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View from Dubai: The Digital Future

DUBAI, UAE -- CabSat 2000, the 6th annual Dubai cable, satellite and broadcast show (Feb. 29-Mar. 2), generated plenty of fresh business as well as hard news from the region's broadcasters. Local hardware distributors all had smiling faces, largely from the much higher margins generated by digital receiver sales compared to the now depressed analogue market. Indeed, CabSat Dubai was altogether a livelier event than its 1999 predecessor, with trade visitors up some 25 percent.

The show was timely, not just to provide a snapshot picture of the state of the industry covering satellite, cable and terrestrial broadcasting, but also to finally screw the lid down on the coffin that was Sara Vision, the Riyadh-based MMDS that finally ran into the buffers in January. Sara Vision's collapse was yesterday's shock news, but as with broadcasters everywhere, they just turn their back on failure and look forward to the next hoped for success, while keeping a weather eye out for the next pitfall.

Locally based Emirates Dubai TV led the news pack with confirmation that it would launch a region-wide 36-channel DVB-T system shortly. The first six test channels went on air February 28, and according to EDTV chief engineer David Boxall, the currently free-to-air system is using Divicom and Hirschmann equipment, and being played out on Nokia boxes.

Riyad al-Shuabi, Dubai's special advisor on broadcasting, says the intention is to migrate the current 10-channel MMDS system to DVB-T, exploiting DVB-T's better transmission reach, tested to a 35-40 km radius of Dubai city. It is also quite possible that the system could extend outside this core area once more comprehensive testing takes place. The broadcast radius is key to the system's success because of the adjacent emirates of Sharjah and Ajman.

No decisions have yet been made on encryption or box supplier, and it is known that tenders are out for quotation. The existing MMDS system used Nagravision encryption. Boxall says DVB-T technology was chosen by Dubai TV because of its potential for including multimedia. Time scale for full implementation is around 6-9 months.

Hussein Anani, spokesman for Dubai TV, says while no decision had yet been made on the precise channel lineup, they would be concentrating on high-value premium channels. Al-Shuabi has also been busy with Dubai's Drama Channel added to the newly launched Dubai Sport and Business channels. Al-Shuabi is also leading a consortium of private investors backing two other digital channels. Travel, described by him as the world's first Arabic-language travel channel, launched at the show. It will be transmitted on Arabsat, Nilesat and Eutelsat. Travel will shortly be joined by a Tele-Medicine channel.

The launch timings for these are not accidental. Dubai is determined to carve out a broadcasting niche for itself, and there is intense competition between Dubai TV and local telco Etisalat. Dubai TV fulfils both a public-service role as well as commercially delivering pay-TV channels to the region. Meanwhile Etisalat, while running much later than expected (and scrubbing a launch date press conference into the bargain) with its 20,000 home cable system, nevertheless mounted an impressive display at CabSat. Dubbed E-Vision, Etisalat is promising a varied package of channels (basic, Arabic, Western, Asian, selective and a la carte) drawn from a 100+ overall bouquet which, says the company, will include PPV/NVOD movie channels.

Etisalat, in a statement issued at the show, say they will [pass] "a total of 100,000 homes by the end of year 2000." One local insider suggested this is an impossible target for E-Vision, adding "they have yet to decide on a number of key elements, not least a box supplier." Conditional Access will come from ViaAccess. It is also known that Pace Micro-Technology was having discussions with E-Vision, which suggests that the recent tender to box-suppliers is still open. If Pace were to win the contract it would see them re-enter a market they once led. Pace had its XTV products on show, which places a 19 GB computer-type hard drive in the set-top box capable of about 20 hours of video storage.

E-Vision say that in addition to the "many channels [which] are on board. discussions were progressing well with other channels and program providers to finalize our product offerings." Etisalat declined to list those channels although did confirm that they have assembled content for two of their own channels (documentary and kids). One channel, Bloomberg TV (which is already available on Showtime), did confirm they would be present on E-Vision.

