalism of the sort never seen or heard before in Arabic. This initial phenomenon is all but forgotten today, particularly because MBC, in its efforts to turn around and revive its fortunes, has increasingly shifted away from its earliest self-proclaimed raison d'etre of public affairs programming for more entertainment-oriented programming. But that in itself underlines my theme: for with the appearance first and somewhat briefly of Orbit's BBC Arabic TV news channel, followed in time by Al-Jazeera and ANN—all providing news coverage, field reports and lively politically oriented talk shows non-stop—MBC's news product, limited in viewing time by its position within a general channel, was greatly eroded.

But what should not be forgotten is that MBC rapidly acquired initially impressive advertising along with its high ratings. The problem with its lack of profitability, while it still had a sharp competitive edge in Arab broadcasting, had far more to do with its expansive, one might even say royal, manner of expenditure and excessive staffing. This is a management style it has been trying to rein in over the past two years, while at the same time shifting program content from public affairs to content that is as popular, as relatively mindless, but with more sophisticated production values than its competition in the free-to-air general channel competitive field.

In contrast ART, launched in 1993, had stabilized by 1995 as a satellite network of specialized channels that was initially free-to-air in the truest sense of the word, just like MBC (in contrast to the Nilesat free-to-air channels, which can only be seen by purchasing a Nilesat decoder). Anyone who had a dish could watch ART without spending an additional dinar or dollar. And by 1993, and even more so by 1995, satellite dish fever was already transforming the skyline of Arabia and the Emirates, and to a lesser per capita but still significant demographic point of view Egypt, which has half the population of the Arab world. ART could provide its rapidly acquired large audience with such specialized channels as movies, variety (drama and talk shows), music, sports and children's shows. Advertising revenue, if not sufficient to cover costs, was nevertheless significant and rising.

It was not so much that ART's programming was that much superior in production value to the national channels, but that there was so much of it, and in such variety, hour after hour, for the same price—in other words, at no additional cost. In the case of the Saudi and Gulf audiences, it was also programming with far more verve and sexual excitement than could ever be hoped for or found on the national channels. Suddenly there were Arab women to look at, lots of them, either singing and bouncing up and down or just simply being seductive in that broad "baladi" style that typifies ART's female presenters. ART's President Sheikh Saleh Kamel had occasional second thoughts about this (on several occasions I was involved with him in drafting dress codes that sought the best of both worlds, what might be called a seductiveness of relative modesty) and compared to ART's free-to-air Lebanese competition like LBC and Future, one must consider ART as a conservative force in the emerging world of Arab satellite broadcasting. But with its backlog of Egyptian movies that had previously been cut to ribbons by Arabian censors if shown at all, and with its pouting, prancing, visibly well-endowed presenters, ART was, for its original, basic Saudi and Gulf market in the mid-nineties, hot stuff indeed.

When ART went over to pay-TV and to digital, both representing confusion and significant costs for the consumer, and did so in that rather arbitrary manner that has until the past spring's management reorganization almost always characterized ART's marketing, distribution, and scheduling efforts, it failed to carry much of its free-to-air audience with it.

In the case of Egypt one could argue that this was because the difference in program quality between ART and the Egyptian national channels was not that great. Indeed in its formative years ART programs were often curiously inspired by Egypt TV's 1970s Arab perspective on broadcast production. But in Saudi Arabia and the Gulf there was another factor at play which increasingly haunts pay-TV specialized channels like ART, and to a lesser degree Orbit: the emergence of privately owned competitive general or specialized free-to-air satellite channels like LBC, Future and Al-Jazeera (which is private in management style and strategic intention if not in actual ownership). Future and LBC delivered entertainment with production values and sexual verve as great or greater than ART, and Al-Jazeera delivered Arabic language news coverage not available on ART or Orbit, and talk shows in greater quantity than Orbit and far more directly political than ART.

Ironically, ART went into pay-TV convinced that advertising revenues would never be sufficient to cover its extensive costs. But instead of cutting its unproductive costs it expanded them with highly staffed marketing and distribution operations that rarely seemed to get off the ground—or when they did, thanks to unique properties like special sports events or dramatic subscription price cutting, failed to sustain initial public interest. In those first years as a digital pay-TV operation, the costs of marketing soared without any significant corresponding rise in subscription income, and advertising revenue disappeared, except for the occasional in-the-clear successes like the 1998 World Cup. The irony in this situation is that satellite advertising revenue, which was analyzed as insufficient, was not in the mid-nineties a static statistic. It has continued to nearly double in dollars-spent nearly every year for the past five years, but little of that revenue went to ART after it opted for pay-TV.

