Inexpensive analogue satellite TV gear introduced to the Arab world during the 1990s, and the even cheaper digital TV satellite technologies that have followed since the beginning of this decade, have been instrumental in short-circuiting a number of stages in the evolution of the TV distribution landscape in the Arab world. Access to such telecast technologies allowed the Arab world to make a swift leap from single into multi-TV channel environment without having to resort to cable distribution - as has been the case in much of Europe and the United States since the 1960s.
Cable TV distribution technologies have undergone slow but progressive developments since the 1960s, with digital terrestrial TV making inroads into many markets world wide, thus enabling the TV industry in Western Europe and the US to develop at a comparable pace. But in the case of the Arab world, just as the rapid proliferation of satellite TV has created many opportunities, so too it has imposed tremendous challenges, if not frustrations, which Arab broadcasters seem to have been unable to cope with.
Local cable distribution (affiliations) in markets like the US allowed national TV networks to harness both local and national advertising budgets. In contrast, the concept of TV networks with local distribution has yet to be put on the drawing board in the Arab World. The market's ecstasy at having access to pan-Arab satellite TV, as opposed a local (national) TV channels, seems to be have taken the Arab World by storm without any regard to the implications for the servicing of specific regions or local communities.
Arab satellite homes from the Atlantic all the way along North Africa and to the Arabian Gulf are catered to by an ever-increasing number of satellite TV channels that take little note of local or regional variations in TV viewing needs. The most overriding concern of pan-Arab satellite TV channels (PASTV) is to be on as many satellites as possible; many over-stretch their coverage to the North Americas and Australia even before being able to establish a viewing foothold in the market they broadcast from.
Most, if not all, PASTV are on multitudes of satellites -- Arabsat, Nilesat, Hotbird, Astra, and others -- without any knowledge of the level of penetration of any these satellites. Thanks to comparatively low digital transponder rents, being on multiple satellites constitutes an insignificant portion of overall operations costs. Industry insiders report that certain satellite providers are giving free rents. Many of the brochures of new PASTV entrants list the satellites they ride on with no information about viewership in any of the Arab markets.
Such a pan-Arab TV landscape poses a number of questions that still require serious thinking from broadcasters. How will the PASTV channels survive financially while spreading themselves so thin, given that most advertising budgets are still local, with the Saudi market still synonymous with the pan-Arab market? An equally serious question is the fate of what is considered to be state-owned national (local) TV channels -- given that most viewers are migrating to the PASTV channels -- both financially and in terms of audience bases? What would be the potential prospects of privately owned TV channels that might seek more local (regional) audiences, especially from a financial point of view, given that local advertising budgets across the Arab world are being squeezed out?
From the general public perspective, the rarely addressed issues are the following: are the 300 million Arabs spread across 22 states and living in dozens of cities and in hundreds of communities served best by dozens of PASTV channels that increasingly look very much alike? And what will become of television as a medium that has often been hailed as instrumental in the socio-cultural and economic process of underdeveloped countries?
Common history and cultural, religious, and political ideals aside, the Arab world is not one society; it is as fragmented as it can get. True, the pan-Arab media, especially the PASTV channels, have been instrumental in enhancing trans-Arab communication and interaction, but local and regional variations require that local and regional audio-visual media need to be given a boost for two main purposes. These are variations in local and regional communities' TV viewing needs, and giving better chances for local advertising budgets to grow and be channeled into television.
The current life-cycle path of the Arab TV landscape shows that it in no way addresses these issues. It is headed for both financial losses on the one hand and, on the other, depriving local Arab communities of local audio-visual media that mirror their concerns, expectations, and frustrations. The PASTV channels are increasingly becoming media that mirror pan-Arab issues and entertainment and a window to the world, but are shutting viewers off their own immediate socio-cultural and economic environments. Thanks to stale, state-owned, single TV channels, local TV has been associated with all the negative perceptions brought about by the Arab state-owned media.
For the more successful PASTV channel, any attempts at local adaptation are frustrated by the lack of local TV distribution mechanics in the Arab markets of the sort that exist in the US and Europe. In effect, this lack is likely to make the idea of regional TV networks with local TV affiliations a far-fetched concept. The ramifications of the persistence of such TV scenarios ought to be of major concern to broadcasters, especially in terms of the financial well-being of the TV channels, both local and pan-Arab.
Current advertising revenues generated by the TV sector in the different Arab markets illustrate the dominant presence of the PASTV sector compared to the local TV channels. In 2004, for instance, total advertising revenues of the TV sector (local and pan-Arab markets combined) amounted to $2.17 billion, which constituted a hefty 47 percent share of the total value of the advertising market in the Arab World ($4.6 billion at claimed rate card values). (See Figure 1)
The forceful presence of the pan-Arab satellite TV in 2004 totaled $1.6 billion and hence has dwarfed the national TV sector across all markets with a share of 74 percent, after which a mere 26 percent goes to the local TV channels of the ten Arab markets covered by PARC's advertising monitoring service. Local television stations in markets like Kuwait, Qatar, Jordan, Oman, and even Saudi Arabia and UAE are left nibbling on advertising crumbs. Indeed thanks to unlocked government coffers, local television channels have yet to be weaned off the mother-government and become more dependent on the private sector for financial survival. Nor are signs of such a weaning in sight.
