The Arab World is at the dawn of a new entertainment era. Communication technology revolution and the expansion of new media in the region have led the way to the effective delivery of on-demand entertainment and introduced a unique opportunity for passive Middle Eastern viewers to become active users and experience the "fifth generation" of television.
After terrestrial television, considered television's first generation, then the spread of video cassette recorders (VCRs) in the late 1970s, representing a technological revolution in entertainment, a third generation was introduced with Direct-to-Home (DTH) reception of analogue FTA (Free-To-Air) channels able to reach 26 million households in the Middle East. More recently, subscription television (Pay-TV) with digital quality and a variety of channel packages constituted the fourth television generation.
Today, on-demand technology makes it likely that the curtain is about to rise on the fifth generation of television in the region. Instant gratification with total control is the key to future digital entertainment. Television and video enjoyment must not treat audiences as passive receivers of low-value services. The next generation of television and video services will be on-demand and fully interactive, providing maximum convenience to viewers and major opportunities for profit to service providers.
After years of expecting "the big next thing," Pay-Per-View (PPV) and other new on-demand services are being deployed aggressively in the market and at a pace that may be exceeding customer-demand projections.
The plans are ambitious, with the introduction of Showtime's Home Cinema, the new scope of Orbit's TV Max [see in this issue Orbit Announces New Channels and Services], Luxsat's all-in-one Super Box, and trials of other new products underway. Choice, convenience and quality are the new viewing drives. Major players have taken the initiative to introduce the first Pay-Per-Day (PPD) service in the Middle East.
Showtime's Home Cinema
Showtime, the leading digital satellite Pay-TV network in the region, was first in using and introducing PPV technology, a pioneering step that entailed both leadership and risk. Showtime's Home Cinema, a service allowing viewers to select the movie they want to watch when they want to watch it, was introduced in March 2002. Showtime subscribers can order the selected movie from a list of movies available during the week and watch the movie during the following day. The service offers 10 channels dedicated to first-run movies starting every 30 minutes throughout the day. The selected movie can be watched as many times as the viewer wishes from 9 a.m. until 3 a.m. the next day. The service is offered for US$ 4.00 per movie. To order, subscribers can either pay in cash in advance or use pre-paid cards and then call to activate their account and order the desired movie.
Showtime's lead in adopting and introducing the on-demand concept in the Middle East and North Africa, has raised multiple questions with respect to its strategies and role as a major player in the entertainment industry in the region. I took my questions to Peter Einstein, Showtime's President and Chief Executive Officer, and asked him to address the issues and provide his vision in regard to the PPV experience.
Abdulrahman: Such a leading step should have a certain concept and philosophy behind it. Could you explain what is the concept/ strategy behind the introduction of Home Cinema service? Was it for a marketing purpose, to upgrade existing subscribers from lower tiers to other expensive bouquets, or an added value, or maybe to attract new subscribers ?
Einstein: All of these! As Showtime has the most stable and technically advanced infrastructure in the Pay-TV business in the Middle East we had the opportunity to develop a multiplexed Pay-Per-View service to offer subscribers the very latest movies. Home Cinema is like having a movie theatre in the comfort of your own home, allowing you to watch the movies you want at the time you want to watch them.
Home Cinema is available to Movies Plus and Total Plus subscribers-it would be unfair to allow Sports Plus and Showtime Plus subscribers access to Home Cinema where they could cherry-pick the best movies without subscribing to the Movies Plus or Total Plus packages. The mix of Western and Arabic blockbusters on Home Cinema has proved a strong selling point for new subscribers and a real added value benefit for existing subscribers.
Abdulrahman: Could you shed some light on the strategy behind introducing Arabic movies in Home Cinema line up?
Einstein: More than 90 per cent of Showtime subscribers are Arab nationals-so it makes perfect sense to provide premium Arabic programming, which is why we have introduced new and exclusive Arabic movies on Home Cinema.
