Television’s business model Fit for a digital world: Middle East perspective B Contents

Foreword 1

About the research 3

Subscription video-on-demand: a complement, competitor and a channel 5

Broadcast sports rights: looking ahead to 2015 17

Television should not go short on long-form 23

Innovation: can the television industry compete? 31

Recent thought leadership 39

Contacts 40

Deloitte in the Middle East 41

Endnotes 43

Television’s business model | Fit for a digital world: Middle East perspective C Foreword

Television appears assailed by a range of digital Deloitte’s assessment of each of these areas suggests challengers: how is it faring in this environment? This that television remains in fine health, and its near-term report assesses television’s current performance and outlook remains positive. SVOD is growing fast, but is outlook given the following developments: currently less than two per cent of the European pay TV market, and an even smaller share of Europe’s TV • The rise of subscription video-on-demand (SVOD) revenues. Television remains the home of premium providers: will the broadband networks enable the sports, with rights values globally forecast to rise by 12 disintermediation of the traditional ad-funded or pay per cent in 2015 to $28 billion, following a double-digit TV broadcaster? rise in 2014. Long-form traditional TV content remains dominant relative to short-form in terms of viewing • Sports: does the rise of the Internet and the hours and advertising. The most viewed online video abundance of sports related information available clip ever, Gangnam Style, has been watched two billion from the Web, challenge television’s primacy as the times globally, every day two billion hours of long-form principal source of premium sports content? programs are consumed in Europe alone. Long-form ads generate about $200 billion annually worldwide, • Video clips: as the most popular clips now attain about 40 times greater than estimated revenues from ‘viewing figures’ in the billions, is short-form video video clips. As for innovation, the TV industry has long content finally toppling the traditional (thirty or sixty proven adept at exploiting a range of technological minutes) program length? advances, from video compression to lightweight drones. More critically the television industry has • Innovation: technology companies seem to delivered consistent innovation in its prime role – that dominate when it comes to innovation, launching a of storytelling. range of headline-grabbing products and services. Today, few TV broadcasters have sizeable research and development departments. Can the TV industry compete in the race to innovate?

1 Deloitte’s Middle East region assessment (found with still remains king. And in innovation, the GCC region’s dark green titles) across the same four areas also yields unique demographics, high smartphone penetration a similar near-term outlook for television in the region: and engagement with social media is driving innovative healthy and positive, but also with its own nuances. approaches to TV content idea generation, production SVOD is much smaller at less than 1 per cent of the and distribution. world SVOD market, but is growing much faster. Premium sports in the region are set to outperform Television has fared positively in an increasingly global sports in terms of growth (not in value as digital world, but should be neither complacent nor American and European sports will retain the largest unnecessarily distracted by the ever-changing digital share) for the second year running. YouTube has broken environment. the ice for short form in the region but long-form

Jolyon Barker Santino Saguto Paul Lee Managing Director, Partner and Technology, Media and Global Head of Research, Global Technology, Media & Telecommunications (TMT) Leader Global Technology, Media & Telecommunications (TMT) for Middle East Telecommunications (TMT) Deloitte Touche Tohmatsu Limited Deloitte & Touche (M.E.) Deloitte Touche Tohmatsu Limited

Emmanuel Durou Gareth Pereira Partner, Director, Middle East Technology, Media & Middle East Technology, Media & Telecommunications (TMT) Telecommunications (TMT) Deloitte & Touche (M.E.) Deloitte & Touche (M.E.)

www.deloitte.com/me/ibctv

Television’s business model | Fit for a digital world: Middle East perspective 2 About the research

About the research • Selected inputs from Deloitte’s proprietary Middle Deloitte has researched and written this report as part East publications, primary market surveys and of its support for the 2015 IBC Content Everywhere interviews with a range of Middle East industry MENA Exhibition & Conference event. players.

The research was led by Deloitte’s dedicated research Findings from the global and regional assessment are division, which consists of full-time research individuals presented side by side. Global findings are highlighted based around the world, and our dedicated Middle under light green titles followed by Middle East region East industry team, which consists of regional findings found under dark green titles. industry experts, working with Deloitte’s network of practitioners that service our technology, media and For further information about this research please telecommunications (TMT) clients. contact [email protected] and ssaguto@deloitte. com. Deloitte’s approach is to analyse the TMT sectors as an inter-related, inter-dependent ecosystem. Deloitte’s About Deloitte analysis of market dynamics for the TV sector is Deloitte refers to one or more of Deloitte Touche guided by our analysis of capabilities and limitations in Tohmatsu Limited (“DTTL”), a UK private company corollary sectors, such as fixed or mobile broadband limited by guarantee, and its network of member firms, networks, evolution of operating systems for mobile each of which is a legally separate and independent phones; economies of scale in screen technologies; entity. Please see www.deloitte.co.uk/about for a pricing models for mobile broadband; developments detailed description of the legal structure of DTTL and in processors; diversification of the smartphone form its member firms. factor; increases in satellite capacity. Global analysis, findings and trends were all assessed and tested Deloitte LLP is the United Kingdom member firm of independently in the Middle East. Results from our DTTL. Middle East assessment were compared to findings from the global assessment to contextualize the About Deloitte & Touche (M.E.) region’s relative positioning in each of the topical areas. Deloitte & Touche (M.E.) is a member firm of Deloitte Touche Tohmatsu Limited (DTTL) and is the first Arab Deloitte’s research approach combines qualitative and professional services firm established in the Middle East quantitative research. Deloitte’s TMT research team region with uninterrupted presence since 1926. holds many hundreds of meetings with executives in TMT companies, investment banks and industry Deloitte is among the region’s leading professional analysts. services firms, providing audit, tax, consulting, and financial advisory services through 26 offices in 15 Specific programs of quantitative research that have countries with more than 3,000 partners, directors informed this report include: and staff. It is a Tier 1 Tax advisor in the GCC region since 2010 (according to the International Tax Review • Inputs from an online survey of 2,000 nationally World Tax Rankings). It has received numerous awards representative respondents in the UK looking at a in the last few years which include Best Employer in wide span of TV consumption patterns and attitudes the Middle East, best consulting firm, and the Middle to TV. The survey was fielded by Ipsos and based on East Training & Development Excellence Award by the a question set written by Deloitte and Ipsos reflecting Institute of Chartered Accountants in England and inputs from industry executives. Fieldwork took place Wales (ICAEW). during July 2014. Respondents were sampled and weighted to reflect the UK adult population (16+).

• Selected inputs from Deloitte’s Global Mobile Consumer Survey, an online survey taking place in 22 countries. Fieldwork took place during May-July 2014.

3 Subscription video-on-demand: a complement, competitor and a channel

Broadcast sports rights: looking ahead to 2015

Television should not go short on long-form

Innovation: can the television industry compete?

Television’s business model | Fit for a digital world: Middle East perspective 4 Subscription video-on-demand: a complement, competitor and a channel

5 Subscription video-on-demand: a complement, competitor and a channel

Proclamations of doom by commentators about Our assessment is that the SVOD market will continue the future of television are easy to find. Every major to grow globally; and in some markets, SVOD offerings technological advance, such as the Internet and tablets may challenge established pay TV players. has prompted a flurry of misguided obituaries for traditional television. However, this progress should be put into perspective. There are thousands of SVOD services, of which only Traditional television’s current nemesis is subscription a handful may be commercially viable in the long run. video-on-demand (SVOD), a service that delivers SVOD will both compete with and complement other television programming via broadband networks1. This TV services, and TV broadcasters need to determine is seen primarily as a challenge to traditional pay TV just how much of a threat – or a partner – SVOD providers, but is also perceived as a potential threat to services may be. free-to-air broadcasters. SVOD competes for spend, as well as for on-screen talent, program producers and The Middle East SVOD market is much smaller, but writers, and viewer attention2. expanding much faster compared to other markets The local SVOD market is still at a relatively nascent Television-on-demand is a decades-old service. 2015 is stage, representing less than 1 per cent of the the thirty first anniversary of the first major video-on- worldwide SVOD market7. Even though the Middle East demand (VOD) trial in Europe, which was run by France is considered to be a high growth market, subscriptions Telecom in Biarritz and lasted seven years3. The trial for SVOD services significantly lag behind other more found that, while the service appealed to consumers, established Western markets. the fiber-to-the-home (FTTH) upgrade required to deliver the service was a cost that neither customers The challenge remains that the SVOD offering in the nor the carrier wanted to bear. region is as yet limited, especially when comparing the size and quality of the library of local providers (e.g. However, technology progresses steadily and untiringly. icflix or du’s On Demand Club SVOD service) with the Global connectivity speeds have increased at a double- likes of Netflix or Hulu. A windowing strategy is not digit rate year-on-year, such that the same millimeter- being effectively leveraged. With around 90-95 per thick copper strands going into homes that were good cent penetration of free-to-air TV channels across the for 19.2 Kbit/s twenty years ago can now deliver 100 region, there is also a considerable amount of free Mbit/s - albeit depending on the distance from the content available8. And with YouTube penetrating telephone exchange4. A constant two Mbit/s link may around 70 per cent of the regional population, SVOD now be sufficient to deliver video-on-demand to a TV will need to have a clearly differentiated proposition set at a quality equivalent to terrestrial broadcast; and to have a future here. This is compounded by little in in ideal conditions an 18 Mbit/s connection can deliver the way of rights management and little support for ultra-high definition (UHD) images. emerging regional independent production. These challenges beg the question: how can local SVOD With every year, SVOD’s addressable market players succeed in the Middle East? widens Faster and better broadband has made SVOD a The good news is that positive market indicators commercially viable proposition, and user numbers support the case for SVOD in the region. and revenues both appear to be growing rapidly. The best-known SVOD provider, Netflix, has over 50 million subscribers in over 40 countries5, and investors’ faith in the company is such that as at the beginning of The challenge remains that the SVOD offering in the August 2014 its market capitalization was over $25 billion, implying a PE ratio of 160. The critics have been region is as yet limited, especially when comparing impressed too. Netflix has 31 nominations (compared the size and quality of the library of local providers to HBO’s 99) in the 2014 Emmys for shows for which it is the distributor6. with the likes of Netflix or Hulu.

Television’s business model | Fit for a digital world: Middle East perspective 6 Currently, around 20-25 per cent of Middle East online video streaming, as much as 40-50 per cent in households have broadband subscriptions (around key GCC and Levant markets13, and consumer surveys 11.5 million households), 9-10 per cent have pay TV evidencing their willingness to pay a premium for a subscriptions (around 4.45 million households) of which high quality and differentiated content service. around 18 per cent are already subscribed to an IPTV service (around 0.8-1.0 million households)9. With all Given demonstrated demand and investment in these metrics exhibiting double digit growth over the infrastructure, we expect the market to follow global past 10 years, the region’s addressable market for trends, but at its own much faster pace. SVOD will only continue to grow and widen. Regional advances in FTTH infrastructure, primarily in SVOD is typically a complement, and rarely a the GCC, also reinforce this. Reports anticipate FTTH to substitute, for pay TV grow by 8 per cent per annum, to penetrate as much A first reality check concerns the motivations of as 17 per cent of local fixed broadband connections by consumers who subscribe to SVOD. The fear among 201810. existing broadcasters is that customers who sign up for SVOD will cancel their traditional pay TV service at Penetration of mobile devices, and media generation the same time – an action which is sometimes known and consumption over those devices is also world- as ‘cord cutting’. Pay TV packages often cost tens of leading in the region11, making multi-device streaming dollars per month. In Europe SVOD is typically priced capabilities a basic yet essential feature for any SVOD at a single-digit fee per month; for example, Netflix is service. priced at €8 per month in the Netherlands.

This fast improving technology readiness, albeit Deloitte’s expectation is that most customers will concentrated around the GCC, has led to the add SVOD to their existing pay TV content and will development of a fairly new local SVOD ecosystem, see SVOD as a way of adding to their existing suite with the emergence of its own set of players who are of programs, equivalent to adding a family pack or a experimenting to find a winning formula in this space: sports pack to a conventional pay TV package. We base this view on observed behavior in the US and the UK, • Broadcasters, namely beIN Sports, OSN and MBC, and the typical human preference for accumulating have all launched their own SVOD services to add to rather than choosing between alternatives. their portfolio of TV offerings (e.g. OSN GO). Indeed, Deloitte currently estimates at least 50 million • IPTV providers, whose subscriptions have grown homes globally, some ten per cent of them in Europe, 6.2 times since their introduction in 2006, will subscribe to conventional pay TV and one or more have introduced their own SVOD offering as a SVOD service. complementary viewing service (e.g. STC’s Shashati, du’s On Demand Club, Etisalat’s eLife ON, Ooredoo’s This is not an aggressive forecast. It extrapolates On Demand Clubs, Telecom Egypt’s TE Live, Umniah observed trends over the past eight years in the US and Jordan’s Apps & Fun Channels, Mobily’s mView). the last two years in the UK. In the US, as of July 2014 Hulu, Netflix and Amazon prime had between them • This is in addition to new entrants such as icflix (UAE) over 55 million subscriptions14, 15. Netflix has built up a and most recently MBC’s Shahid.net (UAE) stated base of 36 million subscribers over the past eight years; shift from a VOD to an SVOD model. Hulu has built a six million plus base for its premium service over the last four years16, and since 2011 • Players from Western markets such as Wherever Amazon has included access to TV and movie content TV are also offering SVOD services catering to Arab for its 10-15 million Prime subscribers in the US17. Over viewers. Even US SVOD giant Netflix has expressed an the eight years that SVOD services have been available interest to expand into the Middle East12. in the US, the number of US homes with pay TV has increased18. On the consumer side, there is demonstrable demand for SVOD services, illustrated by healthy penetration of

7 The complementary nature of SVOD is also shown by are consistent with those seen globally. For example usage patterns. Research by Nielsen has found that the average time spent by users on Shahid.net was 21 SVOD is only a small part of overall viewing: among minutes as of January 201224 versus an average of 187 the top 20 per cent of US viewers who used streaming minutes of time spent watching live TV in the same to get programs, their average streamed content was year25. VOD/SVOD activity in the region is therefore also 22 minutes per day, compared with an average of 242 a small part of overall viewing, as seen globally. minutes for their watching of live TV19. SVOD’s lower subscription costs may make it hard The UK, where services have been available since for it to compete for a wide basket of rights 2012, is the most mature of the large SVOD markets The ability of SVOD services to grow their share of in Europe. So far, the usage pattern of SVOD in the the viewing market will be a function of their content UK is similar to that in the US: the service is typically a budget. This in turn will depend on the revenues they complement, and not a substitute. A survey undertaken can generate, as well as the sales, production and earlier this year found that the 67 per cent of Netflix marketing costs. customers and 77 per cent of Amazon Prime customers also had pay TV20. TV programs are either leased through license agreements or commissioned by television channels In line with global trends, SVOD’s regional and program services. The more successful a series, or positioning is also more complementary than cast and production team, the more sought after it will competitive become, and the cost of its rights invariably increases. Effectively SVOD in the region can indeed be all of the above: a complement, competitor and a channel. IPTV The demand for good television content is at an all-time players (i.e. telecom operators) and pay TV operators high: there are over 350 scripted series in production already offer SVOD services as an add-on to their in the US currently, and a two-year wait for editors and overall service packages, relatively new SVOD providers script writers. such as icflix have emerged as possible competitors, and all SVOD services provide a new channel for In short, good television content is scarce and almost regional content distribution and consumption across always expensive. Netflix’s licenses for the first two multiple devices. 13-episode series House of Cards were reportedly $100 million26, and this did not include streaming rights in Of the three, SVOD in the Middle East is mostly a Germany, France and Italy27. complementary viewing service. The fact that viewers across the region have adopted online video in addition The best television talent also comes at a hefty price: to conventional television illustrates this. the recent pay negotiations for Big Bang Theory reportedly settled on $1 million per 22-minute episode SVOD’s complementary nature is also shown when for each of the three main stars, or $72 million in total comparing pay TV and VOD/SVOD usage patterns. for the 24-episode run28. Whilst VOD/SVOD uptake has been very fast, its increasing usage has not affected nor threatened the In 2013 estimated global SVOD revenues were $5.3 natural growth of pay TV services. For example, the billion; in comparison, spending on content in the user base of MBC’s Shahid.net service (originally a same year by UK TV channels was in the region of $10 VOD service but now migrating to a SVOD service) billion29. SVOD revenues are likely to increase, and their increased from 1.9 million21 to 3.7 million users22 from content budget should grow accordingly. However, the the end of 2011 to the end of 2013, almost doubling in total annual SVOD content budget is estimated at $13.8 size. Despite this fast growth, pay TV households have billion by 201830. Although this is a significant amount, maintained their steady incremental growth from 7 per it also sets a limit on potential revenues. cent to 8-9 per cent over the same period23.

The complementary nature of the service is also reflected in average user streaming patterns, which

Television’s business model | Fit for a digital world: Middle East perspective 8 Strategic partnerships in the region are key to consumers to add SVOD as a complementary service pushing the local content envelope to their overall telecom services package, accessible on The region in general has been suffering from a any internet-enabled device. Istikana’s new partnerships range of content gaps. There is a distinct lack of with Everymedia Technologies (including 200 premium supply in international English content from US or Bollywood film titles)33 and distribution partnerships UK programming available online in the region, with with Yahoo! Maktoob34 and Umniah Jordan35 also serve demand being fulfilled through other means such as as good examples of this. illegal downloads and streaming. SVOD is currently a small part of the pay TV Some of the largest content gaps in the region are also market and may remain so in the medium run in the supply of Arabic content. Arabic digital content In 2014 SVOD is expected to have generated revenues development should be a key focus, as the majority of of $950 million in Europe, which is only 1.5 per cent the population prefers locally produced, Arabic content of the $63 billion pay TV market in Europe, in spite of which is still in its infancy in the region. annual growth of 23 per cent in the prior year. SVOD’s share of the market is a little different when looking SVOD’s lower subscription fees but also relatively lower just at Western Europe, where the SVOD offering is subscription base in the region has made it particularly more mature: in Western Europe its share is 1.4 per difficult for local SVOD providers to expand their cent of pay TV spend36. Worldwide SVOD’s share is content libraries purely on a revenue-based budget. higher, at 2.6 per cent of the market. In addition, there is also movement towards online exclusive content yet this is still limited by production In the medium term SVOD is forecast to grow annually costs. through 2018 at double-digit rates, both in Europe and globally, but is still expected to remain a small part The most viable way to address this is to form strategic of the total pay TV market. By 2018 SVOD is forecast partnerships. Content developers, broadcasters, pay to generate $15.6 billion globally, of which $2 billion TV platform owners and SVOD service providers need will be from Europe37. This equates to four per cent of to work together to address not only content gaps all pay TV revenues globally and 2.5 per cent of the but also to maximize reach via distribution networks collectively. European market.

