An excerpt from a master's thesis submitted to the Department of Journalism and Mass Communications, The American University in Cairo, January 1999
Overview: Pay TV in the Arab World
In every nation of the Arab world except Lebanon, the national broadcasting systems used to be entirely government-owned. The old and former socialist regimes, including Egypt, Syria, and the Sudan, continue to maintain dominant state ownership of the media. However, beginning in the 1990s, many Arab countries decentralized and liberalized their broadcasting systems. While nearly every Arab country has its own state-funded channel on one satellite or another, the explosive growth of channels has mostly come from the private sector, namely, from the pay-TV companies.
It seems that digital pay television will be the fourth generation of television in the Arab region. The first was the introduction and expansion of the government-run terrestrial channels, followed in the late 1970s by the spread of video cassette recorders which allowed viewers to watch videotapes of material that was originally censored by governments. The third generation is direct satellite television with a variety of free-to-air channels. Now, the fourth generation, pay TV, which is in its infancy, may prove to have far-reaching consequences on Arab viewers interested in certain programming that is not shown on terrestrial channels.(1)
Only four years ago there was no subscription TV in the region. Today the Arab world has at least four networks competing for viewership: Orbit, Star Select, Arab Radio and Television (ART), and Showtime, each with a bouquet consisting of movies, sports, series and news.
Whichever package viewers subscribe to, they are all looking for the best broadcasting channels available in the world, and they want them as soon as they become available. Pay-TV subscribers in the Arab world, like anywhere else, know if the show they are watching is five years old, they refuse to watch three-day-old football matches, and they want up-to-the-minute news broadcasts.(2) Most of the pay-TV subscribers throughout the Arab world are well-traveled, affluent and multilingual Arab nationals, often studying or working abroad before returning to their families and countries of origin.(3)
However, even though pay-TV is targeted at the more affluent members of the Arab society, many critics of pay television have questioned whether or not Arab viewers are prepared to pay large sums—large even by Western standards—for their TV entertainment. Over two years ago, Middle East Satellite Today, in its Middle East Cable and Satellite '96 issue, asked this important question. A year later the magazine suggested the answer is a firm "no": significant numbers of potential viewers are still not signing up with their local pay-TV services.(4)
Pierre Daher, CEO of the Lebanese Broadcasting Company (LBC), believes the key to success is to have both a free-to-air and a subscription channel—and LBC does have a hold in both camps, with a subscription channel LBC Plus on the ART/1st Net bouquet. "Pay television will never replace free television," Daher says, "but pay television will take its niche. It has worked all over the world. Why should it not work here?"
But the CEO of LBC competitor Future TV, Ali Jaber, disagrees. "The Arab world is not ready yet for the concept of pay television, which will take at least three or four more years.(5) Future TV pulled out of the ART/1st Net bouquet in October 1998.
Pay Television in Egypt Today
Cable Network Egypt, which went on the air in early 1991, was the first private subscription TV service in the Arab world. [Editor's note: please see Dr. Joe Foote's article on CNE's history in the previous issue of TBS.] Although it is privately owned, the Egyptian Radio and Television Union is a major shareholder, and to this day the government does not allow other privately owned channels in the country. ART and Showtime bouquets are available in Egypt via CNE's satellite system.
CNE currently broadcasts on two systems: the first is "wireless cable," or UHF terrestrial encrypted rebroadcast, for broadcasting four channels: Super Sport; CNN International; M-Net (movies), KTV (Kids' TV) and MTV on one channel; and one channel of selections from three Showtime channels. The second CNE system is satellite DTH for ART/1st Net's Arabic channels and Showtime's Western channels.
CNE's cable system's subscription fee is LE80 [the exchange rate in Egypt is US$1=LE3.4] per month, and the decoder, reduced from LE800 to LE695, is currently sold for LE499, which can be paid in monthly installments of LE19. However, CNE is subsidizing each decoder they sell. If a subscriber pays his subscription fee six months in advance, he is given half a month free, and one month free if payment is made a year in advance. Non-subscribers also get to watch an hour of CNE a day on national Egyptian television from 8 to 9 pm, currently showing either Baywatch or The Bold and the Beautiful.
The main advantage of CNE's cable channels over the company's satellite system is that its decoder and monthly subscription fees are less expensive than Orbit or Showtime. But CNE's UHF terrestrial retransmission decoder can only be used in the greater Cairo area as far as the 6th of October City, some 16 kilometers from Giza, because the system uses ground aerials to transmit programming to subscribers.
ART/1st Net and Showtime channels can only be received with digital satellite television (DSTV) equipment, which consists of an integrated receiver decoder (IRD), CNE/DSTV smart card, and a 60-90 centimeter dish, which costs about LE1000. The IRD costs LE2000; it can be leased for LE500, but an additional year's subscription has to be paid in advance.(6) Orbit (along with Star TV) can be obtained in Egypt by buying a decoder, which costs about LE1700, and paying a minimum monthly fee of about LE170.
Annual subscription for ART's five basic channels is LE1150 (or LE115 per month), and subscribers pay an additional fee for each premium channel.(7) Recently ART introduced a special package for the Egyptian audience, by which a decoder and a one-year subscription to ART's five basic channels costs LE2600, or LE1799 for a three-month subscription. Each of ART's premium channels is priced individually: TNT at LE20 per month, LBC Plus at LE48, M-Net at LE48, and al-Ma'aref at LE17.(8)
The Showtime full bouquet, which consists of nine channels, costs LE199 per month; the mini-bouquet, consisting of the Movie Channel and two other channels, is LE149 a month.(9) The main advantage the IRD has over the basic cable CNE decoder is that the IRD can be used in any Arab country where Showtime and ART services are available. In 1998, CNE claimed 14-15,000 subscribers for the terrestrial Multichoice/M-Net bouquet, but some sources say the number is much lower. Even with a variety of offerings, CNE, after two years' efforts, admits it's having a tough time selling subscriptions. "It's very, very hard," said CNE General Manager Mohammed Abdul Latif.(10)
According to Showtime President Peter Einstein, "Satellite-delivered pay television is a new concept which needs patience and constant education to the public. I think once there is concentrated effort made from all sides, be it Orbit, Nilesat, or other participants, there would be no question of seeing increasing growth in subscribers, not only in Egypt, but also in the entire Arab region.
