The pay-TV and over-the-top (OTT) subscription markets in the Middle East and North Africa (MENA) region have followed divergent paths during the last two years. The first, heavily affected by piracy and the blockade of BeIN Media, is struggling to return to normality, while the second is clearly on a growth spree.
The regional pay-TV market is still trying to recover from the two big developments of 2017: the blockade of BeIN Media in KSA, Egypt and Bahrain, and the launch of pirate TV network BeoutQ.
The blockade deprived BeIN of access to its largest and third-largest markets, KSA and Egypt. Between 2010 and 2016, the MENA pay-TV market had the highest regional growth rate globally, with a compound annual growth rate (CAGR) of 17%. This pattern was reversed in 2017 as a result of the blockade. In 2018, market subscriptions grew around 6%, reaching 4.5m people, up from 4.2m in 2017. This growth was mainly IPTV operators.
While subscriptions grew in 2018 relative to 2017, overall revenues fell 8%, for two main reasons. First, the 2017 figures were artificially inflated because BeIN Media was receiving revenues until the end of summer 2017 in the countries that imposed the blockade. Second, 2018 was the first full year where the slashing of package pricing by OSN took full effect.
Piracy remains a major threat, amplified in 2017 by the launch of BeoutQ and the lack of a robust regulatory framework. The blockade has cost BeIN 45% of its subscriber base. IHS Markit estimates BeIN’s lost revenues to be on the scale of $600m, solely from home subscriptions, from mid-2017 to the end of 2018.
One of the most interesting developments is the recent change in KSA’s media business strategy. The country wants to implement a media policy that is more outward-looking and addresses the future challenges of the sector.
The MENA OTT subscription video market continues to grow impressively. Paid subscriptions are set to rise to over 2m by mid-2019, having reached 1.75m in 2018. Revenues have also reached a record height of nearly $140m. Such figures represent growth of over 40% year-on-year and will continue to rise, reaching 4.75m paid subscribers and around $400m in revenue by the end of 2023.
The market is led by three providers – Lionsgate-owned Starz Play Arabia, MBC’s Shahid Plus and Netflix – which together claimed more than 75% of subscriptions and revenues in 2018. Starz Play remains in the lead as it continues its aggressive expansion strategy in MENA. At the forefront of this strategy are the partnerships it has entered with local operators for distribution and direct-carrier billing. In 2018, more than 20 such deals existed across the region between Starz Play and providers ranging from trans-regional telcos, Orange, Vodafone and Zain to local Saudi electronics retailer eXtra.
Starz Play has seen unprecedented user base growth in the region, thanks to these deals. However, converting this vast user base into paying customers will depend on future investment in content, especially as other services deploy their content options.
The gap between Starz Play Arabia and Netflix narrowed in 2018, with the two providers separated by just 5% in paid subscriber market share, and revenue share level at over 30% each. This competition is set to continue as Netflix begins to localise properly, now providing local currency payment options in its two strongest markets, the UAE and KSA, as well as establishing local distribution deals with regional pay-TV operator OSN and local providers in the UAE.
This, on top of the launch of Netflix’s first original Arabic series, Jinn, the recently announced second series of Al Rawabi School for Girls and the third, Paranormal, will help propel Netflix into more homes around the region, including outside the Gulf states.
However, many services have lost market share. Longstanding local provider Icflix has fallen from a near 40% subscriber market share four years ago to less than 5% in 2018.
Recent entrant iflix has also struggled to gain traction following its market entrance with Zain in 2018. Pay-TV provider OSN’s WAVO, set to emulate the success of British TV provider Sky’s virtual pay-TV service Now TV, has seen slow adoption in the Middle East, with just 35,000 subscribers after more than a year of operation.