Some players have already recognized this and have It is worth noting that SVOD revenues are dominated taken steps in this direction. The recently announced by a handful of players. Total SVOD revenues in 2014 partnership between icflix and du serves as a good are estimated at $6.9 billion; Netflix and Hulu together example31. The partnership has enabled both to bridge are likely to generate over $5 billion, or about three- 38 and enhance their respective offerings, icflix in terms quarters of the total . of greater reach over du’s wide distribution network and du in terms of content from icflix’s portfolio of In Europe there are 3,600 VOD services39, and globally 7,500 hours of internationally-acquired content plus there are probably thousands more, many of them 35,000 hours of Arabic-produced content32. Priced generating revenues from subscriptions. So hundreds, around $8 (in line with global rates from providers or possibly thousands, of SVOD companies are sharing such as Netflix), the new combined offering enables just $2 billion or so in revenues.

Both local SVOD and pay TV markets are small, but SVOD has strong growth potential in the mid-term Content developers, broadcasters, pay TV platform At 9-10 per cent penetration (4.4 million households) the Middle East pay TV market is still quite small owners and SVOD service providers need to work compared to other regions, growing at most by a together to address not only content gaps but percentage point every two years. However, with online streaming already at 40-50 per cent penetration, also to maximize reach via distribution networks especially in the Gulf, there is much room for the SVOD collectively. market to grow.

9 The doubling of Shahid.net users within just two years • HBO, the US-based producer, is planning to expand (1.9 million in 2011 to 3.7 million in 2013, around 100 beyond the 60 markets where it currently operates, per cent growth) is testament to this. At this rate, user and target customers in any market with sufficient growth for Shahid.net is around 6.3 times the 15-16 per bandwidth43. cent growth of pay TV subscribers, seen over the same period. Over the next few years, standalone SVOD players will have to compete not only with the SVOD offerings Assuming all pay TV subscribers and VOD users also from existing broadcasters, but also enhanced VOD buy into SVOD services, this would imply around 80-90 from pay TV operators and terrestrial broadcasters44. per cent penetration of pay TV households by Shahid. net alone. This does not account for the more than ten Local television broadcasters and pay TV platform other SVOD providers in the region. operators are likely to follow suit with their SVOD offerings Although Shahid.net is still to launch as an SVOD In the Middle East region, existing broadcasters, pay provider, the rapid growth and scaling up of their TV providers and telecom operators also offer their captive VOD user base in any case illustrates consumer own SVOD services. Many have enhanced their service demand for online on-demand video content. This is offerings to meet rising consumer demand for high supported by the fact that online video consumption in quality, exclusive content. the region is one of the highest in the world. Notable examples include broadcaster MBC’s Shahid. The local SVOD subscription base could potentially net service, which has announced its transition from overtake that of local pay TV in the mid-term, if not VOD to SVOD and new pure SVOD market entrant earlier. However, this is subject to the development of icflix, who both have expanded their service offerings a viable local subscription model around on-demand through content production and reach via partnerships. content.

Traditional television broadcasters and pay TV platform operators are likely to expand their SVOD offer Most discussions about SVOD focus on new players in The local SVOD subscription base could potentially the TV space, most commonly Netflix, Amazon and Hulu (which has not yet launched in Europe). However, the overtake that of local pay TV in the mid-term, if not SVOD market in Europe includes services provided by earlier. However, this is subject to the development traditional pay TV companies and free-to-air broadcasters, many of which are extending their SVOD offer40. of a viable local subscription model around on- demand content. For example: • BSkyB launched its SVOD service in July 2012 with a movie service marketed under the NOW TV brand; in October 2012 it added an entertainment package; in July 2013 it announced a subsidized streaming box; by July 2014 the service was accessible via leading games platforms41.

• Pro-Sieben, a German pay TV provider, has recently launched an SVOD service, comprising several of its channels and aimed at the nine million German expatriates around the world42.

Television’s business model | Fit for a digital world: Middle East perspective 10 Case Study 1: Shahid.net transition from VOD to Although local SVOD offerings are expanding, they are SVOD45 still not anywhere near the level of mature providers such as Netflix or Hulu. Description: Originally launched in August 2011 for MBC group A simple benchmark analysis shows that Netflix has as a catch-up VOD service for their market leading channels, Shahid.net has seen a much larger portfolio of content (i.e. larger content widespread use across the region and now seeks to library), stronger windowing strategy (i.e. time frame monetize their proprietary content library through for latest releases made available) with exclusive first-air transitioning to an SVOD service. The SVOD service is rights and a good repertoire of originally produced expected to launch in early 2015. content (e.g. House of Cards) than local providers.

Services: This shows that the success of local SVOD platforms • Catch-up TV (original service) would depend on their ability to invest in premium • Switch from VOD to SVOD service (new) original Arabic content (to add as an exclusive part of • SMS news alert service (new) their content portfolio), and to offer the first window for • 5 min episode recap one day prior to airing (new) international content. This coupled with a vast library is • Multi device access on iOS & Android mobile the content strategy which redefined Netflix’s business devices, tablets, connected TVs, laptops, PCs (new) model, and could potentially do so for local SVOD • Content focus: proprietary MBC content (including players in the region. archived content no longer shown on TV) and content from others In the region, this strategy is most viably achievable and implementable through local partnerships between Statistics: SVOD providers and content producers. • Captive VOD users: 3.7 million (end of 2013) • Library size: +4,000 movies and TV shows SVOD platforms such as icflix have recognized this and Case Study 2: icflix as a relatively new SVOD have recently started to invest in their own original player content. This includes new Egyptian produced movies Description: a hybrid SVOD/ HIV and most recently Al Makida, with another 10 TVOD service launched across productions planned for this year48. platforms across the Middle East in late 2013. The service is targeted towards serving the local Arab In any case, the success of SVOD will therefore largely populations and expats around the world. depend on the ability of providers to offer all three elements of the proposition (i.e. vast content library, Services: windowing and exclusive original content) as Netflix has • Library access (original service) succeeded in providing. • “Just out of the cinemas” windowing service • Multi-device mobile and any internet enabled device (through partnership with du), Smart TV app (through partnership with Samsung and LG)47 (new)

Content focus: Arabic Jazzwood, Hollywood & Bollywood

Statistics: • Subscribers: c. 35,000 (last reported in Oct 2014) • Library size: +7,500 hours of international content, +35,000 hours of Arabic content. Equivalent to around 28,000 to 28,500 movies (at 1.5 hours/ movie) • Price: $8-10 per month

11 Figure 1: Benchmark of key local vs. global providers49 Name Size of Library Windowing Strategy Original content International SVOD benchmarks Netflix • Over 100,000 movies and TV shows • “Watch Instantly” service in the US • House of Cards show • Proprietary and licensed TV shows, documentaries enables viewers to see exclusive first • The Square show and other programs run movies and shows after cinema release or production (for shows) • Orange is the New Black show • Exclusive streaming of at least 54 shows after they • American Horror Story show air • Catch up on full season of TV show episodes shortly before premier of • Arrested Development show • Around $8-12 per month (depending on number of the next season (e.g. Breaking Bad) screens and quality: i.e. standard or high definition • Hemlock Grove show or blu-ray) • $200 million for a host of shows from the Marvel universe Hulu Plus • Over 2,500 movies and 1,650 TV series • Shows available exclusively to Hulu • Over 15 original TV shows (examples below) • Current season content from five of the six major US Plus subscribers and certain pay TV • Deadbeat show broadcast networks providers during the first 8 days after an episode’s air date (e.g. Fox shows) • The Next Step show • Over 900 exclusive library episodes from NBC on • Difficult People show Hulu Plus • Catch up on most recent episodes and seasons of TV shows (e.g. Arrow, • Behind The Mask show • Exclusive streaming of at least 29 shows after they Supernatural, Once Upon a Time, • East Los High show air Modern Family, Vampire Diaries, • Exclusive multi-year SVOD rights to several current Revenge) • Battleground show and future primetime shows (e.g. FX and FXX • Catch up on full season of TV show • Up to Speed show Networks: The Strain, Tyrant) episodes shortly before premier of • Casual show • First service to stream MundoFox premium Spanish the next season • Quick Draw show language content • A Day in the Life show • Around $8 per month Amazon Prime • Over 15,000 movies and TV shows • Catch up on full season of TV show • Reportedly spending over $100 million on • Exclusive streaming of 17 shows after they air episodes shortly before premier of original TV shows the next season (e.g. Hannibal) • Around $8.25 per month ($99 per year) • Over 5 original TV shows (examples below) • Certain episodes and entire shows • Creative Galaxy show can be purchased for download but not streamed after they air (e.g. • Alpha House show Breaking Bad, The Walking Dead, • Transparent show which are exclusive for streaming on • Betas show Netflix) • Annebots show Pure Middle East SVOD players icflix • 35,000 hours of Arabic content • New “just out of the cinemas” • HIV movie (Egypt produced) • 7,500 hours of international content (Jazzwood, movies to be offered on a • Al Makida movie (Egypt produced) transactional basis Hollywood, Bollywood) • 10 further original productions to be • Equivalent to around 28,000 to 28,500 movies • Around US$4-6 per film released this year (assumes 1.5 hours movie duration) • Catch up viewing • Around $8-10 per month Istikana • More than 3,000 hours of Arabic content • Catch up viewing • Content aggregator • Equivalent to around 2,000 movies (assumes 1.5 hours movie duration) • Includes Arabic films, TV series and shows (cartoon, documentary, entertainment, drama including dubbed shows) • Around $8 per month Shofha • Over 265 movies and TV shows • TV shows accessible on same day as • Content aggregator • Mainly Arabic classics and new releases international release • Around $1.68 per movie (buy 3 downloads) • First run views just after screening in Egypt’s movie theatres • Around $1.12 per movie (watch in 24 hours) • Option to buy content • Around $0.84 per movie (rent for 48 hours) • Catch up viewing

Television’s business model | Fit for a digital world: Middle East perspective 12 Name Size of Library Windowing Strategy Original content Broadcasters MBC: Shahid.neta • Over 4,000 movies and TV series • View archived content which is no • Proprietary MBC content. Largest producer • Includes MBC content as well as content from others longer shown on TV of Arabic and Turkish dramas (e.g. Arab Idol, The Voice) • Considering some windows with TV • Archived MBC content (e.g. first run movies and episodes before they are broadcast) • Catch up viewing OSN: GO • Over 5,000 hours of premium entertainment • Exclusive first run views after release • Invested in 15 new Arabic shows • Equivalent to around 3,333 movies (assumes 1.5 or production (e.g. deals with Warner • Includes new dramas and original reality hours movie duration) Brothers, Paramount, Fox, Disney, show (example below) • Includes Hollywood blockbusters, Arabic Sony, MGM, DreamWorks Animation • Mousameh Karim (reality series) productions, TV series and children’s content and Universal) • Around $10 per month • Catch up viewing beIN Sports • Over 13,000 live sports events (e.g. football, • Exclusive live viewing of sports • Sports news channel Connect tennis, basketball, rugby, Formula 1, baseball) matches • Complimentary sports programs (examples • Featured competitions: UEFA Champions & Europa • Catch up viewing of matches and below) Leagues, Top European Leagues (e.g. La Liga, Serie shows • The Express show A, Ligue 1, Bundesliga), AFC Champions League, • The Express Extra show FIFA World Cup & European Championships, Tennis • The Locker Room show Grand Slams, many more • 90 in 30 show • English Premier League (EPL) not included • Keys and Grey show • Sports Pass: $8.33 per month ($100 per year) • Global Pass: $10.83 per month ($130 per year) IPTV players du: On Demand • Over 2,000 Movies and TV Shows • Catch up viewing • Content distributor Club • Includes Hollywood and Arabic TV shows • Library consists of latest music videos, kids entertainment, TV lifestyle documentaries and classic Hollywood and Arabic movies • Around $8 per month STC: Shashati • Over 1,000 hours of movies and TV shows • Catch up viewing • Content distributor • Equivalent to around 666 movies (assumes 1.5 hours movie duration) • Latest Hollywood and Arabic movies, films, shows • Three packages: Shashati Movies, Shashati Series and Shashati Kids • Around $6-7 per month for each package Mobily: mView • Over 3,500 hours of movies and TV shows • Live viewing • Content distributor • Equivalent to around 2,333 movies (assumes 1.5 • Catch up viewing hours movie duration) • Over 60 live TV channels • Hollywood, Bollywood, and Arabic Movies, television shows, sports, latest news and updates • Around $9 per month • Starting from $2 per movie (rent in 48 hours)

13 Name Size of Library Windowing Strategy Original content IPTV players Etisalat: eLife ON • Over 2,000 movies and TV shows • Live viewing • Content distributor • Over 175-200 live TV channels • Catch up viewing • Includes English, Arabic and Indian TV channels, movies and TV shows • Around $8 per month (for channels) • Around $1-8 per movie (depending on popularity and release date) Ooredoo: On • Over 700 titles (movies, TV shows, music videos) • Catch up viewing • Content distributor Demand Clubs • Includes documentaries, kids entertainment, extreme sports action, Bollywood classics • On Demand Clubs: ABC Studios ($22 per month), Disney ($22 per month), On Demand Club ($13-14 per month), Al Jazeera Kids ($5.50 per month) • Around $5-22 per month (depending on club) Telecom Egypt: TE • Arabic and English movies and TV series • Catch up viewing • Content distributor Live

Umniah: Apps & • Around 30 Arabic movie clips and TV shows • Catch up viewing • Umniah Channel (otherwise content Fun • Around 20 TV channels (English and Arabic) distributor) • Music, comedy, news & sports, educational games, kids, apps, series, movies & theater • Around $2-6 per month per channel ($0.50-1.50 per week per channel depending on channel) a Although Shahid.net has been a VOD provider, it is included as a reasonable proxy in this analysis given its reported transition to an SVOD service

The addressable market for SVOD in Europe Of the 186 million homes with broadband, a significant A key constraint on the reach of SVOD providers is proportion may have a connection that is too slow broadband penetration. In Europe there are about 186 for streaming video to a television set. Homes in million homes with broadband. This may seem a sizeable rural areas are the least likely to have sufficiently fast market to address, but as of Q2 2012 Netflix had only connections. One of the principal factors that determine 14 million customers outside its home market50. So the the broadband speed for a house over a conventional number of broadband homes might indicate significant copper connection is its distance from the nearest potential for growth. However, not every broadband- telephone exchange. In the countryside, homes are connected home may be a potential client. typically a long way from their local exchange, and every hundred meters of additional distance from the While average broadband speeds are increasing exchange leads to a further fall-off in broadband speed. markedly year by year, variations in speed are becoming even higher. City dwellers tend to live closer to exchanges; but proximity does not guarantee a reliable, fast connection. In general, people prefer to watch television on TV The internet is a shared resource, and your neighbors’ sets: watching on smaller screens is typically a fall-back usage of this resource affects how much is available rather than a first choice. Delivering video to a TV set to you. At peak times there may be congestion, in high definition requires a five Mbit/s connection, and meaning that it may not be possible to watch video-on- consumes about three gigabytes per hour51. demand on a TV set (although you may have sufficient

Television’s business model | Fit for a digital world: Middle East perspective 14 bandwidth to watch on a PC or a tablet). In comparison With FTTH rollouts over the next few years, typical broadcast is a non-rivalrous service – the quality of a constraints concerning bandwidth would not necessarily broadcast television signal to your home is not affected be as much of an issue in terms of receiving a quality in any way by your neighbors’ viewing habits52. SVOD service.

Another factor affecting speed is the quantity of devices Further, the Middle East is forecasted to have 390 in a household. A growing number of individuals million internet users and six to seven connected devices own multiple connected devices, which may remain per household to reach 545 million devices by 2020, connected and using bandwidth even when not in primarily from the GCC54. This strengthens the potential active use. Devices may download photos, videos and subscription base and appeal of multi-device viewing apps in the background. A family with teenage children offered through SVOD. may well have ten bandwidth-sapping devices between them, all debilitating the quality of video-on-demand Both high mobile and a healthy 40-50 per cent online being watched on the TV. streaming penetration (which is likely to grow following FTTH developments), yield a large potential market As an SVOD provider’s subscriber base grows, it may for SVOD. Existing online streaming services such as need to deploy a content distribution network to YouTube already indicate the opportunity. Although a maintain quality of service, and it may need to pay to set free streaming service, it has reported the Middle East up direct connections to internet service providers’ (ISP) and Africa to be its second biggest market, with around networks, adding to the operational costs of running 14.5 million hours being watched daily by local users55. the service53. Even though on a global scale the Middle East’s SVOD The addressable market for SVOD in the Middle market is still quite small, with reports expecting SVOD East subscriptions for the Middle East and Africa together to Both low broadband penetration (compared to Western only represent 1 per cent of the global market by 201756, economies) and widespread piracy in the region the local SVOD market holds plenty of growth potential have somewhat challenged the local SVOD market’s with fewer players at present and opportunities related potential. Compared to Europe, the Middle East region to consumer demand on which to capitalize. is still far behind with only 11.4 million (around 16 times less) homes connected with broadband. So it could be The challenge of language argued that the size of the local addressable market A likely challenge for any regional SVOD player in itself could also be a limiting factor and challenge at addressing the European market is language. Markets present. have differing levels of tolerance for foreign content and subtitled content. However, these barriers have been tackled with a number of long-term efforts. The development and The major SVOD players’ licenses are predominantly implementation of national broadband plans, including for English language content. In Northern Europe many FTTH infrastructure in the GCC and reportedly in citizens are proficient in English, reducing the need for countries rebuilding their infrastructure such as Libya subtitles or dubbing. In the rest of Europe, consumers and Iraq, has led to rapid growth in broadband may be more reliant on subtitles, which can add to the households, at 40 per cent per annum to reach 23 per cost. Smaller European countries such as Romania and cent household penetration over the past ten years. Greece are accustomed to watching subtitled content This is impressive considering that broadband was only – dubbing may be too expensive for those markets. starting out in 2005 with 1 per cent penetration (around But in larger markets such as France, Germany and 600,000 households). Over the next ten years, we Italy, viewers may expect content to be dubbed with estimate that the number of broadband households will only a minority of viewers able to watch in English, or almost double to around 20 million. With this growth tolerating subtitles57. broadband penetration is therefore not necessarily as much of a constraint.