However, this is something of a dilemma for all platform operators in what is now a very confused local market, with more than one trader suggesting this confusion extends to would-be subscribers. On the one hand you have the big four DTH players (Orbit, Showtime, Star Select and ART) each claiming high subscriber numbers, taking the United Arab Emirates comfortably to a 60-70% satellite market. In addition, there are redistribution outfits like 10-channel Dubai Cable Vision, which uses analogue MMDS, and which is testing the DVB-T system. There is also local entrepreneur Bond Communications which uses RF and IF to distribute SMATV-type signals to a large number of apartments and high-rises in the region, and which is already adding NVOD and impulse PPV to some of its properties.

Most channel owners have struck exclusive distribution contracts, either for DTH satellite or terrestrial retransmission. In other words E-Vision has to go cap-in-hand to existing rights-holders for the more popular channels. Orbit, Showtime and the others seem disinclined to give away their key channel assets without adequate fiscal compensation, and neither Dubai Cable TV or E-Vision have had any such conversations.

Dubai is the key market, but close by are the separate emirates of Sharjah and Ajman, each with transmission frequencies under their control, and with transmitters that already reach well into the rich Dubai territory. One insider suggested that one likely scenario sees rival DVB-T systems emerging from outside Dubai. It could easily happen, and in the process create even more vibrancy, and perhaps confusion in an already cluttered market.

One skeptic questioned why E-Vision hadn't structured its hardware and operational build-out to a single company using a normal "turn-key" contract. Non-performance would be immediately invoke penalty clauses, but today's broadcast system integrators are well used to bringing together different elements of a system and giving reliable guarantees on delivery dates and performance minimums. Instead, it seems Etisalat has attempted to create its own play out system, depending far too much on (probably) impressive hardware, and forgetting that subscribers do not watch technology, but programs.

In other words, their delays are allowing the satellite (and probably DVB-T) technologies to win through.

Orbit, Star Select, ART and Showtime all seem to be winning this battle, both locally and regionally. All claim progress, and Showtime's president Peter Einstein describes his winter sales performance as "spectacular."

But ART has confirmed that it has been considering quitting pay-TV. While no decision has yet been made on whether it will offer its five channel premium bouquet on a free-to-air basis, one channel (ART Music) is now available to anyone viewing Arabsat or Nilesat through a digital set-top box, the intention being to attract pan-regional advertising to the channel. ART is owned by Sheikh Saleh Kamel, with a minority holding (30 per cent) controlled by Newcorp/Mediaset investor Prince Al Waleed.

One, as yet unconfirmed, report suggests Prince Al Waleed has currently decided against further investments in ART, although Sheikh Saleh seems able to continue funding the operation. What is beyond doubt is that ART is by any measure well beyond its own five-year plan to break even, and profits seem as elusive as ever. ART celebrated its sixth anniversary at the end of November.

Making a living out of subscription TV in the Mideast still seems to be a nightmare, with rival outfit Orbit also finding it every bit as tough to make ends meet and now committed to switch operations from Rome to Bahrain, where the government is keen to attract broadcasters. At the same time, Orbit is shifting an increasing amount of new Arabic-language production to its new studios in Cairo. Orbit's three-hour daily Ramadan feed from Cairo was considered so successful that the network is now committed to producing another three-hour daily show, "Al-Qahira al-Youm" (Cairo Today) for its new Arabic-language channel al-Thalitha (third channel) which will launch May 1st. Several new weekly shows will also be produced out of Cairo for this channel. However, ART is enjoying success albeit outside of the region. Its North American operation is extraordinarily successful, at least by Mideast standards, with more than 60,000 "Arab bouquet" subscribers now claimed for the Echostar-backed "Dish" network. ART subscribers in Latin America, Europe and the Far East/Australia are also buoyant, with some 25,000 claimed in Europe (to the Arabesque bouquet, some 12,500 on France's TPS system).

ART is enjoying some subscription success in Egypt, with much talk in the trade of Egypt suffering box shortages thanks to aggressive on-screen promotion by Nilesat tenants, state-backed Egyptian Radio & Television Union (ERTU), as well as plenty of activity by ART and Showtime. However, even allowing for this modest success, it is unlikely that Mideast subscribers stand at much more than 100,000. The company is coy about revealing the actual figures; however, one local commentator suggested that without Saudi Arabia and Egypt's subscribers, ART could pack up.