As for Orbit, their basic marketing strategy was sound. They were delivering a product attractive to a small, well-traveled, bilingual and well-off elite who understood that one must expect to pay for quality. And there was no confusion in shifting gears, since Orbit launched as both digital and pay-TV from the beginning. But how much will even such an elite be willing to pay for quality? Orbit's initial pricing, particularly for its decoder, was so outlandish that the optimistic assumptions that there were 100,000 Arabs ready to pay several thousand dollars for a decoder distorted Orbit's business plan—just as their too-pioneering role in digital TV would soon stick Orbit with an obsolete MPEG system that could only be altered at great expense.

The problems of lack of differentiation in a highly competitive field and the cost of new technologies are not limited to pay-TV satellite television. In 1998 the Egyptian Radio and Television Union (ERTU) launched, at great expense, its own specialized or thematic channels: Nile News, Nile Sports, Nile Children, Nile Culture and Nile Variety. Except for Nile News none of these channels are particularly differentiated from ART or from the increasingly Arabized offerings of the even more upmarket specialized pay-TV channels of Orbit. Even Nile News, while representing something of an advance over Egypt TV's conventional general channel news coverage, still cannot compare to the news product of Al-Jazeera, ANN, or the occasional news bulletins of MBC.

The plan was to broadcast in the clear for three years, offsetting some of the costs with advertising revenue and then, having established an audience, swinging over to pay-TV. More to the point, the Nile Thematic Channels, now known as Nilesat Thematic Channels, are suffering the worst of two worlds. As a digital free-to-air network that is part of the encoded Nilesat bouquet they are not truly free-to-air in the same way that analogue satellite was in the early nineties when ART and MBC acquired their audiences. It is true that up until now no one has had to pay for a subscription to the Nile Thematic Channel network, but the far broader mainstream market of analogue dish owners in Egypt, aimed at Arabsat, are deprived of access unless they are prepared to digitalize their dish and secure a Nilesat decoder at significant cost.

Nilesat's growing number of viewers is a comfort to the pay-TV bouquets carried by Nilesat, specifically the ART Arabic bouquet and the Showtime English-language Western entertainment bouquet. Those viewers, still relatively few, are now growing rapidly and with ever-increasing vigor thanks to increasingly successful marketing efforts by both the MultiChoice Egypt-CNE DTH platform providers and by Showtime, with ART finally adopting similar successful strategies with the appearance of the Astra and with Showtime veteran John Tydeman as the new CEO of ART's marketing, distribution, and platform provider arm.

But Nilesat Thematic, as I stated above, has been caught in the worst of two worlds. It has not benefited from the growing pay-TV revenues that are being acquired by ART and by Showtime, and has never had the opportunity to acquire the large audiences that earlier-into-the-market free-to-air competitors have acquired. As a digital and Nilesat-encoded network it is not truly free-to-air; it has never had access to the large analogue market, nor has it the program differentiation opportunities initially enjoyed by its competitors. But that is about to change with its self-reinvention as a pay-TV network on Nilesat that will begin to acquire some revenue as well as liabilities.

Added to the problem of a culture socially conditioned against pay-TV, and the problem of ever-increasing popular free-to-air satellite channels both general and specialized, are the limits of pan-Arab ambition motivating ART, Orbit, and MBC, in that key ingredients in programming--music, soap operas, drama and even certain types of talk shows--still reflect strong local Arab cultural identities rather than a pan-Arab one.

It is the free-wheeling highly political talk shows, first initiated by Orbit's "Ala al-Hawa" hosted by Emad ad-Deeb, and now very much the brand image of Al-Jazeera, which are most successfully pan-Arab. But that broad cultural identity does not necessarily carry over into other spheres of production. Both LBC and Future are, by virtue of satellite, pan-Arab and transnational, but we could accurately describe them as supranational channels carrying Lebanese culture in the broadest sense to the hundreds of thousands of Lebanese expats working in Arabia and the Gulf. Presumably a privately owned supranational Egyptian satellite channel, with the same appeal to local cultural values but with more freedom and superior production values than available from ERTU's terrestrial and satellite channels, would also prove to be as successful. It too would appeal to the vast number of Egyptian expats who are far better off and far more sophisticated in taste than a per-capita equivalent sample back home in Egypt.

Nevertheless, there is some light at the end of the tunnel for pay-TV specialized channels. Showtime, which has slowly and steadily secured subscribers in both the Egyptian and Saudi-Gulf markets, is rapidly approaching break-even status. Of course Showtime has numerous advantages: it is offering Western entertainment, and its product is far superior and more up to date than the Western entertainment that is carried alongside predominantly Arabic programming by the national channels or the free-to-air satellite general channels. Showtime basically repackages Viacom products, so its production costs and concerns are minimal and its attention is very focused on marketing, promotion, distribution, and public relations.