15 A challenge which works both ways in the region SVOD’s outlook in the region is no different; it will Language is also a challenge here, particularly in the broadly follow the global scenario GCC, home to a large range of expatriates, constituting The regional SVOD market has just gone through or a significant percentage of the local population (around is currently going through many of the steps that the 30 per cent in Saudi Arabia58 and 85-90 per cent in more established Western SVOD markets have already UAE59 for example). Hence, subtitling and dubbing is not undertaken. only needed in English and Arabic, but also in languages of other major expatriate communities (e.g. Hindi/Urdu, New SVOD companies have recently entered (e.g. icflix) Filipino, Bahasa, Farsi). Differing dialects across the and are still breaking into the local market. Traditional Middle East pose another challenge for broadcasters pay TV companies such as beIN Sports and OSN have and content producers, where different dialects or also launched their own SVOD services under their own accents are spoken across the region. A viewer from brand (e.g. OSN GO) and telecom players have resorted Egypt may prefer to watch a series with Egyptian dialect to an IPTV play. Only recently has SVOD access been rather than, for instance, Gulf dialect. simplified across most channels (e.g. du provides access through their IPTV network and through any mobile- The SVOD market will likely be blended into the connected device). overall television market Historically, the SVOD market has consisted mainly To date there is still no service at the level of Netflix in of recently-formed companies delivering content via the region which offers a truly holistic content library, the internet, with funding from subscription, but as effective windowing strategy (i.e. time frame for latest the range of SVOD services offered by existing pay releases made available) in addition to a wide range of TV companies grows, and as more pay TV companies originally created content (e.g. House of Cards in the make on-demand a key part of their subscription, the case of Netflix). icflix is addressing this gap, looking to boundaries are becoming ever more blurred. emulate Netflix’s exclusive original content strategy, with its own movie productions for its four categories Traditional pay TV companies have launched SVOD (i.e. Hollywood, Bollywood, Jazwood and Children). services both under their own brand (for example, However given that icflix’s productions have only just HBC in the Nordics60) and via new brands, such as Sky been released, it is still early days to evaluate its success. Deutschland’s Snap. As the addressable SVOD market expands, consumer Some SVOD offerings, such as Netflix content, are being demand for exclusive quality content increases and distributed via pay TV platforms such as Virgin Media competition through a greater number of local SVOD in the UK. Other SVOD content, such as BT’s sports players becomes more significant, the key differentiator channels in the UK, can be accessed multiple ways, via: will largely depend on the ability of providers to offer Sky UK’s satellite service, Virgin Media’s cable network61 all three elements of the content proposition (i.e. or BT’s own IPTV network. large content library, windowing services and original exclusive content). A high quality distribution network As boundaries blur, differentiation is focusing for maximum penetration is also a critical success factor. increasingly on content, which is the current basis of This can be achieved by those who partner for a greater competition for most players in the television space. mutual benefit. Yet again, whoever has the best rights wins but as no single company owns all the rights, there will be several different winners.

Television’s business model | Fit for a digital world: Middle East perspective 16 Broadcast sports rights: looking ahead to 2015

17 Broadcast sports rights: looking ahead to 2015

Deloitte estimates that the total value of global premium sports rights in 2015 will be $28 billion, a 12 Methodology for calculating the value of per cent increase from 201462. It will be the second premium sports rights year of double-digit growth. Key drivers of the increase Our methodology for estimating the value are new domestic broadcast deals for major North of premium sports rights takes the following American sports properties, namely the NFL, NHL and approach: NASCAR, all of which are delivering a substantial uplift in rights fees compared to previous deals. • Only recurring annual competitions are included. The Olympic Winter and Summer Between 2013 and 2015, the value of premium sports Games, FIFA World Cup and UEFA European rights will have increased by a third, that is $7 billion Championship are not included. (see figure 1). The double digit growth in 2014 and 2015 compares with an average of five per cent • The annual value of rights fees are averaged between 2009 and 2013, and will exceed the increase over the duration of the respective contract. in global pay TV revenues for 2014 and 2015. • Fees are converted into US dollars, where While much of the 2015 growth will be driven by deals applicable, using the June 30 exchange rate in in North America, Deloitte estimates that the total that particular year. value of broadcast rights to European top-tier domestic football leagues and UEFA club competitions will • For competitions operating within a remain at about $10.6 billion in 2015, or 40 per cent of calendar year, values are based on rights the total global value of premium sports rights. fees generated in that year. For competitions that operate across two calendar years, This percentage share has been relatively constant over values are attributed to the year in which the past five years. As the value of European rights has the competition ends. So 2009 refers to increased, so too have those for other premium rights, competitions operating in 2009 and 2008/09. particularly for US sports. The value of European sports rights is dominated by the big five European domestic • Our information is obtained from several leagues and the UEFA Champions League, which sources: publicly-available information contribute almost $9 billion of this total. released by rights holders; trade publications; and confidential and proprietary sources.

Television’s business model | Fit for a digital world: Middle East perspective 18 In 2015, three quarters of global premium sports of any domestic sports competition, and in the most rights will be generated by just ten sports properties. recent round of contract negotiations, increased The premium sports in each market represents a small average annual rights fees from about £480 million proportion of all professional sports activity measured per annum to c. £750 million per annum (a 56 per cent by the number of minutes televised, but they represent uplift). the vast majority of viewer interest and the bulk of all television revenues. The vast majority of the increases Many commentators continue to ask when the in premium rights fees come from rights fees paid sports rights value ‘bubble’ will burst63, leading to a by domestic broadcasters, but the value of exported stagnating or declining rights fees. Deloitte’s view is content outside the domestic market is increasing. For that rights fees for live rights to premium properties will example, the English Premier League generates the continue to grow. highest annual rights fee outside its domestic market

Figure 1. Global premium sports rights fees 2010-2015

US$ billion

30 CAGR 2013 – 2015: 15% 28.0

25.0

25 CAGR 2010 – 2013: 7% 21.3 19.7 20.2 20 17.3

15

10

5

0 2010 2011 2012 2013 2014 2015

‘Big four’ US leagues Premier League Other ‘Big five’ European domestic leagues UEFA Champions League Other premium properties

Note: Rights fees in each year are calculated by averaging the value of rights arrangements across the duration of contracts

Source: Deloitte Sports Business Group, 2014

19 Premium live sport continues to deliver large audiences, is not enough to counterbalance the dominant share typically with an attractive demographic profile. It in global value still held by the American and European drives subscriptions and can generate advertising for leagues. The much lower base in the value of regional broadcasters, particularly in an increasingly diverse premium sports rights (over 8.2 times lower between media landscape. the top local leagues and the English Premier League and UEFA Champions Leagues as of 201166) will still The development of pay TV in particular has require significant investment, development and at transformed the broadcasting of premium sports least a decade to reach anywhere close to the levels leagues. Live content is a key subscription driver and being witnessed with the big Western leagues. underpins pay TV business models. As the pay TV subscriber base rises and revenue per user grows, Definition of premium regional sports rights operators are investing increasing sums to secure this We have defined region-specific premium sports key content. as the biggest premium sports competitions that are either played domestically or that include Along with substantial growth in rights fees, there domestic sports teams, in line with Deloitte’s global continues to be further investment in the quality sports rights methodology. This includes but is not of broadcast production for sports. Premium rights limited to domestic football leagues such as the owners face a continual challenge to ensure cutting UAE Arabian Gulf League, the Saudi Professional edge broadcast quality, for example by evaluating the League (SPL), Qatar Starts League (QSL), and the viability of coverage in ultra-high definition (UHD, also Egyptian Premier League, as well as international 64 known as 4K) . competitions, such as the Asian Champions League (AFC), involving football clubs from the Middle East, It is important for broadcasters and production teams and the Pakistan national cricket team, whose home to review continually the technologies available ground is now the UAE, and Formula 1, which takes to them, in order to enhance the value that their place in Bahrain and the UAE. viewers derive from watching sport. For the television experience, this includes UHD, super-slow motion With a much lower base in the value of local sports and an enhanced choice of live matches. On- rights, it is reasonable to expect growth to be higher demand services available to viewers include camera than the global average. The 2015 growth estimate angles, player tracking, instant replays, statistics and follows our 2014 regional sports rights prediction, commentary. Making all of this available, not only on which came to fruition from increases announced in the television but also through any other device that some of the largest local sports rights67. fans may want to use, should increase the perceived value of the experience, even if these additional The recently announced sale of broadcast rights for viewing options are seldom exercised. Saudi Arabia’s professional football league and King’s Cup matches to MBC, in a ten-year deal worth $1.093 Broadcast sports rights in the Middle East: billion, sees its value increase from $40 million per onwards and upwards season to over $109 million per season68. On a year- In the Middle East, Deloitte estimates that in 2015 and on-year basis, this is equivalent to a multiple of 2.7 beyond the value of premium region-specific sports in growth. Further, the deal reflects a rising interest rights will continue to increase by at least 15-20 per cent, exceeding the 12 per cent rise of all premium sports rights estimated globally65. With global sports rights estimated to be growing at a slightly slower In the Middle East, Deloitte estimates that in 2015 pace in 2015 than the 14 per cent growth predicted for 2014, regional sports rights from next year are set to and beyond the value of premium region-specific outpace global growth by an even wider margin. sports rights will continue to increase by at least

Despite the widening gap in growth between local and 15-20 per cent, exceeding the 12 per cent rise of all global sports rights, the extra two per cent difference premium sports rights estimated globally.

Television’s business model | Fit for a digital world: Middle East perspective 20 amongst broadcasters to invest in regional sports (e.g. Qatar Stars League) and international (e.g. English leagues. In this case, the new deal has led to MBC Premier League) sports content. launching their new MBC Pro Sports channels, adding a new dimension to their entertainment content portfolio, Similarly, OSN and ADM have formed a strategic which is already region-leading. partnership to combine their content offering and subscriber base. This couples OSN’s and ADM’s global The UAE’s Arabian Gulf League (AGL) is also growing in premium sports offerings (e.g. OSN’s complete suite the same spirit. This is indicated through the league’s of international cricket rights with ADM’s UFC rights) decision to increase the number of paid broadcast with local premium sports offerings (e.g. OSN’s Pakistan matches from 52 matches in the 2013/14 season to 78 National Team cricket rights with ADM’s AGL rights) to matches for the 2014/15 season69, shared between Abu provide a wider sports offering that is more appealing Dhabi Media (ADM) and Dubai Media Incorporated to both expats and locals. In this partnership, all AD (DMI). The 50 per cent increase in broadcast AGL Sports content is exclusively viewed through OSN’s matches viewable only on pay TV platforms signals pay TV platform, which is bundled with entertainment momentum picking up behind the region’s sports rights bouquets of movies and TV shows74. growth. VOD/SVOD is another model, which enables multi- The ongoing trend is driven by a number of further device streaming of premium sports content. Notable developments and factors. examples include beIN Sports Connect (SVOD service enabling streaming of live and VOD content from Viewership preferences. Earlier surveys in countries top international leagues and competitions), Rotana. with three of the biggest domestic leagues in the net (VOD service enabling access to a range of sports Middle East reveal around 90 per cent of Arab viewers shows, channels and other entertainment content), and on average follow their local league more closely than ADM’s adtv.ae (VOD service enabling streaming of AGL international ones70. For example, the 2013 Football Gulf matches after they have been aired on OSN platforms as Cup Final was one of the single most watched programs well as other entertainment content). alongside reality show Arab Idol71. TV surveys also show that sports channels are the most viewed. For instance Complementary content production. Regional in Saudi Arabia, one survey showed that the top ten broadcasters now provide high quality content as most viewed channels were all sports channels72. an accompaniment to the actual broadcast matches themselves. This includes dedicated commentaries, Improved monetization of sports content. Our survey studio match analysis and on-the-ground reporting and of Middle East viewers shows that the increase in pay TV player interviews, creating a world-class sports viewing subscriptions is inspired by their prime interest in sports experience. content. For example in countries with the three largest domestic football leagues (in terms of fan base and For example, MBC’s sports channels include programs broadcast rights value) Egypt, Saudi Arabia and UAE, 68 involving analytical panels and talk shows with select per cent of pay TV subscriptions are to sports channels, media and sports personalities. The network also followed by 55 per cent to movies and 29 per cent to TV includes special pre and post-match programs75, similar shows73. in concept to programming that is already being done for large international leagues such as the English However, with low pay TV penetration across the region Premier League. and the majority of international leagues primarily driving subscriptions to sports channels, monetization Rotana also produces and offers a range of of local league content is still a challenge. Both local complimentary sports shows, targeting all Khaliji leagues and pay TV operators in the region are youth, specifically in Saudi Arabia. Koora is a daily exploring various business models to maximize this. sports news show which covers and analyses the Saudi Professional League as well as regional and international beIN Sports, for instance, has a full breadth premium tournaments. The show includes special and exclusive sports offering (especially football), bundling local reports, including interviews with analysts, coaches and

21 players76. Al-Malaf Al-Ahmar is another weekly sports League recognition. The GCC’s top leagues from news show, which hosts prominent critics, analysts, UAE, Qatar and Saudi Arabia have received recognition officials and sports opinion leaders in Saudi Arabia77. from the Asian Football Confederation (AFC) as being Soccer Prince Arabia, a sports reality show which amongst the Top 10 leagues across the entire Asia- promotes local Arab sports talent, has also proved Pacific region83. to be popular. The show is produced in collaboration with Freemantle and covers the journey of local Saudi Rise of regional sports events with international football talents who compete to win a year of training clubs and stars. The UAE has taken a leading position with Liverpool Football Club78. in sports industry events and conferences since 2003 with events such as the annual Globe Soccer event, one More languages. Production in multiple languages of the region’s main football industry happenings now is also another dimension which could help raise the in its fifth edition. The awards event has featured key profile and following of local leagues. Naturally, league football stars (e.g. Christiano Ronaldo, Filippo Inzaghi, coverage is predominantly in Arabic for Arab viewers. Franck Ribery, Xavi Alonso and Mehdi Benatia of However, more English content production could also Bayern Munich awarded for best Arab player) to attract help engage the region’s large expatriate populations, interest and encourages development of sports in the which in turn could help expand the fan base of local region by providing opportunities for networking and leagues. deal making84. The event has exhibited great success, attracting an increasing presence of key stakeholders Higher technical capability and content quality. and live TV, press and media coverage. For example, Almost all local premium sports content is now ADM was the official exclusive media partner for the broadcast in HD. Online multi-screen VOD/SVOD most recent awards event which took place at the end services, 3D TV, Dolby digital surround (introduced of 2014 85. to the AGL in the 2013/14 season), dedicated mobile league applications (e.g. the AGL mobile application), In addition to industry events, there is also an increasing live social media updates and most recently second presence of popular international sports events involving screen applications (e.g. for viewers to watch replays international football clubs in the region. Most notably, when watching the match live) are all new additional Doha has been awarded the rights to host the 2014 services to maximize the viewer’s exposure to the Supercoppa Italiana football competition involving the match. UAE-based LIVE HD is a leading company which Serie A teams such as Juventus and Coppa Italia holder has been successful at tapping into the growing live Napoli86. More recently, Dubai has also hosted AC Milan sports market. The company now films 85 per cent of and Real Madrid in the UAE’s Dubai Football Challenge the region’s sporting events for major broadcasters, competition87. with over 1200 sports productions last year, including 237 football matches79. Together, these factors have helped develop the value proposition behind local sports content and promote A new mix on the pitch. The region has risen to the local sports ecosystem. become one of the top destinations for foreign players, trainers and coaches, second only to Europe80. 2014 has seen the region’s top five leagues invest in excess of $200 million for over 100 players81. Of these, the UAE (at $50 million), Qatar (around $50 million) and The region has risen to become one of the top Saudi Arabia (at $31 million) were three of the top 20 international transfer market spenders according destinations for foreign players, trainers and to FIFA’s Transfer Market Report (TMS)82. This has coaches, second only to Europe. generated much hype and increased interest amongst the public and the media, as most players acquired were mainly from Brazil and Argentina, the two most active and followed nationalities in the international transfer market.

Television’s business model | Fit for a digital world: Middle East perspective 22 Television should not go short on long-form

23 Television should not go short on long-form

Traditional television is characterized by its long-form It is not just music video that can generate millions of format, with most programs of 30 minutes or an hour’s hits: the home-made, low-budget clip can do even duration. For decades, viewers have conformed pliantly better. to these fixed lengths, even though in other media, from music to films and from books to newspaper By August 2014 PewDiePie, a UK-based Swede, had articles, there is far more variety. amassed 5.5 billion views and 29.5 million subscribers, and was getting in the region of 200 million views per Online video clips, from the ‘cat-on-skateboard’ genre month95. His videos, mostly voiced-over video game to instructional videos, are challenging traditional play, typically get a few million views each, and over lengths, by being highly popular yet typically ten time he has accumulated billions of views by posting minutes or shorter. Already, programs for young 2,000 clips – and no rap stars were involved. children have been getting shorter, partly in a nod to lower-attention, multi-tasking younger generations. Opening children’s toys on camera can also generate Traditional broadcasters are experimenting more with billions of views. DisneyCollectorBR is a non-Disney other short-form commissions. A brief foray online affiliated channel whose core video output is to show reveals many articles, with eye-popping numbers to new Disney-branded children’s toys being taken out accompany their argument, that argue that short-form of their box and used, accompanied by a voiceover96. is already dominating over long-form, mostly at the About fifty new videos are posted a month. The expense of traditional TV88. channel’s host is anonymous: all that is known of her is her voice and her hands. Does long-form – the foundation of traditional television – have a future? DisneyCollectorBR was the third-most viewed YouTube channel worldwide in April 2014. In the week Deloitte’s view is that it very much does, even though commencing 4th July it was the most-watched channel at first glance, long-form might appear to be in short- on YouTube in the US, with 55 million views. Since form’s shadow. DisneyCollectorBR started posting in April 2011, it has had 2.7 billion views97. Short-form’s (bold) ‘billions’ contrast with television’s (mere) ‘millions’ According to reports, these viewing volumes are One of the most successful traditional TV shows in the lucrative. One source claims that PewDiePie and US at present, Big Bang Theory, attracted an average DisneyCollectorBR earn $7 million and $4 million audience of 17.5 million viewers in its most recent respectively from advertising each year; but this season89. assessment may have confused lifetime views with annual views and the actual numbers are probably In comparison, Korean star PSY holds the title for the lower98. most-watched video on YouTube, Gangnam Style90, which has amassed over two billion views since its Some short-form online video stars earn additional release in 201291. PSY’s official channel has had almost tertiary revenues. For example, Michelle Phan, one of four billion views92 including 114 million for his most the original US-based how-to stars, now has her own recent hit Hangover, a collaboration with Snoop Dogg93. make up line99.

