With internet TV becoming more popular, broadcast veterans predict the early demise of satellite pay TV.
With internet TV becoming more popular, broadcast veterans predict the early demise of satellite pay TV.
Satellite pay TV has been the mainstay of the TV industry for many years, but is now facing serious competition from other methods of content delivery. It is likely that satellite pay TV will be commercially dead within the Middle East in less than 15 years, and this article looks at some of the reasons why.
To an extent, pay TV in the Middle East and North Africa has been its own worst enemy. There are, simply, too many operators chasing too small a market. Although the region covers some 350 million people, the great discrepancies in wealth mean that the potential market for pay TV is actually much smaller. Some analysts put the size of the market as low as three to five million. Compare this with the European market which contains substantially fewer people, but has a pay TV market at least ten times larger.
With such a limited market to work with, it would be logical for the market to comprise a small number of satellite operators, and for those operators to share technologies, but this is not the case. There are presently five operators in the Middle East, with a sixth due to launch at the end of 2010. They use a diverse range of incompatible technologies, with thirteen incompatible cards and systems in use. There are many hundreds of FTA channels, some with comparable content to the pay TV operators. This dilution of the market share makes it very difficult for any operators to sustain a commercial business.
The greatest challenge to satellite pay TV comes, predictably, from the internet. Although this has generically come to be known as IPTV, this is, in fact, a range of technologies designed with the sole purpose of delivering content – music, video, games and so on. The meteoric growth of downloaded services shows that consumers are increasingly aware that they are not bound by the limitations of the broadcasters’ schedules. They are increasingly comfortable with the idea of building their own viewing portfolio, selecting their own content and deciding when and how to view it. It is difficult for conventional satellite pay TV to provide this flexibility, but it is easy, and getting easier, to do this via the internet.
Piracy is a serious issue in the region, as satellite broadcasts are more vulnerable to piracy than internet. Internet TV is a point-to-point delivery system, and so it is easier to control who receives the content.
Internet TV offers other benefits over satellite pay TV, both to the consumer and to the operator. The viewer can download only the content that they want, pay for it on an individual basis and view it when they want. For example, during the 2010 World Cup, some 86 million downloads took place, using the BBC i-player, and there is every reason to assume that this trend will increase.
One drawback of internet TV is that, usually, it is necessary to watch the downloaded content on a PC, and this is not always an attractive viewing environment. However, internet-enabled TV sets and set top boxes are now coming onto the market which will combine the superior presentation of the TV with the flexibility and choice of the internet. TV sets with in-built memory and simple browsers are already available, and this can only grow.
The lack of high-speed bandwidth in the Middle East is the only constraint that is slowing the growth of internet TV, but even this will change as the internet backbones, in the major cities at least, begin to improve. Most subscribers in the Middle East are still limited to less than 1 Mbit/sec, but this will change, and that will trigger an explosive growth in downloaded and real time TV services over the internet.
There are also advantages for the operators. The cost of setting up and running a head-end is substantially lower than a satellite station, and the non-real time nature of internet TV dramatically reduces the costs and complexity of the staffing and scheduling needed at the broadcast centre. With the relatively small market for media services in the Middle East, such savings can make the difference between profit and loss.
The process has already begun. The impending decline of satellite pay TV, and the advantages of internet TV, drove the largest operator in the Middle East, ART, to plan a move from its traditional satellite pay TV platform to an internet TV system, and other operators in the region are following the same path. It is increasingly evident that any operator who relies on satellite pay TV for their future distribution faces diminishing audiences and declining revenue. The future, it seems, is already with us.
The greatest threat to internet television may, in fact, come from the operators themselves. Unless they adopt compatible technologies, and compete solely on content, the same fragmentation and dilution will occur as has happened with satellite pay TV, and with the same end result.
The download culture is in the ascendant; we may be seeing the beginning of the end of satellite pay TV as we know it.
Alan Constant (top pic) is the CTO of Arab Media Corporation and has more than forty years experience in the pay TV industry.
Chris Pollard (second pic) is a senior consultant, specialising in broadcast and communications.
