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Informa forecasts 9.2 million MENA pay TV households region-wide at end-2010

...return on investment (ROI) is a desirable outcome rather than an essential one.

The difficulty of course is that operations with a non-commercial objective compromise those with commercial strategies, as they have high costs but less compunction to make a profit.

They have lavish budgets but little chance of becoming financially self-sufficient. There are no signs of the non-commercial services being closed by their backers - putting the likes of OSN on the back foot in content auctions.

Fig. 2: MENA, pay TV subscriber growth by platform, 2005 and 2010

Informa's research (see fig. 2) shows that region-wide there were 9.2 million MENA pay TV households at end-2010 - giving a pay TV penetration rate of 14% of TV households. Turkey and Israel account for 5.6 million of these homes, or 60% of the total. Informa forecasts that the region will have 13.7 million pay TV subs by end-2016, representing 18% penetration.

Turkish service Digiturk is the MENA region's largest pay TV operator. Outside of Turkey and Israel, OSN is the largest full service supplier with half a million subscribers - although the AJS bouquet has more than a million subscribers. Other significant players include ART, although its subscriber base has been in decline, plus Etisalat’s operations in the UAE. Canal Plus Overseas had added a North African dimension to its sub-Saharan pay TV service, but it failed to find an audience and was wound down in 2H11.

TV advertising runs at about US$5 per capita in the MENA region compared with US$100 in Western Europe. Although the Middle East is unlikely to reach European levels in the foreseeable future, there is plenty of growth potential.

However, TV advertising is not growing as fast as the number of channels available, especially free-to-air ones. There were more than 500 free-to-air (FTA) satellite channels as of 1H11, up from just 100 in January 2004, although the signs are that the rate of growth is slowing. The major players feel obliged to launch thematic FTA channels as their core services come under threat from audience fragmentation. With so many FTA channels on offer, the incentive to subscribe to a pay platform diminishes.

So, while there are several positive factors emerging in the region's TV sector, the composition of the FTA market can still create something of a vicious circle: too many choices means lower average reach per channel, followed by decreasing average ad revenues. Higher programming costs and decreasing revenues means greater losses, which leads to lower quality programming that again decreases average reach.

See Middle East & Africa TV: 8th edition for further analysis and commentary.

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