PSY undeniably has form. Arguably, he may have Short-form’s bold rise in the Middle East: a new it easy: his uploads are slickly-produced, tightly- viewing format in addition to traditional television choreographed, big-budget music videos, some of YouTube has broken the ice for short-form viewing in which feature world-renowned stars. This helps to the Middle East. At around 70 per cent penetration attract those hundreds of millions of views. (Arguably, with localized versions across eight Arab countries (e.g. during MTV’s heyday as a music video station, a global Saudi Arabia, UAE, Egypt and Morocco)100, the Middle hit such as Michael Jackson’s Thriller might have been East is YouTube’s second largest market worldwide101. watched dozens of times by tens of millions of viewers, generating the equivalent of billions of views)94.

Television’s business model | Fit for a digital world: Middle East perspective 24 Indeed, the rise of short-form viewing is bold, also Traditional media companies are going short-form running into the ‘millions’ and even the ‘billions’ in the Traditional television companies and production Middle East, with local users viewing around 5.3 billion houses are responding to the challenge. Disney, for hours on YouTube alone every year (equivalent to 14.5 example, acquired Maker Studios for $500 million. The million hours daily)102. acquisition came with 55,000 channels generating over 60 billion views a year107. Fremantle, a subsidiary of RTL Group, in a joint venture with VICE Media has set up Munchies, an online food channel that provides short- Indeed, the rise of short-form viewing is bold, also form on-demand content108. running into the ‘millions’ and even the ‘billions’ in Broadcasters are also investing. Channel 4 in the UK is in its 15th series of Three Minute Wonder109 and has the Middle East, with local users viewing around 5.3 created a hub for short-form content110. BBC3 has billion hours on YouTube alone every year. created an online space for short-form, two-to-ten minute documentaries111.

So is short-form the long-term future of the format formerly known as television? Has short-form already Short-form success cases seen abroad are also echoed displaced traditional television? in the region, which has its own fair share. There are, after all, few traditional TV shows that boast For instance, in 2013, the spoof video by Saudi the same number of regular viewers as short-form comedians Hisham Fageeh and Fahad Albutairi No stars PewDiePie (29.5 million)112 or HolaSoyGerman Woman, No Drive, mocking the country’s ban on (18.8 million)113. The most-viewed video on the female driving, attracted over 12 million views within a DisneyCollectorBR is Angry Birds Toy Surprise Jake and few days103. the Never Land Pirates Disney Pixar Cars 2 Easter egg (sic) Spongebob, which has had over 90 million views Jordan’s Kharabeesh, an animated and satirical channel since first posted in May 2013. This video is a sequence about regional issues, was named one of YouTube’s top that shows six toy eggs with different gifts inside being 10 channels in 2013 with over 68 million views, now taken out of their box114. averaging about 23 million views a month104. Media players in the region have spotted and The extent of short form’s success in the region jumped onto short-form’s bandwagon has been such that large players such as Al Jazeera The resounding popularity and scale amassed by have also embraced the format. For example, the short-form as a newer format in the Middle East offers network launched Al Jazeera Frames, an online portal a tremendous platform and opportunity for regional consisting of selected short three to five minute media companies, advertisers, new talent, talent social documentaries in various formats from film to seekers, content producers and consumers alike. animation. The initiative seeks to promote the online community’s most talented filmmakers and directors Local media companies and advertisers have recognized and raises awareness of important social issues which this, as the top twenty advertisers in the region are all arise from their coverage105. on YouTube, as a key part of their marketing campaign strategies. However, despite short form’s rise and success, compared to traditional long-form TV shows such as Primarily, advertisers are leveraging the frequency Arab Idol, which amassed over 100 million viewers cap to reach their audience in a highly efficient way. in just its second year in 2013106, we can see that Frequency capping restricts the number of times a traditional TV in the Middle East is also here to stay, visitor to YouTube is shown a particular advertisement with its own bright future. within a specific period of time. Frequency capping is cited as a way to avoid burnout, where visitors are

25 being overexposed and response drops. half episodes of Big Bang Theory, or one fifth of the 24-episode series. We have assumed that the average In addition, advertisers are looking to purchase 100 time the four-minute-12-second video is watched for is percent of preferred inventory on some YouTube about 200 seconds (80 per cent of the total time), and channels ensuring focused targeting of their chosen that US residents have contributed a third of views of demographic. Google Preferred, a service which offers the video worldwide119. Given these assumptions, the the best content that is available on YouTube and total time spent watching Gangnam Style in the US allows advertisers to buy the target demographic on is about a fifth of the most recent 24-episode series. that specific content alone, would be made available Between Gangnam Style’s online launch and August in the coming months. However, it appears that 2014, US audiences have therefore spent ten times advertisers are already gravitating towards a preferred more time watching Big Bang Theory than PSY. inventory strategy in the region, much before the advent of Google Preferred. A similar comparison with NCIS offers an even starker contrast: US viewers spend almost as much time For example, brands such as P&G are sponsoring up to watching one episode of NCIS as they have ever spent 250 channels, that were developing content specifically watching the world’s most-watched online video. for Ramadan across multiple categories including About 17 million viewers in the US watch each hour- cooking, lifestyle, beauty and so on. long NCIS live and a further 18 million either catch up within seven days of broadcast120 or watch on affiliate Given the large amount of ad inventory available, networks121. If we assume that every online view pricing however still remains low in the region. of Gangnam Style anywhere in the world has been watched in its entirety, the 144 million hours that this On the content production side, short-form has also represents would be equivalent to just four episodes of proved to be popular amongst production companies NCIS watched by US audiences. NCIS has 24 episodes and creative houses. per series; it has just completed its eleventh series and its 258th episode; it is broadcast in 200 countries; For example, Creative Culture Catalyst (3C), a Riyadh- its first spin-off series, NCIS: Los Angeles has just based web production house, runs a comedy-focused completed its 121st episode and a further spin-off starts YouTube channel; Telfaz 11. Its most popular show La this year122. Yekthar (“Put a Lid on It” or “Zip It”) has accumulated over 80 million views115 and over 755,000 subscribers116. Looking at the totality of all short-form viewing, YouTube claims one billion unique views and six billion Another Saudi-based media company UTURN hours of viewing per month; including other online Entertainment Group, established in 2010, is an video sites might add a further 25 per cent to this exclusive content producer for YouTube. Their most total123. In comparison, European residents watch about popular show 3al6ayer (“On the Fly”) attracted over 66 two billion hours of TV every day, and the US residents million views and around 850,000 subscribers117. about 1.5 billion hours124.

Short-form is significant in itself, but insignificant compared to long-form television It is worth looking at the numbers more carefully. Big European residents watch about two billion hours Bang Theory in the US attracted an average audience of 17.5 million viewers in its most recent season; which of TV every day and US residents about 1.5 billion may seem modest in comparison to the volume of hours. views for short-form online videos118.

If we convert both viewers and views to total hours viewed, US residents have spent an aggregate of 38 million hours watching Gangnam Style since 2012, equivalent to the total viewing time for four-and-a-

Television’s business model | Fit for a digital world: Middle East perspective 26 The significance of long-form over short-form is even clearer in the Middle East Viewers and views are fundamentally The difference between long and short-form is more different apparent in the Middle East, even at the viewership Television viewing is typically quantified by level. For example MBC’s top 10 dramas alone have viewers (live, or within a few days) and online amassed more than 0.6 billion viewers in 2013, ranging video by views (all-time). There are fundamental from 48 million to over 123 million viewers125. This is differences between these two metrics which far more than the regional short-form success cases are occasionally overlooked when comparing we have examined, which at most have tens of millions traditional TV with newer forms of video format. of viewers. On this rough basis, long-form TV in the region typically has 10-100 times more viewers than In mature television markets, between one and short-form. two per cent of advertising revenues are spent measuring TV viewing among a representative The difference is also clear when comparing average sample of respondents. Whenever anyone in time spent online (which includes streaming short- the sample is in front of a TV set, their viewing form videos amongst other activities such as social habits are recorded and aggregated. The networking), typically 2.17 hours per day, against approach is typically agreed by all key industry average time spent watching traditional television, players, and underpins the $200 billion dollar typically 3.11 hours per day (as of 2012)126. On average global TV advertising industry. viewers spend almost an hour more per day on long- form television than on short-form television, which is With online video, the definition of a view is often accessed online. typically any request made to a server to play a piece of video. There is no agreed measurement This difference is multiplied further when comparing of what constitutes a view, and a view could total hours viewed across both long and short forms. be anything from a millisecond to the entire clip. According to comScore’s data, the average length of a ‘view’ is about four minutes127. Long-form TV in the region typically has 10-100 There do not appear to be any industry-wide or national standards for measuring online video times more viewers than short-form. views. There is also no official data for annual online short-form video revenues, but Deloitte estimates this to be about $5 billion currently128.

There is no certainty that a video is actually visible on a screen when it is playing; it may well be playing ‘under the line’, on a part of the page that is not visible on a screen. There is no data on how many people are watching each view.

There is also no way of knowing for sure how each online video is used. Music videos, like music stations on TV, may be used more as a jukebox, playing music in the background, rather than as a conventional video service where viewers predominantly look at a screen129. Of the top ten all-time views on YouTube, which together have amassed billions of views, nine are music videos130. Up to 40 per cent of all online video views may be views of music videos131.

27 Short-form and long-form: distinct and similar Arguably, comparing long-form with short-form in this way is unfair, and Deloitte does not disagree 94 per cent of all respondents watch television on with this view. However the comparison is useful in a TV set at least weekly, a third on a computer, and demonstrating, by means of a common metric (viewing time), the strength and resilience of consumer demand just 15 per cent on a smartphone for long-form television.

The comparison is not useful insofar as, from a During the day, we are more likely to have consumer’s perspective, short-form and long-form smartphones, PCs or tablets with us, and can spend content are quite distinct propositions, even though a few minutes watching a clip, or sequence of clips. industry commentators sometimes position them Clips watched during the day fill small voids of time, for incorrectly as substitutes for, or competitors of, each example when waiting for friends, or simply to break other. the monotony of the day.

Consumers seem to prefer different devices for short- In the evening, most people want to relax, and prefer form and long-form. Conventional long-form television to watch a sequence of long-form content on a large programs, whether broadcast live or delivered television set, with choice ideally curated by a third on-demand, are typically watched on television sets; party. We do not want to put together ourselves a long shorter video content is more typically watched on sequence of five-minute videos for watching: we want computers, smartphones and tablets. someone else to do that for us, hence the emergence of TV shows such as MTV’s ridiculousness and Channel Deloitte’s research has found that among the two 4’s Rude Tube, which are based on a sequence of short thirds of UK adults who watch short-form video, video clips138. about 70 per cent use a PC to do this, 35 per cent use a smartphone, and only a quarter a television set132. Low-budget content created as clips for watching Among those who watch video clips on more than on small screens, and with low-quality sound, may one device, about half named a computer as their not work so well on larger screens, and with better preference for this activity133. speakers. Production flaws that look quirky and are appealing on a small screen may be off-putting In comparison, 94 per cent of all respondents watch when shown on a large screen139. The appeal of television on a TV set at least weekly, a third on a ridiculousness and Rude Tube is that they are traditional computer, and just 15 per cent on a smartphone134. TV shows: shot in a studio, with professional cameras and proper lighting, into which excerpts from a small Among respondents using a TV to watch content selection of short-form clips are interspersed. on-demand (TVOD), about two thirds had watched long-form programs on-demand on their set, but For younger generations, short-form may be the main only ten per cent had used it to watch YouTube135. source of video content. For some people, this may Over time TV is likely to capture an increasing share of last their lifetime; but for others, their preferences TVOD. Of those watching TVOD on a TV set, 60 per may change to those of their parents, and long-form cent are watching more long-form TV programs on may become their default choice for watching TV, demand compared to a year ago136; among those using because they prefer the complexity that long-form computers to watch TVOD, the figure is 43 per cent137. content offers. A recent survey conducted by Deloitte on viewing behavior in the UK found that about An explanation for this behavior is that different eleven per cent of adults aged 16 or more had access types of video suit different needs. Across the entire to Netflix, but among 16-34 year olds the proportion population, video clips are likely to be viewed through was double this140. A recent analysis of UK viewing the day; whereas long-form is typically watched in the patterns for Netflix found that a majority of the top ten evening. most viewed titles were dramas, such as Breaking Bad, Dexter and House of Cards141.

Television’s business model | Fit for a digital world: Middle East perspective 28 Short-form and long-form: distinct and similar, but Secondly, short-form video can be very interactive. short-form also has its own story in the Middle East For instance, YouTube in the region is used more as an Much of the general rationale around short-form versus interactive rather than a pure passive viewing platform. long-form is universal and also holds true in the Middle Surveys of short-form viewing in the region confirm this, East. where in the UAE, 75 per cent of participants said they are using YouTube not only to view videos, but also to Regional consumers, like those globally, also treat short- communicate with friends and other users145. The same form as a distinct proposition, accessing it at different survey shows that in Saudi Arabia, 35 per cent of users times, places and devices to long-form. For instance have shared their own short-form content via uploading in Saudi Arabia, 50 per cent of short-form YouTube on the platform146. content is accessed via a mobile device. Similarly in the UAE, 40 per cent of YouTube content is consumed on Broadcasters may only commission short-form as mobile devices142. This implies that short-form content an exception is accessed by Arab consumers more on the go, outside Deloitte does not expect that traditional broadcasters of home, whereas long-form is likely to be viewed on will move to commissioning short-form as their television devices at home. mainstream offering, except for younger audiences (aged ten and below), who have always had shorter In the Middle East, where 70 per cent of the population content, with stories contained within a five-minute is aged less than 35 years143, short-form appears to be episode. Offering children long-form content as they most appealing to the youth. Research shows that 50 grow older would simply follow the pattern of children per cent of daily YouTube users are under 35 years, 35 with books. For toddlers, when being read to or per cent are aged 35 to 44 years, with the remaining 15 when learning to read, the demand is for short books per cent aged 45 years or more144. with hundreds of words. As children grow older they progress to books with hundreds of pages. However, the rise of short-form as a newer viewing format has its own story in the region. Key factors The broadcasting model has been built around behind short-form’s success here are two-fold. long-form, and arguably inertia might be one of the forces for maintaining long-form in the future. There Firstly, short-form is widely perceived to be and used as would also be practical difficulties in changing over a more authentic, uncensored and trustworthy source of to commissioning thousands of short-form titles, information, like social media. Any time a controversial rather than hundreds of long-form titles every year. event occurs, short-form videos can be uploaded on Furthermore the current TV advertising model, based YouTube to tell the story, which could otherwise be on inserting a sequence of ads during a thirty minute or censored or suppressed. Ultimately this was the spark hour-long program, works well and is something that behind the Arab Spring, where YouTube was widely viewers accept; consumers would be less tolerant of ads used by Arab users to track political events and keep in within a two-minute clip147. touch with the real story on the ground. The platform is now highly used as a tool for freedom of expression, Deloitte expects that broadcasters will look at short- creativity and a reference point for regional news. form video portals as a way of identifying talent, similar to the way that music labels have scouted for new performers and hits. Short-form video stars have a large portfolio of their previous work online, and the more successful come with an existing fan base. The caveat In the Middle East, where 70 per cent of the is that there are so far few examples of short-form stars population is aged less than 35 years, short-form migrating to traditional TV, and one attempt to transfer an internet hit to traditional TV did not work out as appears to be most appealing to the youth. planned148.

29 Regional broadcasters are more likely to use short- form as a complement to long-form shows Broadcasters in the region are likely to follow suit, Broadcasters in the region are likely to focus more focusing more on long-form which is generating much on long-form which is generating much higher higher viewership than short-form as it is. viewership than short-form as it is. However, at the same time, broadcasters such as MBC are already using short-form to complement existing long-form shows, usually in the form of repackaged content. For example viewers of MBC’s popular Turkish Riepl’s law still rules drama series can watch a five-minute recap of an A European media executive recently commented: episode the day before it is aired on television149. “New, further developed types of media never replace the existing modes of media and their usage patterns.” Sharjah Media Corporation (SMC) has also made good Short-form is newer than traditional long-form; use of short-form for their long-form shows. SMC’s television is newer than the cinema. TV and cinema popular reality talent show Munshid Al Sharjah, now in co-exist, even if television and the film industry may its seventh edition, is similar in format to Arab Idol, but have traded cartoon characters for drama, and the dedicated towards finding the next Nasheed (Islamic emergence of television did not mean the disappearance inspired music) star from across the Muslim world. For of films. Similarly short-form has not displaced long- this edition, the show will reportedly launch a website form, and in our view it is not likely to do so. to enable contestants to audition online, by submitting short audition videos up to three minutes in length150. Both forms are created in a similar process (talent in front of a camera), but the outputs and the needs which Al Jazeera has for some time been integrating short- they address (with the exception of music videos) are form in many of their long-form programs. As early as largely dissimilar, even if they are watched by the same 2010, Al Jazeera had partnered with YouTube to create audiences. Demand for both short-form and long-form, a video archive of the 2010 Iraq elections, consisting or TV and movies, or social networks and meeting in of many short form videos of Iraqi citizens’ views. cafés, is a human pattern, observable over millennia. We The short-form “Iraqi voices” videos were reportedly often accumulate, and rarely discard. featured in Al Jazeera’s longer broadcast coverage of the news event151. Riepl, the German publisher who made his observation in 1913, has form (like PSY). Short-form is also used to complement, or bring attention to other industries such as tourism and culture. The investment fund of twofour54, ibtikar, uses short series such as What’s Up UAE, an adventure show, to promote sites and destinations that the UAE has to offer152. Similarly, The Qasr Al Hosn series, which consists of 13 video segments, covers the event which was held in Abu Dhabi to celebrate its 250-year history153.

Television’s business model | Fit for a digital world: Middle East perspective 30 Innovation: can the television industry compete?