But whatever progress is made in the subscription arena, ART's income cannot yet begin to get close to matching expenditure. A senior ART official put programming expenditure at $500,000 per day earlier this year, topping $180m/annum at one stage. Those losses/investments have now been curtailed, with significant changes to ART's senior management team, loss-making education channels dropped and a much greater attention to the bottom line perhaps a new experience for some of ART's senior managers.

Nevertheless, the expenditure continues. A new and in Cairo terms, "spectacular" $30m production center is close to being completed at Kafr al-Nasaar in Giza, near the famous Pyramids. Comprising two huge 500 square meter studios and a pair of 150 square meter sound stages, plus impressive editing and post-production facilities. The final bill, when the adjacent admin block is finished, is expected to be close to $50 million, and the site is designed to allow production to shift from ART's Avezzano facility, near Rome, "back to where our audience is based," according to an insider.

Reducing its dependence on Avezzano is likely to cost ART a small fortune. Italy has famously tough labor laws, and ART is currently facing some 78 lawsuits by disgruntled employees. The lawsuits represent a striking turnaround at Avezzano. Only two years ago, Avezzano was considered the showcase production as well as transmission center for ART, where professionalism and performance seemed paramount and where morale was high in contrast to the rest of a network organization well known for intense internal politics."But over the past year and a half there has been an exodus, voluntary and otherwise, of most of the seriously professional management. "Observers believe that Sheikh Saleh's recent recall of the acting managing director at Avezzano, Barig Siraj, and Siraj's subsequent resignation, is an attempt by the Sheikh to respond to the problem.

There have been other management changes within ART. Most recent and most dramatic was the resignation of Usama Jamjoum as head of Muxco, which handles marketing and distribution of ART channels. Effectively Jamjoum had become the second most powerful individual within the orbit of ART and ART-related companies. He has been replaced by John Tydeman, the founding CEO of Gulf DTH/Showtime and for the past few years the head of a MMDS setup company active in Africa. Tydeman reports directly to Sheikh Saleh.

More likely is that Avezzano will be retained, at least as a transmission and Mux center. But ART production chiefs recognize that ART's points of difference over its free-to-air competitors (currently more than 60 channels) must be boosted. Consequently, the coming months will see greater resources invested in exclusive sports, especially soccer, a huge driver in the region. Second thrust will be in new movie production, with around 15 movies now in various production and pre-production stages. ART consider this number to be the minimum slate for 2000, and they want the eventual annual number to be higher.

The new Giza studio complex allows ART to invest in more drama shows and long-form series, always highly valued by Mideast audiences who relish highly melodramatic output. Another benefit, according to Usama Al Sheikh, former general manager of ART and now head of ART's new studios at Kafr al-Nasaar, will be other production demands from independent producers in the region.

Showtime, however, makes much more hopeful noises, with talk of 200,000 subscribers in the air and the promise of profits soon. Their new promotional activity focuses on that most Egyptian of movie-star icons, Omar Sharif, as familiar to Western viewers as to locals. Showtime has just won carriage for CNN, plus Cartoon Network and TCM, each considered a valuable asset. Showtime largely exists on acquired Western programming, which it subtitles into Arabic and promotes in the Arabic language. It works, and they are making steady and sustained progress. In a recent exclusive interview Einstein says Showtime will move into profit sometime in this next year or so, and is promising some spectacular additions to the Showtime family of products, not least pay-per-view (PPV) movies and transactional TV. Indeed at the recent Dubai show demonstrations were held of tele-shopping services which generated considerable interest among visitors.

Speaking specifically about the Sara Vision debacle, Einstein says: "We have always traded in the Kingdom, but now that Sara Vision is finished and the dish ban seems to be totally relaxed it means we can aggressively market and promote. We have always been rather dependent on word of mouth, and with the potential that we have already achieved, and with pleasant noises coming from the ministry, we are ready to move ahead quickly. The first decoders already went in, and advertising and promotions have been booked. For example we have 1 million leaflets going out on (Kipco's milk company) cartons, and full page ads ready to go."

He added that Sara Vision's closure was no great surprise. "The whole concept was a good idea, four or five years ago. But the constant delays, and the fact that the company seemed not to be ready for launch for much of that time. Moreover it lost its support, and for an expensive nationwide system, that high-level support is vital." Asked whether much the same argument might be applied to E-Vision, Einstein replied: "This is different in that there is solid government support for the project."