Showtime has always adopted a policy of providing programming appropriate and accessible to Arabs. That is why all our programming is subtitled in Arabic, why our scheduling is focused on prime time in Saudi Arabia (and channels are not simply beamed-in from around the world), why 50 percent of Showtime on-air trailers are produced with Arabic audio, etc. The addition of Arabic movies on Home Cinema is an extension of this philosophy.
Abdulrahman: Does this mean that Showtime has started to adapt a new strategy, after being positioned as "the leading provider of the best western entertainment" for many years?
Einstein: There has been a shift in the focus of Showtime to the best in world entertainment. We have always maintained that we would provide the best entertainment available, especially if the content is exclusive to Showtime. With so many free-to-air channels with some producing very good Arabic content, it is difficult to provide content that is exclusive.
Abdulrahman: Can you describe the Home Cinema subscriber's profile? Did Arabic movies prove to have higher buy-rates than western movies?
Einstein: The Arabic movies on Home Cinema have proved a tremendous success, with buy-rates higher than those of western movies. Key reasons for this may be that the movies on Showtime are uninterrupted by advertising and that they are directors' versions. The profile of Home Cinema purchasers is in line with the Showtime subscriber base.
Abdulrahman: Which markets proved to be the most adopting of and favorable to Home Cinema PPV service? Could you rank these countries?
Einstein: The key markets for Showtime are Saudi Arabia, Kuwait, UAE, and Egypt. The launch of the pre-paid Home Cinema card has proved especially successful in Saudi Arabia where there are still a significant number of Showtime subscribers paying by cash. The pre-paid card means that those subscribers can now easily make a spontaneous decision to watch a PPV movie rather than having to plan their moving viewing and pay cash in advance. Generally, movies in Saudi are strong, probably because there are no cinemas in the Kingdom.
Abdulrahman: PPV movie buy-rates reported by some international sources could be characterized as "none in double digits," even megahits and Box Office movies. How successful is PPV in the Middle East? Could you give an approximate buy-rate per movie or an approximate indication of activation percentage among active Showtime subscribers?
Einstein: The buy-rate for Showtime is increasing all the time-and remember that the service has only been running for a little over six months. For the first Pay-Per-View event-the Tyson-Lewis boxing match-Showtime recorded a higher buy-rate in the Middle East than that achieved in the United States, which is a phenomenal achievement.
Abdulrahman: How do you evaluate the service in light of the current penetration rate? Is it paying off as compared to projections?
Einstein: We are very pleased with the success of Home Cinema to date-and the figures are improving day by day and month by month. It is paying off because it provides subscribers with even greater choice and offers real added value content.
Abdulrahman: PPV will be closely aligned with Video On Demand (VOD) in the audience's minds in terms of technology. How different is Pay Per View from VOD?
Einstein: In many respects Home Cinema is a multiplexed VOD service. A subscriber's Home Cinema account is tracked through their unique smart card number and we have made it as simple as possible to immediately order a movie from the selection available. Our leading edge IVR (Interactive Voice Response) system takes the consumer through the options available and billing is made automatically either through the subscriber's credit card or debited from the Home Cinema pre-paid card credits. The IVR then automatically 'opens' the channels on the consumer's smart card which are showing the selected film.
Abdulrahman: From your own experience, what are the limitations and/or problems that might be hindering PPV growth?
Einstein: Cash paying subscribers were an untapped opportunity-until we launched the Home Cinema pre-paid card. With more transponder capacity we may look to further extend the choice available on Home Cinema and there are other opportunities to offer Pay-Per-View events, for example, especially after the success of Tyson-Lewis.
Abdulrahman: Pay-TV market has proved to be a highly competitive market, with some providers offering PPV and others providing VOD and interactive TV services. What is the market overview from your point of view in light of upcoming competition?
Einstein: Showtime is the market leader in Pay-TV in the Middle East and, to complement that, we have the most advanced technical infrastructure that we use to offer applications and services that consumers want. For example, we are currently rolling out our SmartTV range of interactive services that include a video mosaic, intelligent EPG, and video games.