31 Innovation: can the television industry compete?

If you were to ask a hundred senior executives to name and Candy Crush have been downloaded to digital five innovative companies, you would likely end up with devices around the world158. a list dominated by Silicon Valley’s finest but bereft of traditional media companies154. If you were to compare During this time, average viewing hours in Europe the research and development budgets of the top ten have risen slightly from three and a half hours to just technology companies with those of broadcasters, you under four159. Television advertising revenues in Europe might struggle to find sufficient broadcasters with R&D increased from $34.7 billion to $38.9 billion between teams of any scale. 2004 and 2013160.

This does not imply, however that the traditional Television in the Middle East: still king television industry is not innovative. Rather it reflects Similarly in the Middle East, television has maintained popular perceptions of ‘innovation’ which tend to its position as the dominant media platform, despite focus on disruptive technology-centric innovations, digital disruptions including the rise of online such as the self-driving car, delivery by drone or tablet streaming, social media, and mobile gaming as well as computers. smartphone and Smart TV penetration.

Television’s innovations are typically smaller in scale This is reflected in the evolution of television’s average and greater in quantity: the aggregate of all these viewing time and total advertising spend. The average changes over the last decade is a television service time spent by locals watching television has remained which for consumers and suppliers alike is distinct from fairly consistent from 2009 to 2012 at around 3.1 a decade back, and which has retained audiences and hours161. Total television advertising spend, as a grown revenues despite the recent surge of digital and percentage of total advertising spend and compared digitally-enabled distractions. to other media platforms, has remained around 40 per cent over the last five to six years162. Even after high Television is the traditional media sector that has growth in digital platforms, our projections show that remained resilient throughout the rise of digital television’s total advertising spend will still be four The past decade has experienced the mainstream times larger than that of digital in 2015, projected at 40 adoption in Europe of major new device types, new per cent and 10 per cent, respectively163. digital services and connectivity services. It is worth remembering that since 2004, television has had to At the same time, the rise of digital has in fact contend with the following: complemented the region’s television market. This is essential to meet rising demands from more • The smartphone, tablet, digital video recorder and sophisticated viewers for high quality television and broadband has gone mainstream in most European content. With this in mind, television’s outlook remains countries; globally spend on living-room consumer positive, with Middle East total television advertising technology is about $800 billion155; revenues expected by our estimates to surpass $2.6 billion by 2019164. • The average processor power in each device has ratcheted up, with processor speeds in high-end Television has reinvented itself through myriad smartphones and tablets doubling year-on-year156; innovations The TV industry has survived this decade of change • Traffic flowing over networks is now measured in through reinventing itself technologically across dozens of Exabyte (billions of gigabytes) per month, multiple aspects. and has grown by double-digit amounts year-on- year157; Production quality has improved significantly: the majority of footage from just a few years back is • Facebook and YouTube have grown from zero or markedly dated. One reason is due to the increase minimal numbers to over a billion users each; in the quantity of programs shot in high definition and ultra-high definition. Second, the range of • Billions of copies of Angry Birds games, Farmville camera angles is steadily widening, thanks to the

Television’s business model | Fit for a digital world: Middle East perspective 32 miniaturization of high definition (HD) quality cameras. Demand for next generation television. One of This means that sports fans are increasingly able to the key developments in the Middle East has been follow the action from the players’ perspective: horse the adoption of next generation television sets from racing enthusiasts are offered a view from the jockey’s international manufacturers. Reports suggest that in helmet165; multiple cameras are placed on Formula 1 the Middle East, consumers are spending as much cars; nature enthusiasts can enjoy footage from bird- as $30,000 on Sony’s 84-inch, next-generation 4K born lightweight cameras166. television sets. For Sony, this marks the region as one of the fastest growth areas169, as Middle East sales TV has also become more agile in delivering stories by were the second highest after Japan. Local viewers exploiting advances in connectivity. For example news are therefore not only interested in exclusive content, broadcasters are using multiple 3G and 4G channels but are also buying into the latest technological simultaneously to deliver a high-quality feed from advancements to enhance their viewing experience. wherever there is sufficient mobile coverage, rather than having to wait for the satellite truck167. Proliferation of Smart TV’s. Similarly, Smart TVs have also been dubbed the future of television in the The distribution of television pictures has undergone region – connecting the television set to the internet profound change over the past decade. The majority to provide viewers with a more interactive experience of broadcasters in Europe have successfully migrated and access to a large variety of content. Research to digital terrestrial transmission, increased their shows that Smart TVs will penetrate between 25 to HD offering and launched on-demand services. 40 per cent of the television market by 2015170. This Broadcasters have yet to launch ultra-high definition prominent rise has led to various partnerships between (UHD) services; these are expected in the next two OTT players and major consumer electronics players. years. UHD content is available via on-demand sites, For example, Istikana has partnered with Samsung including Netflix and YouTube. Electronics to enable viewers to access the SVOD service, including 3,000 hours of video content directly There has also been innovation in the financing of from Samsung’s Smart TVs171. Similarly, icflix has also programming, with initial funding being raised from partnered with Samsung Electronics to provide SVOD a variety of rights – from streaming on mobile to services directly via Samsung’s Smart TVs172. subscription video-on-demand in other territories – in addition to first broadcast. Crowdfunding is also Smartphones as second screens. The rapid adoption being used – it provided the money needed to revive of smartphones, whilst it has not changed how much Veronica Mars: fans raised $5.7 million to bring the title people watch traditional television, has also opened up back to life168. new channels for television content consumption. This is demonstrated by reports which indicate the majority Technology and digital: adopting global and (70 per cent) of MBC’s Shahid.net viewers access their inspiring local innovation website through their mobile phones173. The Middle East’s television industry has also made progress in embracing technology and digital to Local innovation through social media. Social media enhance content and viewership. Innovations have has proven to directly impact the performance of in part been inspired through the adoption of global television shows. According to studies, an 8.5 per cent innovations, while others are home grown. increase in tweets for a premiere episode, and a 4.2 per cent increase for a midseason episode correspond to a one per cent increase in a show’s boost in its ratings174. Gyrolabs, an Egyptian start-up, has been the first to The Middle East’s television industry has also made establish a social TV service known as Remotak. This social digital TV guide provides users with the ability to progress in embracing technology and digital to interact with friends also watching the same show. Via enhance content and viewership. Facebook and Twitter users can see which shows their friends are watching and even watch some channels live from their device175. The integration of social media

33 and television in the region has therefore shown required to provide DTT tuning devices with every remarkable progress. television set179. In response to these directives, media companies such as SMC, ADM and DMI have recently The rise of Social TV inspiring local content shifted to digital broadcasting180. innovation. The Middle East’s unique demographic (particularly in the Gulf countries), high smartphone Financing innovative programming. The region has penetration and strong engagement with social media throughout the years focused on imported content. have been key drivers behind innovation in content idea More recently, locally produced content has witnessed generation and production. Social TV is an emerging a surge in demand, and incubators and media trend in the region which combines social media usage accelerators have responded by providing financial with TV watching trends. assistance, particularly to local content producers. For example Abu Dhabi’s twofour54 provided Peeta Planet While this is not unique to the Middle East, the region with production and financial support181. is finding new ways to leverage social interactions in order to drive the content production process. The impact of these trends on the television market is resulting in innovative ways in which TV content is being developed. Social TV is an emerging trend in the region which combines social media usage with TV watching Al Jazeera has been quick to apply the concept of Social TV with one of their flagship shows The Stream. trends. Branded as a “Web Community with a Global TV show”, it is an aggregation of stories and content which is sourced from various social media platforms Facebook, Google+, Pinterest, Reddit and Twitter. To deliver this, the network has partnered with Storify, a Television is constantly refining the art of platform enabling users to tell stories using social media storytelling (i.e. tweets, photos and videos). The show has proved Stories are a core human trait. Television’s most successful, having won the 2012 Webby Award for central role is storytelling. There are few storylines, so ‘People’s choice in news and politics’ under the ‘online maintaining audiences requires television to relentlessly film and video’ category, with nominations for another improve its ability to relay the same tale. two Webby Awards in 2014. The show’s success has also led to the airing of a separate American version The current House of Cards, produced by Media Rights of the show on the Al Jazeera America network in the Capital, with Netflix as the original channel, provides US176. an example of how the same centuries-old story – the allure of power – can be made more compelling over Notably, the UAE’s Peeta Planet, a social media-based the years. The Washington-based House of Cards was travel series, started as a show on YouTube but now based on the BBC’s House of Cards, set in London broadcasts to over 50 million viewers across the which was an adaption of Michael Dobbs’ 1989 book Middle East177. The show’s resounding success had led House of Cards. Shakespearean themes are common to to its transfer to television, where it is now aired on all three works, particularly the characters of Richard III the Dubai One channel (with episodes still uploaded and Lady Macbeth182; the technique of the ‘breaking of onto YouTube once they have been broadcast on the fourth wall’, in which the actors speak directly to television)178. The show is based on suggestions by fans the audience, is used in the current House of Cards as on social media, who direct each episode. well as in Richard III.

Migration to digital terrestrial transmission (DTT). Another core storyline is the rags-to-riches story The region is quickly shifting from analog to digital immortalized by Cinderella. Reality shows excel at broadcasting. This is seen through new regulations conveying the same tale. The best-known winners of in countries such as the UAE where TV suppliers are the global Got Talent franchise have typically been

Television’s business model | Fit for a digital world: Middle East perspective 34 drawn from humble backgrounds. Susan Boyle, the In the past, TV series have been specific to individual winner of 2009’s Britain’s Got Talent183, was 47, single countries or clusters across the Middle East (e.g. Levant). and unemployed at the time of her first appearance on By casting actors and actresses collectively from various the show; Liu Wei, who took first prize playing piano in Arab countries (implying a variation of dialects), TV China’s Got Talent, had no arms and used his toes184; series can appeal to and attract a wider range of Sung-Bong Choi, the winner of 2011’s Korea’s Got viewers. Talent185, was abandoned by his parents at three, ran away from his orphanage aged five, lived in a container Growth in online streaming has also driven the evolution for ten years and was once buried alive186. in local content. After all, the Middle East does account for 300 million daily views on YouTube, the second Wealth – and its implications – is a constant theme highest of any region globally189. Content innovators in stories, televised or otherwise. In the 1970s, Dallas in the region have capitalized on this and have also relayed the ups and downs of a family whose wealth focused their efforts online. The emergence of local was based on an abundant, valuable resource. Keeping YouTube celebrities is a new trend in the region, as they up with the Kardashians, which has aired nine series so often take a satirical approach to recent political turmoil, far, portrays the ups and downs of a family whose value taboo topics and general traditional values. is partly derived from its abundant fame. Aside from pan-Arab programming, regional players In addition to retelling centuries-old stories, television is are also combining content from other cultures and developing new ones, notably scripted reality in the last ethnicities. For example, MBC launched a new channel decade and reality in the decade prior to that. MBC Bollywood which broadcasts Bollywood content, with Arabic subtitles and dubbed content. This led to More storytelling is fundamental to one of the biggest the broadcaster acquiring 800,000 viewers in 2014190. sources of funding of TV content – the advert – which generates over $200 billion globally per year187. The Television’s evolution is long-term best produced ads can be some of the most compelling Looking ahead, television will continue to evolve – as it content on television, and are least likely to suffer the has no other alternative. Change is likely to continue to fate of being fast-forwarded188. The ads for the Super be characterized by multiple increments, some taking Bowl can attract as much attention as the game itself. many years to deploy fully, rather than dramatic change.

Content convergence: moving from domestic to For example, one emerging innovation is the use of regional and international storytelling lightweight drones (pilotless aircraft) to capture shots. Content producers in the Middle East have recently The miniaturization of HD cameras makes these portable shifted towards developing pan-Arab content. A on small, rotor-equipped drones, meaning that aerial notable example of this is the TV series Al Ikhwa (“The footage no longer requires a helicopter. A small drone, Brothers”), which airs on OSN Ya Hala. The show is costing a few thousand dollars, can be used to capture produced in the UAE capital Abu Dhabi, and comprises overhead shots, and due to their small size can get a diverse cast from Syria, Egypt, Lebanon, Morocco, and closer to the action. a range of countries across the Gulf. Drones are already used for filming in sports, news and nature programs191. Drones are not yet used more widely due to uncertainty over regulation: it may take many years to resolve fully what usage is permitted. There are also technological challenges, such as maintaining the Content producers in the Middle East have recently stability, increasing the range and improving the speed shifted towards developing pan-Arab content. of drones. Sports coverage has always been at the forefront of innovation in TV and is likely to remain so. One emerging innovation is greater measurement of athletes

35 on the field. Their total distance run is already measured; Similar to Western countries, the introduction of DTT in one innovation being introduced for American Football selected markets across the Middle East has provided Players is measuring their speed and acceleration192. In viewers with access to a greater variety of channels future seasons, as measurement technology improves, and programs, and in comparison to analogue TV, even more data, such as heart rate, body temperature has far greater reach. In 2014, the number of pay DTT and lung capacity may be monitored and shared with households was at 3.13 million194 which will continue viewers193. to increase as the region embraces a transition towards digital. Another future long-term innovation is the evolution of distribution of content. It is very likely that TV IPTV is another rapid development in the region as it has images will be available in both higher resolution and gained substantial traction over the years. The demand greater ranges of resolution, to suit diversifying sizes for OTT, coupled with multiple device distribution and of television set. Programs are likely to remain being high quality picture has increased demand for the relayed via a combination of terrestrial broadcast, service. As a result, IPTV penetration has witnessed cable, satellite and online. Higher resolution will be around 65 per cent per annum growth in the region, the made possible by better compression, as well as higher highest being in Saudi Arabia, UAE and Qatar. network transmission speeds. Although the majority of IPTV platforms in the region Online delivery of television programs will become are owned by the major telecom operators (i.e. Etisalat steadily more popular and more voluminous. Viewers and du in UAE, STC and Mobily in KSA, Batelco in will expect the quality of on-demand delivery to be Bahrain and Ooredoo in Qatar, Orange Jordan, Telecom similar to that offered by broadcast, even though the Egypt, Zain), content providers and traditional pay TV underlying technologies are very different: the internet, providers in the Middle East also have the capabilities to after all, was not designed for real-time delivery of provide such services. One challenge is the insufficient content. Broadcasters, SVOD providers and network bandwidth in some parts of the region, where operators will need to work together to architect connections cannot adequately support IPTV services195. networks so as to be able to replicate the broadcast experience. The establishment of tView’s measurement system in the UAE, a natural evolution following global One of the biggest innovations required for TV developments, was a breakthrough for advertisers, advertising is an upgrade to measurement systems. broadcasters and content producers. More focused and Currently viewing on a TV is captured, but most targeted advertisement has reaped a higher return on measurement systems in Europe are not yet able to investment and enabled television players to strategize capture data for consumption on computers, tablets and and distribute content based on measurable demand smartphones, resulting in a growing volume of watching and viewership patterns. However, this does not account being under-counted, particularly among younger age- for online viewership patterns, which are significant groups. given the region’s very high device penetration and online activity. Innovative hybrid measurement systems Television’s evolution in the Middle East: a mixed are therefore still needed to help players adequately bag of hot and cold developments measure total viewership patterns accurately. Television’s progress in the Middle East has been mixed. Some developments have been very fast (e.g. DTT, IPTV growth off the back of fast broadband infrastructure development, Smart TV and smartphone penetration) and some have been very slow (e.g. pay TV penetration, IPTV penetration has witnessed around 65 per cent which is not used as widely as free-to-air television). Other developments have naturally followed those seen per annum growth in the region, the highest being globally (e.g. introduction of television measurement) in Saudi Arabia, UAE and Qatar. while some have been relatively unique to the region (e.g. sports programming enhancements).

Television’s business model | Fit for a digital world: Middle East perspective 36 Sports content and programming remains a key focus Change and continuity for innovation in the television industry, particularly What innovation means differs according to an in the Middle East. beIN Sports, the leading sports industry’s maturity. Companies in newer sectors, such broadcaster in the region, is already setting new as consumer robotics, are expected to launch disruptive, standards for the customer viewing experience by surprising products and services. offering multi-screen technology services across television, computers, lap top, tablet and smartphone More mature industries which already serve a devices. The beIN Sports Connect SVOD service, mainstream market, such as television or automotive one of the leading pure sports SVOD services in the have less license to change. This is not because they world, enables users to stream sports across multiple are expected to stagnate, but because their customers connected devices. Extensive coverage and services on are content with the current offer, and may be hostile social media are also applied to drive interactivity with to any iterations of this product that look or feel very viewers. different.

Developments towards the Qatar 2022 FIFA World Cup Changes need to be subtle in the consumer’s in turn will also inspire new innovations. This will include perception, even if the innovation required to deliver a the first deployment of temperature controlled pitches. minimal increment is profound. Over the past decade The technology monitors, in real time, the quality of the self-driving capability in cars has ratcheted up, via the air in the stadium, the weather and the climate in features such as distance and lane control, automated addition to other environmental conditions. Mobile parking, traction control and satellite navigation-guided sensor stations will also be installed in areas in order to automatic gear boxes. Yet cars still look like cars. process localized and personalized air quality data196. By leveraging the ‘Internet of Things’ concept, the All sectors, as they mature, have to tread the tightrope technology can generate data which can be accessed between change and continuity. A decade ago, less through multiple channels, such as mobile or web than five per cent of mobile phone owners had a portals, which can be embedded in televised match smartphone. Today smartphones are the predominant coverage. Mobile sensor stations will be installed in mobile phone format. Each year, major new models areas in order to process localized and personalized air are launched, and with each launch the scope for the quality data197, which can be accessed anywhere. This is perception of radical change lessens. The demand is the quite revolutionary in the domains of sports, technology same but better: meeting this can still deliver enormous and innovation in the region and globally. value.

To benefit from these innovations, television players Today’s television still largely resembles that from should focus their business models towards the a decade back: channels, story arcs, and peak development and distribution of premium content and programming timings are all constants. But at the same invest in technologies to enable its delivery to satisfy time, TV has become profoundly different, production the tech-savvy youth’s demand for high quality content quality has ratcheted up, formats are more refined, there anywhere and everywhere. are more channels, and there is more choice over when and where to consume. The consumer’s response to this has been to largely carry on as before: the majority of viewers choose to watch in the living room, live, in the evening, with adverts, in the company of people, and To benefit from these innovations, television players with the TV tuned to the channels that dominated ten should focus their business models towards the years ago; teenagers and older children living at home, choose to watch in their bedrooms, but on laptops now, development and distribution of premium content and not on portable TV sets. Television has innovated; and invest in technologies to enable its delivery its consumers have largely chosen to stick with it. to satisfy the tech-savvy youth’s demand for high quality content anywhere and everywhere.