But Einstein says Showtime has other tricks up its sleeve. "We want to exploit our Open TV platform, so I see us incorporating the ShowNet [internet by satellite] service into the platform, cross-promoting ShowNet. Then, and also high on our list, is adding the other services, interactive and transactional services, for example. And we are also readying ourselves for pay-per-view. I know the market has been talking about this for some time, but we have always held back until we had the right set of numbers. We want it to be an added-value service for viewers. But PPV needs a lot of extra satellite capacity, and if we could partner with Nilesat as well as the studios on a transactional basis, the this would be the right step, and we are having those discussions now."

He says that these services will become available shortly. "We want to move those discussions along, but as to timetable it is possible that it could be early next year. I do not see PPV as the driver, but I certainly see PPV as enhancing the overall offering. But so will transactional services, and ShowNet. They will all contribute. We are looking at all the different aspects, not least technical and engineering, banking, or course, and how we will run the call center and collecting the money, and how we can cope with a highly dynamic response rate."

It seems a new sports channel is also coming from Showtime. "Sports is high on the radar, and we will use the existing service, where Sheikh Saleh's ART plays an equally important part, as the foundation for anything we do. Looking at sport, and what is really appealing to viewers in the region...let me say that simply putting together a 24 hour channel might be a good marketing proposition but if you break it down to its component pieces we all know that 60% or 70% of that on offer simply isn't relevant. I am speaking to the Sheikh as to how we could move forward on other joint acquisitions, and making sure that the prices are kept sensible. There's no point in any of us bankrupting ourselves in the ever-rising spiral of sports. We capped our bid for the Italian super league and we were right to do so, not offering prices that were not financially viable. But we will acquire where it makes sense, and whether a 12- or 24-hour service we will be there, soon."

Perhaps the most interesting set of proposals revolve around e-commerce and Internet-based services which Showtime and sister-company ShowNet can now begin to provide. "We already know there is high internet traffic going on," Einstein said, "so e-commerce for the thousand and one products that could work in this sector are all interesting to us. This is going to be, in my view, an amazing set of services. We might partner with channel owners where it makes sense, or start our own services. We are not going to ignore business-to-business services, either. We are already getting up to speed, looking at the things that could be done today on the Open TV platform without too much extra effort. Some home shopping, banking, insurance, for example are all available through Kipco sister companies."

Einstein also confirmed that Kipco (Showtime's Kuwait joint-venture owner) is looking further afield. "We could look anywhere. Sheikh Faisal [Kipco's CEO] and I share the vision that this is, has been and will be a great market to be in. The Middle East is a whole market in itself, and one day perhaps, when the political issues with Israel are sorted out and it becomes a solid, single market, then it can be force like Europe or Latin America. Kipco is a global organization, and has many interests outside the Middle East. Each of those markets could be important, outside of the region. Kipco's media sector, which now includes ShowNet as well as ourselves as well as its cellular telephony interests, can all be harnessed as assets in other parts of the world. It might be that we will look at starting something up, either as a Kipco-funded entity or Gulf-DTH funded company depending on the situation. We could link in a overseas joint venture, perhaps with an existing player who might want access to the Middle East, and where we gain access to the foreign market. Or we could acquire, in markets that are in their infancy or where we might want to embark on a competitive venture. We are over the hump now, charging forward and able to spare some time to examine some of these options. We simply look at opportunities inside and outside of the region. Kipco and its board is very much outward in their thinking."

New channels are also coming from the highly popular "and controversial" Qatar-based al-Jazeera news channel. It is preparing two new channels, covering business news and documentary programming. The controversy comes largely from gas-rich Qatar's traditional adversaries, oil-rich Saudi Arabia. Saudi Arabia is alleged to have encouraged advertisers to boycott al-Jazeera, and whatever the truth in that may be, the channel manages to find itself banned in one or other Middle East states, all of which helps ratings.

About Chris Forrester

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Chris Forrester, TBS contributing editor, is a well-known broadcast journalist, with columns regularly published in Middle East-related magazines and newspapers. A frequent broadcaster, he is also author of "Digital television broadcasting—drivers for growth and pattern of uptake," published in June 1998 by Phillips Business Information.

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