Orbit television and Radio Network: TV Max
Also this year, Orbit Television & Radio Network, one of the main players in the Pay-TV industry in the Middle East & North Africa, announced the start of its PPV service. Packaged and branded as "TV Max," it allows the viewer to purchase access to pre-scheduled premium programming, such as exclusive sport events and big-hit just-released movies. The new service aims to enhance the viewing experience and give more control over the "what-to-watch" question. Launched in June this year, TV Max has featured some of the most recent Arabic and international blockbuster movie titles, such as 'Ayyam al Sadat,' 'Swordfish,' and 'Training Day.'
Samir M. Abdulhadi, Orbit CEO, stated, " The introduction of our TV Max Pay Per View service signifies a crowning moment in the modernization process of Orbit's digital technology. It also serves to highlight our continued quest to enhance the network's programming bouquet" [see in this issue TBS' Interview with Orbit's CEO].
Abdulhadi believes that TV Max has revolutionized the home entertainment experience of Orbit's subscribers, who have enjoyed viewing the very latest cinema titles conveniently delivered directly into their livingrooms a few minutes after ordering. Additionaly, according Orbit's CEO, and to further speed up the experience, the payment process for TV Max viewers is simple and trouble free and could be made simply by having their accounts debited on-line.
Abdulhadi states, "Now that TV Max is established, our next task is to meet the growing expectations of this cutting-edge service. As such, we intend to introduce over the coming months a new wave of innovations. The service will be soon expanded to eleven channels to broaden the choice of quality movie titles available to our customers. We will also introduce booking via TV remote control units, which will allow customers to order TV Max titles without having to leave their armchairs."
These innovations constitute a continuation of Orbit's deployment of the new generation of STBs and the switch to Digital Video Broadcasting (DVB). Orbit has transmitted in digital quality since its inception; however, the move to DVB will offer a better image and sound quality, as it is based on a more advanced technology than the one used in the past.
Envisioning the future:
In the immediate future, the region will be witnessing the appearance of new names in the on-demand home entertainment field offering their new interactive services with state-of-the-art STBs and new technology and trying to establish themselves among the market players.
LuxSat Middle East, founded in 2001, is a platform providing interactive TV services that plans to launch its multimedia on-demand platform in 17 countries around the Middle East-North Africa region. The platform will allow viewers to select from a menu of video titles whenever they wish. While the title is playing they have the option to pause, rewind or fast forward. The on-demand functionality should give viewers more of the programming they want, with more control over the time they want to watch and exactly the same level of control over playing as over a DVD. The service will be launched via Nilesat. While launch dates were previously announced for late 2001 and early 2002, commercial launch has been delayed for more than a year.
In an interview with Mohamed Osama, CEO of LuxSat Middle East, which claims to be the Middle East's leading multimedia on-demand distribution platform, Osama spoke about LuxSat's unique platform, the technology behind it, and future plans. Osama is also Founder, Vice Chairman, and CEO of Trans-Global Technologies, distributor of digital hospitality VOD/PPV. His entrepreneurial activities started with the founding of the "Multi-dimension Studio" in cooperation with T.N Communication. Dr. Osama is also a practicing plastic surgeon and directs a family business representing several multinational pharmaceutical and medical companies.
Abdulrahman: As an innovation, VOD is obviously the latest technology in home entertainment. It is also sometimes perceived as a premium over PPV. Could you shed some light on the VOD technology and how it works?
Osama: LuxSat is set to provide on-demand personal entertainment via Push Multicast Data Transmission Technology, a technology that gives significant advantages over traditional point-to-point convergence. The multicast technique consists of simultaneously sending data by satellite to end-users, a technique making LuxSat competitive versus other alternative VOD solutions like cable or ADSL.
VOD is not an extension or premium over PPV. It is a totally new approach to accommodate a unique lifestyle, with the drive to give the best quality and to avoid the free, non-revenue-generating model that has challenged the point-to-point technology. The viewer sends a request to the server, the server streams back the video content as many times as there are user requests and the access to content is instant, as it is already stored in the hard drive of the terminal. Digital content transmitted is stored on the box's hard disk and is available for instant viewing. However, digital content files are encrypted before transmission to avoid illegal copying of content.