37 Leveraging the region’s youth and media hubs to The rise of dedicated media zones such as the Dubai drive change Media Cluster (which includes Dubai Media City, Dubai The Middle East, driven by its youth demographic, is Studio City and the International Media Production known to be quick in adopting new technologies, once Zone) and Abu Dhabi’s twofour54 in addition to others they are proven in the West. New innovations such as across the Middle East (e.g. Cairo’s Media Free Zone, YouTube have enabled the youth to develop their own Beirut’s Media Zone) have also emphasized the rising creative edge – and it has proven to be a force to be prominence of local content production in the region. reckoned with. As these initiatives and hubs continue to encourage Large media players and government entities have made the development of new technologies and support efforts to satisfy high demand for new, locally produced young creators in developing local content, the plot content. of television in the Middle East will only continue to thicken201. For example, Al Jazeera’s Innovation and Research Group, which itself launched around mid-2014198, have opened their first major community innovation initiative, the online Innovation Challenge. The event was open to regional and international software Large media players and government entities have designers, technologists and developers to explore new made efforts to satisfy high demand for new, locally ideas about storytelling with new media consumption patterns (i.e. through mobile and web apps). Winners of produced content. the challenge would be awarded and given cash prices, with the possibility of future incubation support from the network199.

Al Jazeera has also followed up with another innovation event, Canvas. Similarly, the three day innovation event involves various media professionals, journalists, designers, software developers, inventors and researchers who collaborate to create innovative solutions to challenges posed by Al Jazeera. The event aims to raise awareness and encourage innovative developments across the media and technology industries. The inaugural theme for the recent 2014 event was “Media in Context”, involving exploration of the relationship between contextual information and media across the entire content life cycle from production to distribution and consumption. As with their other innovation event, winning solutions would be recognized and possibly be selected for future incubation support, including mentorship and funding grants200.

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39 Contacts

Researched and written by:

Santino Saguto Emmanuel Durou Gareth Pereira Partner and Partner, Director, Technology, Media and Middle East Middle East Telecommunications (TMT) Technology, Media & Technology, Media & Leader for Middle East Telecommunications (TMT) Telecommunications (TMT) Deloitte & Touche (M.E.) Deloitte & Touche (M.E.) Deloitte & Touche (M.E.) +971 4 376 8888 +971 4 376 8888 +971 4 376 8888 [email protected] [email protected] [email protected]

Paul Lee Adil Parvez Danah Khatib Global Head of Research, Senior Consultant, Consultant, Technology, Media & Middle East Middle East Telecommunications (TMT) Technology, Media & Technology, Media & Deloitte Touche Tohmatsu Telecommunications (TMT) Telecommunications (TMT) Limited Deloitte & Touche (M.E.) Deloitte & Touche (M.E.) +44 20 7007 0197 +971 (0) 4 376 8601 +971 (0) 4 376 8601 [email protected] [email protected] [email protected]

Marketing contacts:

Nadine El Hassan Patrick Mallouh Manager, Manager, Public Relations Brand & Communications Deloitte & Touche (M.E.) Deloitte & Touche (M.E.) +961 (0) 1 748 444 +971 4 376 8888 [email protected] [email protected]

Television’s business model | Fit for a digital world: Middle East perspective 40 Deloitte in the Middle East

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41 Television’s business model | Fit for a digital world: Middle East perspective 42 Endnotes

1. Currently many TV industry conferences include a session on SVOD, see: Tuning in to Netflix, Newsline, 16 June 2014: http://mediatel.co.uk/ newsline/2014/06/16/tuning-into-netflix/; At the 2013 Royal Television Society conference, one session involved an interview with Netflix’s Chief Content Office, see: Tuning in to Netflix, Royal Television Society, 2013: http://www.rts.org.uk/rts-cambridge-convention-2013-netflix- %E2%80%93-new-risk-takers; other sessions discussed Netflix, including an interview with Mike Fries, CEO of Liberty Global, see: Liberty Global CEO Talks Netflix, Deal Chatter, The Hollywood Reporter, 11 September 2013: http://www.hollywoodreporter.com/news/liberty- global-ceo-talks-netflix-627268; also see: Conversation with Reed Hastings, Netflix CEO & founder, Copenhagen Future TV Conference, 13 September 2013: http://futuretv.dk/conversation-with-reed-hastings-september-2013/

2. Source: Netflix outbids pay TV for rights to Disney movies, Yahoo News, 4 December 2013. See: http://news.yahoo.com/netflix-outbids-pay- tv-rights-194144418.html; Source: Netflix outbids pay TV for rights to Disney movies, The Hollywood Reporter, 15 March 2011. See: http:// www.hollywoodreporter.com/news/netflix-outbids-hbo-david-fincher-167882; Some traditional TV companies have stated that they are contemplating mergers so as to be able to compete with SVOD providers, see: BCE, Astral Media argue for merger, cite threat from Netflix, The Globe and Mail, 6 May 2013: http://www.theglobeandmail.com/report-on-business/bce-astral-media-argue-for-merger-cite-threat-from- netflix/article11730805/

3. Source: ITV Tests Around Europe: So Far, It’s a Turn-Off, Department of Computer Science, Columbia University. See: http://www.cs.columbia. ed/~hgs/Internet/Itv.html

4. The actual speed realized depends on distance from the exchange, among other factors. Fibre to the cabinet delivers about 100 Mbit/s at a distance of half a kilometer, and falls to 50 Mbit/s at a distance of a kilometer. See: Very-high-bit-rate digital subscriber line 2, Wikipedia: http:// en.wikipedia.org/wiki/Very-high-bit-rate_digital_subscriber_line_2

5. Source: Investor Relations, Netflix, 21 July 2014. See: http://files.shareholder.com/downloads/NFLX/3293886067x0x769748/9b21df7f-743c- 4f0f-94da-9f13e384a3d2/July2014EarningsLetter_7.21.14_final.pdf

6. Source: 2014 Emmy Awards: ‘Game of Thrones’, ‘Fargo’ Lead Nominations, Variety, 10 July 2014. See: http://variety.com/2014/tv/news/emmy- nominations-2014-list-emmys-nominees-1201260236/

7. “Worldwide Over-the-Top Subscription Video on Demand Market”, PR Newswire (29 Jan 2014): http://www.prnewswire.com/news-releases/ worldwide-over-the-top-subscription-video-on-demand-market-242489931.html

8. “Nine in 10 MENA households now taking satellite TV”, Digital TV Europe, March 2014: http://www.digitaltveurope.net/157432/nine-in-10- mena-households-now-taking-satellite-tv/

9. Deloitte research and analysis. Note that Middle East in this case refers to all MENA countries except negligible markets referred to by Informa as “Rest of MENA”. Rest of MENA includes Palestine, Yemen, Iraq and Libya. Hence these countries have been omitted in our overall household and penetration estimates. Source Data: “Global TV Household Forecasts 2005-2017”, Informa Telecoms & Media (Year-End, 2013)

10. “OTT video in MENA: local players are better positioned than international players to capture the opportunity”, Analysis Mason, August 2013: http://www.analysysmason.com/About-Us/News/Insight/OTT-video-in-MENA-Aug2013/Article-pdf/

11. “Defining the Digital Services landscape for the Middle East”, Deloitte (Jan 2014)

12. The Netflix Plan to Conquer the World, The Hollywood Reporter, 2 May 2013: http://www.hollywoodreporter.com/news/netflix-plan-conquer- world-449083

13. Arab Media Outlook, Deloitte, 2012 ; “MENA Internet Usage & Consumption Habits 2013”, IPSOS, 2013: http://www.slideshare.net/ MaisAbuSalah/ipsosarabnetpresentation-beirut2013130325072901phpapp02

14. Netflix launched its streaming service in 2007; Hulu launched a year later; Hulu Prime launched in 2010. See: Company Overview, Netflix: https://pr.netflix.com/WebClient/loginPageSalesNetworksAction.do?contentGroupId=10477; also see: About us, Hulu: http://www.hulu.com/ about; also see: Hulu Plus Launches Out of Preview for $7.99/month, Hulu, 17 November 2010: http://blog.hulu.com/2010/11/17/hulu-plus- launches-out-of-preview-for-7-99month/

15. Amazon has not published an exact number of Prime members, but has stated that as of end 2013 there are tens of millions; some reports suggest there were 20 million Prime members as of the start of the year. Based on warehousing acreage and capillarity, which is greatest and densest in the US, we estimate that at least half but no more than three quarters of Prime members are in the US. See: Amazon Says It Has 20 Million Prime Members, Business Insider, 7 January 2014: http://www.businessinsider.com/amazon-prime-members-2014-1

16. Source: Hulu Plus Launches Out of Preview for $7.99/month, Hulu, 17 November 2010. See: http://blog.hulu.com/2010/11/17/hulu-plus- launches-out-of-preview-for-7-99month/

17. Amazon had previously offered a range of pay-per-view rental and download-to-buy options via Amazon video on demand. See: Amazon Prime Members Now Get Unlimited, Commercial-free, Instant Streaming of More Than 5,000 Movies and TV Shows at No Additional Cost, Amazon, 22 February 2011: http://phx.corporate-ir.net/phoenix.zhtml?c=176060&p=irol-newsArticle&ID=1531234

18. The number of pay TV homes fell for the first time in 2013: 2012 was the peak year for pay TV homes. The decline in 2013 was less than a quarter of one per cent. In all previous years the number of pay TV homes increased by a small amount. The number of pay TV homes in the US has stayed constant against a background of rising household formation, so the proportion of homes with pay TV in the US has been in decline for a number of years. See: TV Subscriptions Fall for First Time as Viewers Cut the Cord, Bloomberg, 20 March 2014: http://www. bloomberg.com/news/2014-03-19/u-s-pay-tv-subscriptions-fall-for-first-time-as-streaming-gains.html

43 19. Source: Neilsen Q4 2013 Cross-Platform Report, Nielsen, March 2014. See: http://penngood.com/2014/03/05/nielsen-q4-2013-cross-platform- report/

20. We have calculated pay TV subscribers as being all respodents with Netflix or Amazon prime who only had digital terrestrial reception. See the appendix (page7) in, Netflix – Friend or Foe?, BARB, 21 July 2014: http://www.barb.co.uk/whats-new/329

21. “Arab Media Outlook 2011-2015”, Deloitte (2012), Shahid.net personal interview, Deloitte (2013)

22. “MBC to launch SVoD service in MENA”, YouTube Statistics, IHS Technology Article (10 Jul 2014): https://technology.ihs.com/505919/mbc-to- launch-svod-service-in-mena

23. Deloitte research and analysis. Note that Middle East in this case refers to all MENA countries except negligible markets referred to by Informa as “Rest of MENA”. Rest of MENA includes Palestine, Yemen, Iraq and Libya. Hence these countries have been omitted in our overall household and penetration estimates. Source Data: “Global TV Household Forecasts 2005-2017”, Informa Telecoms & Media (Year-End, 2013)

24. “Arab Media Outlook 2011-2015”, Deloitte (2012), Shahid.net personal interview, Deloitte (2013)

25. “Arab Media Outlook 2011-2015”, Deloitte (2012)

26. For more information on Netflix’s licensing-centric approach, see: Netflix the ‘New HBO’? Get Real, Variety, 19 July 2013. See: http://variety. com/2013/digital/news/netflix-the-new-hbo-get-real-1200565593/

27. In Germany, Sky Deutschland has exclusive rights to House of Cards; in France CanalPlus has exclusive rights to the first two series of House of Cards. Source: Why Netflix subscribers in Europe Won’t Get ‘House of Cards’, The Hollywood Repoter, 25 June 2014. See: http://www. hollywoodreporter.com/news/netflix-subscribers-europe-wont-get-714647

28. Big Bang Theory has been commissioned for three years, implying near $200 million in talent costs for the three main stars. Source: ‘Big Bang Theory’ Stars will Without Contract, The Hollywood Reporter, 16 July 2014. See: http://www.hollywoodreporter.com/live-feed/big-bang- theory-stars-still-719147

29. Spend on all content by UK TV channels was £5.8 billion ($9.8 billion at August 2014 exchange rates) in 2013, an increase of 3.7 per cent on the previous year. Source: The Communications Market 2014, Ofcom, 2014, See: http://stakeholders.ofcom.org.uk/binaries/research/cmr/ cmr14/UK_2.pdf

30. Morgan Stanley estimate quoted in this article. Netflix 2014 European Expansion: A Look Ahead, Variety, 6 March 2014. See: http://variety. com/2014/digital/news/netflix-makes-plans-to-move-into-europe-but-it-faces-fights-from-local-competitors-1201125910/

31. “du announces icflix service for mobile TV”, ITP (21 Oct 2014): http://www.itp.net/600557-du-announces-icflix-service-for-mobile-tv

32. “Middle East ‘Netflix’ prepares summer launch”, Digital TV Europe (16 April 2013): http://www.digitaltveurope.net/47431/middle-east-netflix- prepares-summer-launch/

33. “Istikana and Everymedia in Bollywood VOD deal”, Rapid TV News (2 April 2013): http://www.rapidtvnews.com/2013040227059/istikana- and-everymedia-in-bollywood-vod-deal.html#ixzz3Nkv5GVVOwith yahoo!Maktoob

34. “Yahoo! Maktoob partners with Istikana”, Digital Production ME, (Jul 2013): http://www.digitalproductionme.com/article-6490-yahoo- maktoob-partners-with-istikana/

35. “Video-on-Demand Portal Istikana Announces Deal with Umniah in Jordan”, Wamda, (4 Feb 2013): http://www.wamda.com/2013/02/video- on-demand-portal-istikana-announces-deal-with-umniah-in-jordan

36. While the SVOD offer may be superior in Western Europe, so is the traditional pay TV offer.

37. Source: Consumer Video Media Services, Worldwide, 2011-2018, 1Q14 update, Gartner (Report is accessible for paid subscription)

38. We have not included the contribution of Amazon’s video-on-demand service as it is now bundled into its Prime service, whose principal offer is free delivery. At the start of the year Amazon had 20 million Prime subscribers, and the cost of service in the US is $100 per year. If we assume a fifth of the value of a Prime membership is the ability to access TV content on demand, this would represent at least $400 million.

39. For the latest list, see: MAVISE, http://mavise.obs.coe.int/

40. For a commentary on the possible for Netflix as it expands into new European markets, see: Netflix 2014 European Expansion: A Look Ahead, 4 March 2014: http://variety.com/2014/digital/news/netflix-makes-plans-to-move-into-europe-but-it-faces-fights-from-local- competitors-1201125910/

41. Source: Sky’s Now lands on PS4, heads to Xbox One soon, Wired, 24 July, 2014. See: http://www.wired.co.uk/news/archive/2014-07/24/sky- now-tv-ps4-xbox-one

42. Source: ProSiebenSat.1 launches international OTT service, BroadbandTV News, 5 August 2014. See: http://www.broadbandtvnews. com/2014/08/05prosiebensat-1-launches-international-ott-service/

43. Source: HBO set to expand online overseas, Advanced Television, 5 August 2014. See: http://advanced-television.com/2014/08/05/hbo-set-to- expand-online-overseas/

Television’s business model | Fit for a digital world: Middle East perspective 44 44. The increased appeal of broadcasters’ VOD service is reflected by demand: In March 2014 the BBC’s iPlayer received 248 million requests, a 25 per cent increase on the previous year. See slide 4 in: Monthly Performance Pack, June 2014: http://downloads.bbc.co.uk/mediacentre/iplayer- performance-jun14.pdf

45. “MBC to launch SVoD service in MENA”, YouTube Statistics, IHS Technology Article (10 Jul 2014): https://technology.ihs.com/505919/mbc-to- launch-svod-service-in-mena

46. “Streaming: Videos, On-Demand in The Middle East” , Wall Street Journal (19 Mar 2014): http://blogs.wsj.com/middleeast/2014/03/19/ streaming-videos-on-demand-in-the-middle-east/

47. icFlix launches smart TV app, NexTV Africa & Middle East, 19 Dec 2013: http://nextvame.com/5-ott/icflix-launches-smart-tv-app/

48. “ICFLIX Releases HIV, a First Original Production”, PR Newswire (2 Oct 2014): http://www.prnewswire.com/news-releases/icflix-releases-hiv- a-first-original-production-277896491.html ; “ICFLIX Releases Al Makida, an Original Production”, PR Newswire (28 Dec 2014): http://www. prnewswire.com/news-releases/icflix-releases-al-makida-an-original-production-286955301.html ; “Icflix releases its original production ‘Al Makida”, Trade Arabia (2 Jan 2015): http://www.tradearabia.com/news/MEDIA_272431.html

49. Deloitte research and analysis (2015). All data and information is sourced from company websites, press clippings, interviews and proprietary sources.