But it does have a formula which responds directly to the problems I have surveyed, and to the degree that formula has been followed or even initiated in certain cases by its Nilesat subscription service providers MultiChoice Egypt and CNE DTH, it has been successful. [Editor's note: MultiChoice Egypt General Manager Khalid Abu Nuwar spoke to TBS about their marketing strategy and why it's a key reason behind CNE's success.] Following the recent major changes in management at ART that I have already alluded to, that same market strategy is now being followed by ART.

Showtime's strategy is to keep adding value without adding price, but at the same time never cutting price. Where the cost has come down is in hardware (dish, decoder, smart card), which according to both Showtime and MultiChoice executives removes the real barrier to entry. Program cost alone, according to this now successfully demonstrated theory, was never the real obstacle given the growing sense in the region of obvious value as well as immediate gratification. When Showtime launched in the region only a few years ago they had six channels in their bouquet: The Movie Channel, Paramount (American sitcoms), TV Land (American adventure shows), MTV Europe, VH1 (a somewhat more tasteful MTV alternative brilliantly established by MTV as its own slightly more upmarket competition), and Nickelodeon. Since then Showtime periodically adds new channels without increasing subscription fees: Bloomberg (business news), Style (a predominantly women's fashion and soap opera channel), Discovery, Hallmark (upmarket and family-oriented TV movies), Sony Entertainment, CNN, Turner Classic Movies and Turner's Cartoon Network. [Editor's note: since this paper was presented at the colloquium, still more powerful channels have been added: Abu Dhabi Sports, with its Italian League football and NBA professional basketball properties, and The Movie Channel 2.]

When Showtime departs from the formula of adding value at no added cost, it only does so outside of its regular package. Thus Showtime, partnering with Sheikh Saleh in his recent acquisition of the Euro 2000 football finals, established a pay-per-event channel, the Euro 2000 channel, with Arabic and English options for commentary and analysis.

In Egypt, where equivalent Arabic commentary was available on Egypt TV, the pay-per-event experiment drew a limited audience of English-speaking viewers. But in the Arabia-Gulf market the Euro 2000 channel was much more of a success, and that success indicates that if the market culture remains somewhat hostile to paying for ongoing television service, it increasingly understands that special events, especially sports events, justify special costs. Whether this attitude will carry over to pay-per-view movies is not clear--and perhaps doubtful, given the incredible amount of piracy still prevalent in the Arab videotape market, which will rob any pay-per-view movies on satellite of much of their otherwise timely appeal.

Showtime is about to become the first digital multimedia network in the Middle East, with a three-phase operation. Phase one, ShowCast, is already operative and being offered experimentally in Egypt and Kuwait, and again at no extra cost to full-bouquet subscribers. ShowCast is an Internet service offering Web pages selected by Showtime, and can handle between 200 and 300 sites. The service currently includes around 100 sites in five categories: entertainment and lifestyle, news, sports, kids, and Islamic culture.

The Web pages are automatically cached in the computer hard drive (connected by PC card to the satellite receiver) whether the computer is on or in standby mode. This is not true interactive Internet, but it is super-fast, family-friendly Web browsing--and sufficient for many users, since surveys show that most Web users rarely go to more than 16 or 17 sites on any regular basis. Added to that are three TV channels--CNN, ANN, and Bloomberg, plus a real-time Microsoft ticker tape of stock exchange information--which are Internet-delivered onto the viewer's PC--and this is not cached viewing; these are real-time video-streamed TV channels.

Interactivity is available at added cost. That's ShowNet, and the cost is $60 a month for fast, always-available basic Web access via satellite, but using local ISP and telecomm facilities to access the service. This way Showtime is not cutting out the local telecomms from participating in the profits, and is allowing those telecomms that chose to do so to filter website requests.

Added value, product differentiation, almost always at no extra cost. It is a never-ending strategy, not a tactic. And by this time next year, Showtime will extend its ShowNet capability to a set-top box that will deliver Internet into the satellite-connected TV monitor, making the Internet easily available to the hundreds of thousands, if not millions, of Egyptians who own TV sets and satellite dishes but not computers--or those who, if they are not already linked by a dish to satellite broadcasting, are far more likely to subscribe to Showtime than to buy a computer. And that will be another world, a potential communications revolution in the expansion of new media in the Arab region, and just possibly worthy of another paper.