In effect, it is not only the local government-owned TV channels that are financially vulnerable; the pan-Arab satellite TV sector as whole is also vulnerable. Irrespective of whether the TV channels are government or private owned, they find themselves in an increasingly crowded market with the prospects of real increase in advertising revenues slim at best. The pan-Arab satellite market remains trigger-happy nevertheless. Thanks to the rampant proliferation of digital satellite TV broadcasting and the low cost of being on satellite, the increase in the number of TV channels seems set to exceed the average annual growth of advertising revenues.
With advertisers wary about the size of audiences television can deliver for them, many of the TV channels are counting on revenues from SMSs and phone calls for subsistence. Revenues from interactive TV remain outside the scope of advertising monitoring. Unconfirmed reports indicate that Arab audiences are displaying positive disposition to SMS messaging. Some TV channels are already running as many as three scrolls on one screen. In such a crowded screen environment, there will probably be little room for advertising, if marketing efforts in this direction are taking place at all.
Pan-Arab satellite TV remains the most intriguing Arab medium in terms of the ability to shift the flab from lean adverting muscles. At face value it gained a 46 percent increase in advertising revenues in 2004 over 2003. But we are not in a position to estimate the real size of the increase, let alone estimate the actual size as these figures are calculated at rate card values, which some industry insiders ridicule as being inflated by well over two-thirds the actual revenues.
What is evident however is that taking the pan-Arab satellite sector as a whole, the 46 percent increase in revenues was accompanied by a greater increase in the number of advertising slots (60 percent). The increase in advertising space, where one advertising space is equal to one thirty-second advertising spot, grew at an even higher rate (66 percent).
The unequal growth rates of these three interrelated advertising measures indicate that overall average rate card value per spot in effect declined by 10 percent from $1879 in 2003 to $1690 in 2004. The 60 percent increase in the demand for TV advertising spots, countered by a 10 percent decline in cost per advertising spot, produces a media economics scenario that defies basic economic concepts of supply and demand.
The market forces that are bringing the rate cards down are many, not to mention the mushrooming in the number of TV channels that are willing to take a relaxed attitude. We need to bear in mind that this relaxed approach is very much perpetuated by the big market players as well.
The pan-Arab satellite TV sector is at cross-roads. While a few major players still expect double digit ratings for TV programs, as was the case in the limited TV channel environment of four or five years ago, they are perpetuating audience fragmentation through their fertile generation of thematic channels.
By virtue of their own nature, thematic channels are targeted media. It is not clear yet whether the advertisers are considering them as such, let alone whether these thematic TV channels have the mindset to market themselves as such. It may still take some time for the pan-Arab TV sector to break loose from the gridlock of mass audiences. Double digit TV program ratings were possible in the single TV channel environment. They were sustained to a large extent in a limited TV channel environment. But the multi-digital-TV broadcast environment has its own market rules.
Indeed, should the main PASTV channels count their audiences across the different Arab markets, those audiences would be significant, but such trans-market audiences will not impress advertisers, not even international brands, especially since most of the advertising budgets are still local. This in effect is the major week point in the PASTV channels as advertising media, especially when the advertising budgets are Saudi-based.
We currently are witnessing the continued rise of the PASTV channels, where in fact it is difficult to keep track of their numbers unless one keeps a close eye on the growing list of TV channels on both Arabsat and Nilesat. But in the thick of this hype, the PASTV sector may need more than wealthy businessmen or governments to keep their life support system on. If this is the case with the main PASTV channels, local TV channels are even more vulnerable, with the possible exception of the Lebanese and the Egyptian markets, where the advertising revenues channeled into local television remain comparatively large (See Figure 2).
The notion "Be pan-Arab or perish" will hold in the short run, but the market has become crowded indeed, while the advertising pie is not growing sufficiently in real terms. There is a limit to how much the Saudi advertising market -- the Mecca of all pan-Arab satellite TV channels -- can grow. In the short run the local TV channels are bound to continue losing ground, as are the prospects of growing the advertising budgets that would have naturally gone into TV had the local TV been able to deliver the desired sizes of consumers. This is happening at a time where the pan-Arab channels are not able to recover the lost ground.
Pan-Arab satellite TV channels will be able to recover such ground only if local TV distribution can be put in place. SamaCom, part of Dubai Holdings, has just launched its digital terrestrial TV telecast service in the UAE, which seems to have the potential of local adaptation of regional TV formats and contents. This is believed to be one viable solution in the absence of other forms of cable distribution such as exist in the US or Europe. Arab broadcasters need to search for solutions where they can strike a balance between local, regional, and international TV contents.
It is not by the contents of pan-Arab TV -- increasingly dominated by the US -- alone that local TV viewing needs will be met or the much needed local advertising budgets grown.