50. Source: Investor Relations, Netflix, 21 July 2014. See: http://files.shareholder.com/downloads/NFLX/3292886967x0x769748/9b21df7f-743c- 4f0f-94da-9f13e384a3d2/July2013EarningsLetter_7.21.14_final.pdf

51. Source: Internet Connection Speed Recommendations, Netflix. See: http://help.netflix.com/en/node/306/; Source: How can I control how much data Netflix uses?, Netflix. See: https://help.netflix.com/en/node/87

52. SVOD providers can mitigate the impact of congestion by setting up what are known as content distribution networks. This can increase the quality of service, but it can also increase connectivity costs. For more information on this, see: Content delivery network, Wikipedia: http:// en.wikipedia.org/wiki/Content_delivery_network

53. For more information, see: Netflix Signs Peering Deal with AT&T to Reduce Buffering, Mashable, 30 July, 2014: http://mashable. com/2014/07/29/netflix-att-peering-deal/

54. TV-Everywhere poised for rapid uptake, Gulf News, March 2014: http://gulfnews.com/business/technology/tv-everywhere-poised-for-rapid- uptake-1.1302792)

55. “MBC to launch SVoD service in MENA”, YouTube Statistics, IHS Technology Article (10 Jul 2014): https://technology.ihs.com/505919/mbc-to- launch-svod-service-in-mena

56. “Worldwide Over-the-Top Subscription Video on Demand Market”, PR Newswire (29 Jan 2014): http://www.prnewswire.com/news-releases/ worldwide-over-the-top-subscription-video-on-demand-market-242489931.html

57. To see more information on the cost of subtitles in Denmark, see: Netflix success marred by poor subtitles, high cost and limited stock, The Copenhagen Post, 24 July, 2014: http://cphpost.dk/news/netflix-success-marred-by-poor-subtitles-high-cost-and-limited-stock.8443.html

58. “Population of Saudi Arabia at 30 million in 2013”, BQ Doha (19 Feb 2014):http://www.bqdoha.com/2014/02/population-saudi-arabia-30- million-2013

59. “United Arab Emirates Population 2014”, World Population Review (2014): http://worldpopulationreview.com/countries/united-arab-emirates- population/

60. Source: HBO Weights More Web-TV Services Overseas, The Wall Street Journal, 3 August 2014. See: http://online.wsj.com/news/article_email/ hbo-weighs-more-web-tv-services-overseas-1407106582-lMyQjAxMTA0MDAwMzEwNDMyWj?_ga=1.264616719.1298682447.1387006483

61. Netflix content is streamed to Virgin Media’s set top box. For more information see: Watch Netflix on your TV with TiVo®, Virgin Media: http:// store.virginmedia.com/digital-tv/channels/netflix.html

62. The estimates in this section have been developed by the Deloitte Sports Business Group, using their definition of premium sports broadcast rights which is rights fees for the most popular sports competitions in the biggest sports around the world. These include: the top-tier domestic football leagues in each European, Asian, Latin American, Middle East and African Country; the top regional club football competition on each continent, four major North American professional leagues – Major League Baseball (MLB), National Basketball Association (NBA), National Football League (NFL), and National Hockey League (NHL); the top US college sports conferences; the National Association for Stock Car Auto Racing (NASCAR); Formula 1; the Indian Premier League; Indian national team cricket

63. For example see: TV Sports a Spectacular Bubble, Forbes, 16 January 2013: http://www.forbes.com/sites/igogreenwald/2013/01/16/ tv-sports-a-spectacular-bubble/. Talk of a bubble in sports rights has existed for decades – and may well persist for decades. Talk of rights bubble bursting is still strong – and still wrong, Sports Business Daily, 22 July 2013. See: http://www.sportsbusinessdaily.com/Journal/ issues/2013/07/22/Media/Sports-Media.aspx

64. For example, Sony trialled UHD (4K) at the Confederation Cup in Brazil, 2013. 4K footage was also captured at Wimbledon 2013. Source: Sony and FIFA began testing 4K technology in the FIFA Confederations Cup 2013, Sony, 25 April 2013: See: http://www.sony.es/pro/press/pr-fifa- 4k; Also see: BBC and Sony to trial 4K TV at Wimbledon, Technradar, 24 April 2013: http://www.techradar.com/news/home-video/video/ television/tv/audio/sony-and-bbc-to-trial-4K-tv-at-wimbledon-1147095

45 65. The methodology used for determining growth in Middle East premium sports rights is the same as that used for determining the global value and growth of premium sports rights. Calculations are based on the biggest premium sports leagues and competitions in the Middle East, treated as a sizeable and representative sample of premium sports rights in the region. We have obtained information principally from publically available information released by rights holders, trade publications, confidential and proprietary sources.

66. TV Broadcasting Rights in Arab World-Annual (USD m), Exhibit 101: Viewing preferences and value of local vs. international leagues, Domestic Leagues – Undervalued Sports Properties, Sports, Arab Media Outlook 2011-2015, Dubai Press Club, Deloitte

67. “Broadcast sports rights: premium plus” prediction, TMT Predictions 2014 | Middle East, Deloitte

68. “MBC to air Saudi football league, King Cup matches in $1 bln deal”, Al Arabiya News (31 July 2014): http://english.alarabiya.net/en/ sports/2014/07/31/MBC-to-broadcast-Saudi-football-league-King-Cup-matches-in-1-bln-deal.html

69. AGL reportedly has 7 matches per round and 26 rounds per season. “Arabian Gulf League to move two games a round to pay-per-view”, The National (12 Sep 2013): http://www.thenational.ae/sport/arabiangulf-league-to-move-two-games-a-round-to-pay-per-view ; “3 AGL matches per round to be encrypted”, Arabian Gulf League (22 Jul 2014): http://web.agleague.ae/en/news/ex-office-meeting1.html

70. “Broadcast sports rights: premium plus”, TMT Predictions 2014 | Middle East, Deloitte (19 Mar 2014)

71. Reality TV tops ratings in UAE, reveals recent report, 7 Days in Dubai, October 2013: http://7daysindubai.com/business-news-989/

72. IPSOS Television Audience Measurement (TLM) Data (Mar 2013)

73. The UAE Arabian Gulf League, Saudi Professional League and Egyptian Premier League are regarded as the biggest leagues in the Middle East and have been taken as a representative sample for the Middle East. A weighted average has been applied to survey results accounting for the large population difference between UAE, Saudi Arabia and Egypt. This has been applied to obtain a representative regional weighted average. Source: Exhibit 41: Pay-TV Subscriptions by Content Type, Pay-TV, Arab Media Outlook 2011-2015, Dubai Press Club, Deloitte, Ipsos press releases, Deloitte analysis.

74. Abu Dhabi Media and OSN announce Strategic Collaboration, Abu Dhabi Media official web site: http://www.admedia.ae/news-and-events/ press-releases/abu-dhabi-media-and-osn-announce-strategic-collaboration/

75. “MBC Group launches sports channels”, Al Arabiya News (8 Aug 2014): http://english.alarabiya.net/en/media/television-and- radio/2014/08/09/MBC-Group-launches-sports-channels.html

76. Rotana.net website: http://www.rotana.net/en/r/koora

1-رمحألا-فلملا/Rotana.net website: http://www.rotana.net/en/r .77 78. Soccer Prince Arabia website: http://www.soccerprincearabia.net/en/contents/view/aboutus.html

79. “Abu Dhabi’s LIVE HD takes the lead in sport production”, Broadcast Pro Middle East (12 Oct 2014): http://www.broadcastprome.com/ content-creation/taking-the-lead/#.VJ8TBJDDA

80. “Stand out sports: The Economics of Middle East Football Transfers”, Stand Out Sports (7 Oct 2014): http://www.stand-out.me/en/article/50

81. “Stand out sports: The Economics of Middle East Football Transfers”, Stand Out Sports (7 Oct 2014): http://www.stand-out.me/en/article/50

82. “Stand out sports: The Economics of Middle East Football Transfers”, Stand Out Sports (7 Oct 2014): http://www.stand-out.me/en/article/50

83. “Stand out sports: The Economics of Middle East Football Transfers”, Stand Out Sports (7 Oct 2014): http://www.stand-out.me/en/article/50

84. Globe Soccer website: http://www.globesoccer.com/

85. “Abu Dhabi Media selected as official media partner of renowed “Globe Soccer” Awards 2014”, Abu Dhabi Media (Dec 2014): http://www. admedia.ae/news-and-events/press-releases/abu-dhabi-media-selected-as-official-media-partner-of-renowned-g/

86. “Italy’s Supercoppa to be held in Doha”, Host City (7 Oct 2014): http://www.hostcity.net/event-bidding-news/italy%E2%80%99s-supercoppa- be-held-doha

87. “AC Milan stun Real Madrid in Dubai match”, Khaleej Times (31 Dec 2014): http://www.khaleejtimes.com/mobile/inside.asp?xfile=/data/ nationsports/2014/December/nationsports_December308.xml§ion=nationsports

88. For example see: 2006: “YouTube and CBS partnered up to declare that CBS clips on Youtube [sic] actually increased overall TV ratings but that is almost certainly hogwash”, see: Let’s Just Declare TV Dead and Move On, Techcrunch, 27 November 2006: http://techcrunch. com/2006/11/27/lets-just-declare-tv-dead-and-move-onhttpwwwtechcrunchcomwp-adminpostphpactioneditpost3865-2/; 2013: “Global audiences of prosumer video producers will create content that is viewed by global audiences in numbers far in excess of traditional TV”, see: ‘Suck It, Traditional TV’: How We’re Going To Watch Things In The Future, Business Insider, 19 February 2013: http://www.businessinsider. com/the-future-of-television-2013-2#ixzz3A13IT75q; 2014: “This is the year that the web emerges as the new audience consumption platform for video, and moves to eclips [sic] TV. Sometimes it pays to be a student of history”, see: Why Television Is Dead, Forbes, 28 January 2014: http://www.forbes.com/sites/stevenrosenbaum/2014/01/28/whytelevision-is-dead/

89. Source: Three on ‘Big Bang’ to Get $1 Million an Episode, The New York Times, 5 August 2014. See: http://www.nytimes.com/2014/08/06/ business/media/big-bang-theory-stars-renew-their-contracts.html?_r=0

90. Source: PSY – Gangnam Style, Youtube, 15 July 2012. See: https://www.youtube.com/watch?v=9bZkp7q19f0

Television’s business model | Fit for a digital world: Middle East perspective 46 91. 2,058 million as of 10 August 2014. See: PSY – Gangnam Style, Youtube, 15 July 2012: https://www.youtube.com/watch?v=9bZkp7q19f0

92. 3,943 million as of 10 August 2014. See: PSY Official YouTube Channel, Youtube, 2014: https://www.youtube.com/user/officialpsy/about

93. Source: PSY – Hangover feat, Youtube, 8 June 2014. See: https://www.youtube.com/watch?v=HkMNOlYcpHg

94. There are no data readily available on the number of views of Thriller on MTV. What is known is that MTV part-funded the video, by contributing towards the cost of the Making of ‘Thriller’ and that when Thriller was released in 1983, the song was on heavy rotation at a time when MTV was showing music videos constantly. As of August 2013, 97.7 million US homes had access to MTV. See: 12 Thrilling Facts About Michael Jackson’s ‘Thriller’ Video, Rollingstone, 29 October 2013: http://www.rollingstone.com/music/news/12-thrilling-facts-about-michael- jacksons-thriller-20131029; Nielsen data quoted in: List of How Many Homes Each Cable Networks Is In – Cable Network Coverage Estimates As Of August 2013 Categories: 2-Featured,Cable TV,TV Ratings Reference, 23 August 2013, TV by the numbers: http://tvbythenumbers.zap2it. com/2013/08/23/list-of-how-many-homes-each-cablenetworks-is-in-cable-network-coverage-estimates-as-of-august-2013/199072/

95. In October 2013, PewDiePie had 192 million views worldwide. See: PewDiePie unseats Miley Cyrus as world’s most popular YouTube channel, The Guardian, 8 November 2013: http://www.theguardian.com/technology/2013/nov/08/pewdiepie-miley-cyrusyoutube-videos

96. For more information, see: YouTube’s Biggest Star Is An Unknown Toy-Reviewing Toddler Whisperer, BuzzFeed News, 18 July 2014: http:// www.buzzfeed.com/hillaryreinsberg/youtubes-biggest-star-is-an-unknown-toy-reviewing-toddler-wh

97. Source: DisneyCollector, Youtube, 2014. See:https://www.youtube.com/user/DisneyCollectorBR/about

98. This article bases its estimate of annual earnings on all-time historical views; all the mentioned stars mentioned in the article have been posting for several years, so the estimated figure for annual earnings may be in excess of actual. See: The 25 Highest Earning Youtube Stars, Celebrity Networth, 9 March 2014: http://www.celebritynetworth.com/articles/celebrity/the-25-highest-earningyoutube-stars/. For example Michelle Phan, who is listed as earning $1.3 million each year from advertising revenues, is reported in the LA Times as earning ‘more than $1 million’ in 2014 from all sources of income, including a make-up line, endorsements and a book deal. See: YouTube’s biggest stars are cashing in offline, LA Times, 7 August 2014: http://www.latimes.com/business/la-fiyoutube-stars-20140808-story.html#page=1. The Daily Mail estimates that PewDiePie earns $4 million a year. See: Meet the man making $4m a YEAR from posting hilarious and often expletive-laden clips of himself playing video games on YouTube, Mail Online, 19 June 2014: http://www.dailymail.co.uk/news/article-2663123/Meet-man-making-4m-YEAR- posting-vulgar-hilarious-clipsplaying-video-games-YouTube.html.

99. Source: YouTube’s biggest stars are cashing in offline, LA Times, 7 August 2014. See: http://www.latimes.com/business/la-fiyoutube-stars- 20140808-story.html#page=1

100. YouTube and The Middle East: The Story of 6 Arab Web Superstars, Digital in the Round, February 2014: http://www.digitalintheround.com/ youtube-arab-web-stars/

101. “MBC to launch SVoD service in MENA”, YouTube Statistics, IHS Technology Article (10 Jul 2014): https://technology.ihs.com/505919/mbc-to- launch-svod-service-in-mena

102. “MBC to launch SVoD service in MENA”, YouTube Statistics, IHS Technology Article (10 Jul 2014): https://technology.ihs.com/505919/mbc-to- launch-svod-service-in-mena

103. Online channels: The YouTube generation, Screen Daily, December 2013: http://www.screendaily.com/features/online-channels-the-youtube- generation/5064659.article; also see: http://www.alrym.net/findings/no-women-no-drive; and see also: http://www.jadaliyya.com/pages/ index/17256/laughing-in-the-kingdom_on-saudi-youtube-comedy

104. YouTube, the ultimate tool for Arab startups? Wamda, November 2014: http://www.wamda.com/2014/11/youtube-the-ultimate-tool-for-arab- startups-

105. Al Jazeera Frames Facebook page:https://www.facebook.com/AJFrames/info?tab=page_info

106. “MBC: ‘Arab Idol’ finale watched by 100 million”, Asharq Al-Awsat (1 Jul 2013):http://www.aawsat.net/2013/07/article55308009

107. Source: Disney buys YouTube channel operator Maker Studios for $500M, CBC News, 25 March 2014. See: http://www.cbc.ca/news/business/ disney-buys-youtube-channel-operator-maker-studios-for-500m-1.2585241

108. Source: 4oD goes mobile with new shorts commissions, Channel4, 26 June 2014. See: http://www.channel4.com/info/press/news/4od-goes- mobile-with-new-shorts-commissions. Source: Fresh Online, BBC, 2014. See: http://www.bbc.co.uk/programmes/articles/2Tnx5607kZsNCC QHkvC91gX/the-brief. Source: VICE and FremantleMedia launch online youth food channel “MUNCHIES” and unveil inaugural titles at MIPTV 2014, FremantleMedia Limited, 7 April 2014. See:http://www.fremantlemedia.com/news/news-detail/14-04-07/VICE_and_FremantleMedia_ launch_online_youth_food_channel_%E2%80%9CMUNCHIES%E2%80%9D_and_unveil_inaugural_titles_at_MIPTV_2014.aspx

109. Source: 3 Minute Wonder, Channel4, 2014. See: http://www.channel4.com/programmes/3-minute-wonder/episode-guide

110. Source: Online Short-Form Video, Channel4, 1 July 2014. See:http://www.channel4.com/info/commissioning/4producers/online/shortform; Source: 4oD goes mobile with new shorts commissions, Channel4, 26 June 2014. See: http://www.channel4.com/info/press/news/4od-goes- mobile-with-new-shorts-commissions.

111. Source: Fresh Online, BBC, 2014. See:http://www.bbc.co.uk/programmes/articles/2Tnx5607kZsNCCQHkvC91gX/the-brief

112. Source: PewDiePie, Youtube, 2014. See: https://www.youtube.com/user/PewDiePie/about

113. Source: HolaSoyGerman, Youtube, 2014. See: https://www.youtube.com/user/HolaSoyGerman/about

47 114. Source: Angry Birds Toy Surprise Jake and the Never Land Pirates Disney Pixar Cars 2 Easter egg Spongebob, DisneyCollector, Youtube. See: https://www.youtube.com/watch?v=aoc8d0gcf08

115. Laughing in the Kingdom: On Saudi YouTube Comedy, Jadaliyya, November 2014: http://www.jadaliyya.com/pages/index/17256/laughing-in- the-kingdom_on-saudi-youtube-comedy

116. “YouTube and The Middle East: The Story of 6 Arab Web Superstars”, Digital in the Round (Feb 2014): http://www.digitalintheround.com/ youtube-arab-web-stars/

117. “Laughing in the Kingdom: On Saudi YouTube Comedy”, Jadaliyya (Nov 2014): http://www.jadaliyya.com/pages/index/17256/laughing-in-the- kingdom_on-saudi-youtube-comedy

118. Source: Three on ‘Big Bang’ to Get $1 Million an Episode, The New York Times, 5 August 2014. SeE: http://www.nytimes.com/2014/08/06/ business/media/big-bang-theory-stars-renew-their-contracts.html?_r=0

119. The methodology for this calculation is as follows: Gangnam Style is 4:12 minutes long and had accumulated 2.06 billion views as of 10 August 2013. This equates to 144 million hours viewed. Not all videos are viewed in their entirety. It is assumed that that on average 80 per cent of the video is viewed (so that most views of the video are in their entirety, but some views may be very brief), we get to 115 million hours. If we focus on the US (so that we can make the comparison with Big Bang Theory) and assume that a third of all views are in the US, the total hours spent watching Gangnam Style since it was uploaded in July 2012 is 38.4 million hours. This is equivalent to four-and-a-half episodes of Big Bang Theory or about a fifth of one of the seven series shown so far.