Abdulrahman: What are you planning to offer to the viewers? And how is your service different than existing PPV services?
Osama: LuxSat is offering totally different entertainment solutions: Pay-Per-View, 3D graphic quality online gaming, internet browsing, e-mail, music-on-demand, and news-on-demand, with Video-On-Demand full interactivity while watching selected English, Arabic, and Indian movies; in other words, the viewer can pause, rewind, play, and fast forward the movie exactly in the same way the DVDs and VCRs are used. We are betting on the convenience of the service and the enhancement of lifestyle of people who can afford personal entertainment on demand.
Abdulrahman: Who are your business partners in terms of technology?
Osama: We have business partnerships with major technology providers worldwide: Microsoft, Intel, Compaq, 3 Com, and LuxSat International.
Abdulrahman: And in terms of programs and material offered to your viewers?
Osama: We have concluded agreements with major Hollywood studios for box office movies and with major Arabic and Indian providers for library titles, in addition to other independent film producers.
Abdulrahman: At a time when Pay-TV in the Middle East and North Africa (MENA) region has been pointed at as a slow market and major Pay-TV players are still working hard to acquire additional subscribers to their platforms in order to start making profits after many years of investment, do you think that introducing VOD to the MENA market is a wise decision ?
Osama: I agree with you that the last 10 years have indicated that Pay-TV is a slow market to pick-up and that was due to several factors; the first, is that some viewers were not ready to pay for what they watch on TV and were satisfied with the limited programming they have been offered by terrestrial local TV. Others, were satisfied with the some 40 analogue channels provided through analogue FTA satellite channels. It was not until viewers started to change their decoders, which was a hurdle, that the acquisition curve of Pay-TV came up in the past two years. I strongly believe that not only Pay-TV is picking up but also the games market is booming, when the international games industry is working around a figure approaching 7 billion US$. That should be taken into consideration as a major indicator that games, DVD, and home entertainment are absolutely booming and that now is the time for it. Having said that, we are after the big fish and we are working on acquiring up to half a million subscribers in the coming five years.
Abdulrahman: Based on your business objectives and strategies, who is your prime potential customer?
Osama: I will explain it further. Today, there are still 3 million viewers using analogue receivers; these are our potential customers. They will eventually move to digital entertainment, where they have various options: to move to FTA digital receivers, to subscribe to available Pay-TV platforms, or to get our unique all-in-one box.
Abdulrahman: Pay-TV audiences have been using various types and versions of IRDs [Integrated Receivers/Decoders] and STB since the introduction of Satellite TV and Pay-TV platforms. Could you give us a an idea about Luxsat's Set Top Box?
Osama: It is not an ordinary STB, it is a complete station connected to a satellite TV dish, operated by a simple handset. The station is an all-in-one satellite receiver, 3D games console, DVD, and audio CD player and Internet terminal, all operated with a remote control.
Abdulrahman: When are you planning to launch your service?
Osama: We have already started testing, with around 250 boxes in various countries in the Middle East. We can describe them as test accounts. Through these accounts we were able to test the robustness of the system, the quality of the service, and the friendliness of the box through the feedback provided by these accounts.
Abdulrahman: So that means that you will launch your service commercially soon? Based on your business plan, what is your commercial launch date?
Osama: The commercial launch of the service is not yet declarable. We are still in the finalization of legal issues in countries of operation.
Abdulrahman: In a market place like the MENA region, what are the limitations, challenges, or risk factors you are considering?
Osama: I cannot think of any risk factors or limitations but the affordability of the box. However, I need to emphasize that it is not an ordinary STB, it is a state-of-the-art all-in-one approach to family entertainment allowing viewers to watch instantly on-demand content with full choice, control, and convenience.
Abdulrahman: What is your vision and philosophy behind introducing VOD services in the region?