"In some parts of the Arab region, Showtime has taken off further than others. Egypt has been a slow market mainly because we had some logistical problems in getting our decoders here, and a lot of people were waiting for Nilesat to see what this thing is before they went ahead in making a purchase decision. But we have seen an increase in subscribers since introducing the leasing of decoders."(11)
Einstein, however, was quite realistic in his projections by stating that CNE "is not going to go into every home in Egypt, but there is a significant number of people in this country that can afford LE99 per month." He feels that it would not be unrealistic in the next few years to reach 100,000 subscribers. "If we get there," he says, "I will be a happy man."
It is evident that Showtime will have to put more effort into selling their package to the Egyptian market, especially since all the channels are in English. To overcome this, Showtime has started subtitling their Style, Hallmark, and TV Land channels.(12)
Showtime's full-time allies and part-time competitor ART has firmly laid its emphasis on Arabic-language programming. According to Mark Sorour, Multichoice's commercial general manager, "Our distinguishing feature is that we are providing an Arabic service to Arab viewers. The Levant, including Egypt, is a huge TV consumption market. It is crying out for programming that is culturally and socially acceptable. ART fulfills that function."(13)
Although it is difficult to get correct figures on the numbers of pay-TV subscribers in Egypt, some figures are available based on a survey done in September-October 1997 by the Pan-Arab Research Center. Out of a sampling of 4438 Egyptians, only 297, or 6.7 percent, had satellite or pay television. This clearly shows that the penetration of pay-TV in the Egyptian market is still quite low.
Problems Facing Pay-TV in Egypt
From the very start, pay television in Egypt faced problems that hindered its success. The first major problem was that CNE was losing both subscribers and potential subscribers daily to satellite services which were introduced in Egypt at about the same time CNE was launched. Egyptians quickly learned that they could get a lot of channels, both Arabic and international, by acquiring a satellite dish and decoder. In addition, if a SMATV system was available in the viewers' apartment building, then the cost of viewing the free-to-air channels would be even lower than the cost of subscribing to CNE.
The two most powerful constraints that limit the success of any pay-television company in Egypt are language and economics. From the language side, all of Showtime's and CNE's basic cable, as well as 70 percent of Orbit's channels, are in English. This may be the reason that ART's all-Arabic network got the highest share of viewers in PARC's 1997 survey.
Another critical reason for the lack of subscribers is economic. Urban poverty in Egypt rose from 30.4 percent in 1981 to somewhere between 36 and 49 percent in 1990. In rural areas the rise is even greater, going from 29.7 percent to between 54.5 and 64.5 percent in the same time period. In 1997 the per capita gross national product in Egypt was around US$1200. A year's subscription to Showtime originally cost around US$588 (and has since been only marginally reduced), meaning it would consume about half an average Egyptian family's income.(14)
But Hamdy Kandil, a communications expert and former UNESCO regional communications adviser for the Arab states, says the main problem hindering pay-TV in Egypt is that "these channels are not appealing enough to get people to subscribe. I don't see that these channels are offering something new, when compared to Egyptian television. Egyptians, like most Arabs, have been used to free television service for over 35 years, so if these pay television companies are expecting them to pay, then they must offer them new exciting programs. People throughout Europe and the United States were also used to free television, but pay-TV has been very successful there since the increase in competition among these pay-TV companies has led to better subscription channels and better packages offering over 35 channels. The failure of pay television in Egypt (and other Arab countries) has little to do with the wealth of the country, but is because the companies aren't offering viewers channels that are worth paying for."(15)
Chris Forrester, a journalist expert in the field of satellite broadcasting, concurs. "What makes pay-TV successful throughout the world is programming. Programming drives this industry forward. The problem in the Arab world is that most of the subscription companies don't offer better programming than that of the free-to-air channels." In addition, Forrester feels the programs have to be marketed extensively, and that this is not happening. "Pay-TV in the Arab world is a business that is simply not being run well."(16)
1. Amin, Hussein and Boyd, Douglas A., 1994. "The Development of Direct Broadcast Television to and within the Middle East." Journal of South Asian and Middle Eastern Studies, Vol. 18, No. 2, p. 50.
2. "Arab World Pay-TV Broadcasters Expect Good Return." Satellite Television, November 27, 1996, p. 5.
4. Forrester, Chris. "1997: Will Digital Survive?" Middle East Satellite Today, February 1997, p. 25.
5. Forrester, Chris. Digital television broadcasting: drivers for growth and pattern of uptake. Phillips Business Information, 1998.
6. CNE data, 1998.
7. ART data, 1998.
8. CNE data, 1998.
9. Showtime data, 1998.
10. Personal interview with Mohammed Abdul Latif, May 1998.
11. Personal interview with Peter Einstein, May 1998.
12. Showtime data, 1998.
13. Butter, David. "Battling for Arab Satellite Space." Middle East Economic Digest, November 1995, p. 4.
14. Forrester, Chris. "1997: Will Digital Survive?" Middle East Satellite Today, February 1997, p. 27.
15. Personal interview with Hamdy Kandil, 1998.
16. Personal interview with Chris Forrester, 1998.