120. Using on-demand or by watching a pre-recorded copy stored on a digital video recorder (DVR)

121. Source: The Plight of NCIS: TV’s Biggest Drama Gets No Respect, The Atlantic, 4 March 2014. See: http://www.theatlantic.com/entertainment/ archive/2014/03/the-plight-of-em-ncis-em-tvs-biggest-drama-gets-no-respect/284175/

122. Source: The Plight of NCIS: TV’s Biggest Drama Gets No Respect, The Atlantic, 4 March 2014. See: http://www.theatlantic.com/entertainment/ archive/2014/03/the-plight-of-em-ncis-em-tvs-biggest-drama-gets-no-respect/284175/

123. Dailymotion cited 105 million unique visitors per month, and 2.2 billion video views per month. See: Dailymotion around the world, Dailymotion, 2014: http://advertising.dailymotion.com/stats/

124. Nielsen estimates 296 million people in the US are aged 2+; average viewing is about five hours per day. See: Nielsen estimates 116.3 million TV homes in the U.S., up 0.4%, Nielsen, 5 May 2014: http://www.nielsen.com/us/en/insights/news/2014/nielsenestimates-116-3-million-tv- homes-in-the-us.html. Also see: Average American watches 5 hours of TV per day, report shows, New York Daily News, 5 March 2014: http:// www.nydailynews.com/life-style/average-american-watches-5-hours-tv-day-article-1.1711954

125. “Top 10 Arab TV drama shows of 2013”, Arabian Industry (2013/2014): http://arabianindustry.com/broadcast/photos/2014/jun/1/top-10-arab- dramas-of-2013-4714645/#the-10th-most-popular-arab-drama-of-2013-according-to-figures-from-dubai-based-audience-measurement- company-tview

126. “Arab Media Outlook 2011-2015”, Deloitte (2012)

127. According to comScore metrics for the US market in December 2013, 188 million unique viewers watched 52.3 billion views (comScore defines a view as anything over three seconds in duration), and the average monthly time spent per viewer was 1,165 minutes. This equates to about 252 seconds per video. This average includes long-form video from sources such as Turner Digital, which had the tenth-highest number of unique viewers. See: comScore Releases December 2013 U.S. Online Video, Rankings, Comscore, 10 January 2014: http://www.comscore. com/Insights/Press-Releases/2014/1/comScore-Releases-December-2013-USOnline-Video-Rankings

128. There is a wide variety in unofficial estimates of YouTube’s revenue, ranging from $3.7 billion (Forbes estimate) to $5.6 billion in 2013 (eMarketer, quoted in the FT). See: YouTube advertising revenue surges 50% to $5.6bn, Financial Times, 11 December 2013: http://www. ft.com/cms/s/0/377ed152-6220-11e3-bba5-00144feabdc0.html#axzz39bo7uW1v. Also see: Google Earnings: Ad Volume Soars Even as Cost Per Click Declines, Forbes, 21 July 2014: http://www.forbes.com/sites/greatspeculations/2014/07/21/google-earnings-ad-volume-soars-even- as-cost-per-click-declines/

129. This would be similar to how music channels on TV are often used, as an alternative to listening to music radio.

130. The other video making up the top ten is Charlie Bit My Finger – Again! which ranked at number four at 21 July 2014. See: Most viewed YouTube videos: From ‘Gangnam Style’ to ‘Wrecking Ball’, The Independent, 15 July 2014: http://www.independent.co.uk/arts-entertainment/ music/features/most-viewed-youtube-videos-from-gangnam-style-to-wrecking-ball-9607483.html

131. Source: The YouTube Musiconomy: Just How Big Is It? (Infographic), Video Ink, 17 December 2013. See:http://www.thevideoink.com/features/ special-issue/the-youtube-musiconomy-just-how-big-is-it-infographic/#.U-ey5ztwbIU

132. Source: Deloitte UK TV survey, July 2014, 1,941 respondents (respondents with access to a TV, tablet, PC, laptop, smartphone or MP4 video player at home)

133. Source: Deloitte UK TV survey, July 2014, 597 respondents (respondents who watch short video clips on two or more devices)

134. Source: Deloitte UK TV survey, July 2014, 2,000 respondents (adults aged 16+ in Great Britain)

135. Source: Deloitte UK TV survey, July 2014, 889 respondents (respondents who use VOD services on any TV)

136. Source: Deloitte UK TV survey, July 2014, 774 respondents (respondents who use VOD services on any TV)

Television’s business model | Fit for a digital world: Middle East perspective 48 137. Source: Deloitte UK TV survey, July 2014, 567 respondents (respondents who use VOD on any computer)

138. For example, see: Ridiculousness, MTV, 7 August 2014: http://www.mtv.com/shows/ridiculousness/ridiculousness-season-5-ep-5-bonus- clip/1729960/playlist/; Also see: Episode Guides, Channel4, 2014: http://www.channel4.com/programmes/rude-tube/episode-guide

139. “A three-to-five minute piece-to-camera with a teenage kid shouting into the microphone, showing something ‘cool’, with a lot of jump cuts and text on the screen is not what TV audiences expect.” See: The New TV Pilot Seasons: Bringing YouTube Stars, Channels and Bloggers to TV Screens, Techcrunch, 9 August 2014: http://techcrunch.com/2014/08/09/the-new-tv-pilot-season-bringing-youtube-stars-channels-and- bloggers-to-tv-screens/

140. Source: Deloitte UK TV survey, July 2014, 2,000 respondents (adults aged 16+ in Great Britain)

141. The results for the US had similar findings to those for the UK, albeit with a little more comedy among its top ten. See: GfK Study reveals, for the first, time audience figures and drivers of sign-up for SVOD services in the US and UK, GfK, 7 August 2014: http://www.gfk.com/ documents/press-releases/2014/20140807_subscription%20video%20on%20demand_us-uk.pdf

142. YouTube and The Middle East: The Story of 6 Arab Web Superstars, Digital in the Round, February 2014: http://www.digitalintheround.com/ youtube-arab-web-stars/

143. Deloitte research and analysis; based on a proprietary study of digital services (2013).

144. Deloitte research and analysis; based on a proprietary study of digital services (2013).

145. “YouTube and The Middle East: The Story of 6 Arab Web Superstars”, Digital in the Round (February 2014): http://www.digitalintheround. com/youtube-arab-web-stars/

146. “YouTube and The Middle East: The Story of 6 Arab Web Superstars”, Digital in the Round (Feb 2014): http://www.digitalintheround.com/ youtube-arab-web-stars/

147. The average 60 minute program on commercial ad-funded television typically has between 10-15 minutes of ads in peak-time. Some percentage of that is ad skipped (about half of programmes that have been pre-recorded; in homes which have a digital video recorder, the average quantity of viewing watched pre-recorded is between 15 and 20 percent). Adverts that are inserted into programmes watched on-demand, e.g. via broadcaster’ on-demand sites, can typically not be skipped. Five minute videos often have 30 second pre-rolls, much of which is skipped after a few seconds, leading to a much lower ad load, in the region of ten percent.

148. Source: Herskovitz: ‘quarterlife’ better for the Net, cable, The Hollywood Reporter, 28 February, 2008. See: http://www.hollywoodreporter. com/news/herskovitz-quarterlife-better-net-cable-105843;

149. “MBC to launch SVoD service in MENA”, YouTube Statistics, IHS Technology Article (10 Jul 2014): https://technology.ihs.com/505919/mbc-to- launch-svod-service-in-mena

150. “Sharjah TV launches 7th edition of Munshid Al Sharjah”, WAM: Emirates News Agency (7 Sept 2014): http://www.wam.ae/en/news/ general/1395269323101.html

151. “YouTube and Al Jazeera English create video archive of Iraq elections”, journalism.co.uk (9 Mar 2010): http://blogs.journalism. co.uk/2010/03/09/citizentube-iraqi-voices-citizen-perspectives-from-inside-the-country-on-election-day/

152. For example, nine of the 10 most innovative companies in Fast Company’s ranking for 2014 are technology companies, or are heavily technology-based (e.g. a data-analytics-centric charitable organisation). See: Bloomberg Philanthropies, 10 February 2014: http://www. fastcompany.com/most-innovative-companies/2014/bloomberg-philanthropies

153. “What’s Up UAE”, twofour54 ibtikar website: http://ibtikar.twofour54.com/en/portfolio/our-content/series/whats-up-uae.html

154. “Qasl Al Hosn”, twofour54 ibtikar website: http://ibtikar.twofour54.com/en/portfolio/our-content/series/qasr-al-hosn.html

155. This comprises the range of devices used in the living room: televisions, PCs, tablets, smartphones, games consoles, digital video recorders (DVRs), streaming video boxes such as Apple TV

156. For a depth discussion on differences in CPU and GPU performance between Apple’s iPhone 5 and 5s, and between models of iPad, see: iPad Air’s A7 chip is identical to the iPhone’s, just faster, ARS Technica, 30 October 2013: http://arstechnica.com/apple/2013/10/ipad-airs-a7-chip-is- identical-to-the-iphones-just-faster/

157. IP traffic in Western Europe is forecast to reach 19.3 exabytes per month by 2018, a CAGR of 18 per cent. See: The Zettabyte Era Trends and Analysis, Cisco, 10 June 2014: http://www.cisco.com/c/en/us/solutions/collateral/service-provider/visual-networkingindex-vni/VNI_ Hyperconnectivity_WP.html

158. As of January 2014, Angry Birds apps had been downloaded two billion times. As of November 2013, Candy Crush has been downloaded 500 million time. See: Angry Birds downloaded 2 billion times, has as many MAUs as Twitter, VG24/7, 22 January 2014: http://www.vg247. com/2014/01/22/angry-birds-downloaded-2-billion-times-has-as-many-maus-as-twitter/; also see: Half a billion people have installed ‘Candy Crush Saga’, The Verge, 15 November 2013: http://www.theverge.com/2013/11/15/5107794/candy-crush-saga-500-million-downloads

159. In 2004 average daily viewing time was 215 minutes; by 2010 it was 228 minutes. Source: One TV Year in the World, 2011

49 160. Numbers are in nominal terms and exclude online video advertising, a significant proportion of which would be earned by broadcasters for advertisements placed within programmes delivered online. In 2013 online video advertising revenue was $1.2 billion. Source: Bloomberg, 2014

161. “Exhibit 31: Evolution of time spent watching TV on a weekday in the Arab region 2009-2012”, “TV” section, Arab Media Outlook 2011-2015, Deloitte (2012)

162. “Exhibit 11: Arab Region – Advertising spend evolution and split by platform (%)”, “Arab Media In a Global Context” section, Arab Media Outlook 2011-2015, Deloitte (2012)

163. “Exhibit 11: Arab Region – Advertising spend evolution and split by platform (%)”, “Arab Media In a Global Context” section, Arab Media Outlook 2011-2015, Deloitte (2012)

164. Projection for total television advertising spend from end of 2015 to end of 2018 (i.e. by 2019) is based on historical and estimated data from our Arab Media Outlook analysis. The CAGR from 2009 to 2015 was calculated and projected forward to arrive at the 2018 year end estimate for total advertising spend. Based on historical data it is assumed that television retains its share at 40 per cent. Source data: “Exhibit 11: Arab- region – Advertising spend evolution and split by platform (%)”, “Arab media in a global context” section, Arab Media Outlook 2011-2015, Deloitte (2012)

165. Source: CBS News First to Broadcast Horserace Using GoPro as Jockey Helmet Camera, GoPro, September 2010. See: http://gopro.com/news/ cbs-news-first-to-broadcast-horserace-using-gopro-as-jockey-helmet-camera

166. Source: Cameras have been attached to gannets. See: Camera attached to a gannet captures bird’s eye view, BBC, 12 November 2013: http:// www.bbc.co.uk/nature/24898391

167. For more information see: High Capacity 3G & 4G Broadcast Tuned for Transmission, Stream Technologies Limited, 2014: http://www.stream- technologies.com/3g-broadcast; also see: Broadcast Media, LiveU, 2014: http://www.liveu.tv/broadcast_media.html

168. Source: Kickstarter funding brings ‘Veronica Mars’ movie to life, CNBC, 12 March 2014. See: http://www.cnbc.com/id/101486470

169. “Large-screen TVs make it big in the Middle East and Africa”, The National (June 2013): http://www.thenational.ae/business/industry-insights/ retail/large-screen-tvs-make-it-big-in-the-middle-east-and-africa#ixzz3LC4mdmoT

170. “TV Goes Social in the Arab World” Wamda (April 2013) See: http://www.wamda.com/2013/04/tv-goes-social-in-the-arab-world-3-trends

171. “Istikana partners with Samsung Smart TV”, Istikana (June 2012) See: http://blog.istikana.com/post/25057440964/istikana-partners-with- samsung-smart-tv

172. MBC: “1000 more MENA Channels”, Advanced Television, September 2014: http://advanced-television.com/2014/09/23/mbc-1000-more- mena-channels/

173. “Samsung partners with iciflix to bring the best home entertainment for Smart TV consumers”, Al Bawaba (4 Jun 2013) : http://www. albawaba.com/business/pr/samsung-smart-tv-consumers-496787

174. “TV Goes Social in the Arab World: 3 Trends”, Wamda (April 2013) See: http://www.wamda.com/2013/04/tv-goes-social-in-the-arab-world-3- trends

175. “TV Goes Social in the Arab World: 3 Trends”, Wamda (April 2013) See: http://www.wamda.com/2013/04/tv-goes-social-in-the-arab-world-3- trends

176. “The Stream”, Wikipedia (last modified on 30 Dec 2014): http://en.wikipedia.org/wiki/The_Stream

177. Peeta Planet Official Web Site. See: http://peetaplanet.com/

178. “YouTube, the ultimate tool for Arab startups”? Wamda (Nov 2014): See: http://www.wamda.com/2014/11/youtube-the-ultimate-tool-for- arab-startups-

179. “Arab Television Industry Growing Steadily”, The Guardian (Oct 2013) See: http://www.theguardian.com/media-network/media-network- blog/2013/oct/16/arab-television-industry-growing

180. “Spotlight falls on digital terrestrial TV in the Arab world”, Asia OTT, (21 May 2014): http://www.asiaott.com/2014/05/21-6644.html

181. “UAE Switches on DVB-T2”, DVB (22 Dec 2014): https://www.dvb.org/news/uae-switches-on-dvb_t2 ; “Spotlight falls on digital terrestrial TV in the Arab world”, Asia OTT, (21 May 2014): http://www.asiaott.com/2014/05/21-6644.html

182. Source: 9 Things ‘House Of Cards’ Took From Shakespeare, Huffington Post, 21 February, 2014. See: http://www.huffingtonpost. com/2014/02/21/house-of-cards-shakespeare-_n_4823200.html

183. Source: Susan Boyle’s First Audition – I Dreamed a Dream – Britain’s Got Talent 2009, Youtube, 4 September 2012. See: https://www.youtube. com/watch?v=deRF9oEbRso

184. Source: Winner of China’s Got Talent Final 2010 – Armless Pianist Liu Wei Performed You Are Beautiful, Youtube, 10 October 2010. See: https://www.youtube.com/watch?v=B1Qut0Nrsiw

185. Source: Korea’s Got Talent 2011 Final, Youtube, 2011. See: https://www.youtube.com/watch?v=vIy99OT2BAQ

Television’s business model | Fit for a digital world: Middle East perspective 50 186. Source: Rags-to-riches Korean reality TV star Choi: ‘Music was my only friend’, CNN, 21 August 2011. See: http://edition.cnn.com/2011/ SHOWBIZ/Music/08/21/south.korea.talent/

187. In 2014 television is expected to generate $207 billion in net advertising revenue, or 40.2 per cent of the global advertising market. See: MAGNA GLOBAL Ad Forecasts: Reaching the Half Trillion Mark, Magna Global, 16 June 2014: http://news.magnaglobal.com/article_display. cfm?article_id=1578

188. For example one advert, to market the launch of a new TV channel in the Belgian market, has been seen 51 million times online, see: How television advertising deals with DVRs destroying their business, SFGate, 27 December 2013: http://blog.sfgate.com/techchron/2013/12/27/dvr- advertisements/; Also see: A dramatic surprise on a quiet square, Youtube, 11 April 2012: https://www.youtube.com/watch?v=316AzLYfAzw

189. “Why YouTube should be a Top Priority for Middle East Marketers in 2014”, Wamda (Jan 2014). See: http://www.wamda.com/alisajid/2014/01/ why-youtube-should-be-a-top-priority-for-middle-east-marketers-in-2014

190. “How the UAE is Helping the Bollywood Boom”, The National (May 2014). See: http://www.thenational.ae/arts-culture/film/how-the-uae-is- helping-bollywood-boom

191. For an example of sports footage, see: The Future of Sports Photography: Drones, The Atlantic, 18 February 2014: http://www.theatlantic. com/technology/archive/2014/02/the-future-of-sports-photography-drones/283896/; for information on how BBC News used drones, see: Behind the mind-boggling shots captured by BBC drones, The Wired, 12 February 2014: http://www.wired.co.uk/news/archive/2014-02/12/ bbc-drone-journalism . For an example of how drones are being used in nature footage, see: WATCH: Breathtaking nature footage... taken from a drone, The Week, 27 February 2013: http://theweek.com/article/index/240666/watch-breathtaking-nature-footage-taken-from-a- drone ; for information on how movie studios are planning to use drones, see: Hollywood applies to use drones on film productions, The Guardian, 3 June 2014: http://www.theguardian.com/film/2014/jun/03/hollywood-movies-us-military-drones

192. In the forthcoming American Football season, National Football League (NFL) players will have RFID chips within their shoulder pads to enable their location, speed and other metrics to be calibrated. See: NFL players will wear RFID chips this season to track their movements, The Verge, 31 July 2014: http://www.theverge.com/2014/7/31/5957277/nfl-players-will-wear-rfid-chips-this-season-totrack-their-movements

193. In the forthcoming American Football season, National Football League (NFL) players will have RFID chips within their shoulder pads to enable their location, speed and other metrics to be calibrated. See: NFL players will wear RFID chips this season to track their movements, The Verge, 31 July 2014: http://www.theverge.com/2014/7/31/5957277/nfl-players-will-wear-rfid-chips-this-season-totrack-their-movements

194. “Number of TV households in the Middle East and Africa from 2010 to 2014, by platform (in millions)”, Statista (2014). See: http://www. statista.com/statistics/322986/number-tv-households-platform-middle-east-africa/

195. “IPTV is a Booming Business in the Middle East”, Arabian Industry (April 2014). See: http://arabianindustry.com/broadcast/features/2014/ apr/22/up-ip-and-away-4673461/?artpno=4#.VKQD3yuUdUU

196. Source: Qatar Air Quality Tech Chosen for 2022 World Cup Venues, Host City, December 2014. See: http://www.hostcity.net/sporting-venues- news/qatari-air-quality-tech-chosen-2022-world-cup-venues

197. Source: Qatar Air Quality Tech Chosen for 2022 World Cup Venues, Host City, December 2014. See: http://www.hostcity.net/sporting-venues- news/qatari-air-quality-tech-chosen-2022-world-cup-venues

198. “Al Jazeera’s Innovation & Research Group Launches”, Al Jazeera (22 Jul 2014): https://medium.com/@aljazeerair/al-jazeeras-innovation- research-group-launches-b2e989bbabfe

199. “Al Jazeera Media Network Opens Innovation Challenge”, Al Jazeera Press Release (26 Aug 2014): http://www.scoop.co.nz/stories/CU1408/ S00459/al-jazeera-media-network-opens-innovation-challenge.htm

200. “Al Jazeera Media Network Announces First Open Innovation Event: Canvas”, iHub (28 Sep 2014) :http://community.ihub.co.ke/blogs/20753/ al-jazeera-media-network-announces-first-open-innovation-event-canvas

201. Middle East & Africa TV (9th edition), Informa Telecoms & Media (2012)

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