Osama: We are betting on the customer's convenience, instant control, and satisfaction. Our customers will enjoy a consistent experience. We have the first call center directly connected to the CRM [Customer Relations Management] application. Different portals will allow customers to be in easy reach of the customer center, which they can reach by phone, fax, e-mail, or through the web.
Interactive services become a key part of Pay-TV providers' strategic vision
In addition to offering movies on demand, other services will also be introduced. Home shopping, Internet access via television, e-mail, and online gaming figure among other potential interactive services.
Interactive television has been understood so far as simple entertainment, offering changing camera angles on a soccer match or tournament, participation in quiz shows and online games, plus the Electronic Program guide (EPG). In fact, however, interactive solutions could carry much more than entertainment services and offer a wide variety of business-to-business and business-to-consumer application services, plus educational facilities, distance learning, and much more.
While companies are launching new technology that will transform television, it will take some time for the consumers, or at least the majority of consumers, to learn about and get used to new ideas in using the applications and to use all the new features.
Smart TV is the interactive television platform launched by Showtime in June 2002. Services offered are limited to video games, EPG, and channel guide. However, the service will be extended to include news services, horoscopes, and other enhanced information services.
On the other side, Orbit has also joined the parade with their new STB and interactive Mosaic feature [see in this issue Orbit Announces New Channels and Services]. Orbit also has announced other soon-to-come interactive applications, including electronic games, but further details, such as the kind of gaming experience they will provide, are yet to be disclosed.
June also witnessed the commercial launch of Orbit's new Internet Via Satellite (IVS) service. Accessed through a separate 'black box' connected between the dish and PC, IVS allows Internet access at around 250Kbps, five times faster than a good telephone connection to the Internet. The service is operated independently of Orbit's TV services and will be soon available in all territories.
The Future promises a lot of movement
Media analysts forecast that the number of VOD-enabled subscribers in the United States will exceed 39 million in 2005, up from more than 800,000 digital cable subscribers now using such services commercially.
Though the case is quite different in the Middle East and no clear estimates are available for the region, next year the region is likely to witness additional operators launching their PPV/PPD and on-demand services targeting hundreds of thousands TV households and aiming at an audience looking for more convenience, control, and interactivity.
Once on-demand companies start in, the race will begin, moving aggressively to install digital STBs in consumer's homes. However, such changes require a lot more than just technology and innovation: content-related issues, customer retention, and customer service management are the real challenges lying ahead for newcomers.
In order to maximize revenues, high-profile content must be acquired for VOD platforms. The audience will not accept just "normal" content shown on other FTA channels and presented to them under another name. The audience is also very price-conscious, exposed to better programming than was the case a few years ago, and highly selective when it comes to paying to watch. Also, content offered via PPV and on demand must be suitable for Gulf tastes, preferences, and traditions. While no-one can deny the value of adding different types of content, library titles will not appeal to more than 10 to 15 percent of the audience; industry statistics indicate that that 50 percent of VOD buys are new releases.
Pay-TV has secured a limited audience in the Middle East. Optimistic voices come up with high expectations that on-demand services will be the fastest-selling product and that the potential is huge. In a region where the number of dish receivers is relatively low and at a time when satellite penetration in Egypt, for example, is at under 10 percent compared with 15 to 50 percent in the Gulf, it is difficult to predict the future of this new entertainment technology, especially with a market where only a small number actually pays for what they watch on TV.
Using satellite technologies, companies are rushing into 2003 with plans to launch their high speed, advanced technology on the Middle Eastern niche market. It seems likely that VOD will begin large-scale commercial deployment over the coming year and that 2003 will definitely witness success stories, new entrants, some who simply survive, and failures.
In an unpredictable market no-one can be sure which player will be left standing after the smoke clears. To survive, it will take more than the best technology or "big-name" business partners to succeed. It is the vision and a real understanding of the motivations and concerns of users that will lead to the success stories and point to which player will take the biggest piece of the VOD revenue pie.