MENA market dynamics: Opportunities and threats

PIRACY: THE SCALE OF THE PROBLEM AND EFFORTS TO ADDRESS IT NETFLIX AND ITS IMPACT ON THE MENA TV MARKET

t 5IF XJEF BWBJMBCJMJUZ PG CPPUMFH TBUFMMJUF DIBOOFMT BOE streaming services makes TV piracy a serious problem in the MENA region. Many countries have been, at the recommendation of the International Intellectual Property Alliance (IIPA), placed on the US Trade Representative’s Watch List, which can result in trade sanctions. The UAE was latest country the IIPA recommended to be placed on the list, in early 2016. t 5IFSF BSF TFWFSBM GBDUPST UIBU NBLF UIF .&/" SFHJPO BOE hotbed for TV piracy: 1. The availability of a rich, well-established FTA offering has conditioned many consumers to believe that entertainment content should be freely accessible. As a result, some consumers committing piracy are not even aware they are stealing content. 2. In countries including Saudi Arabia and Qatar, the installation of a satellite dish is banned. This prohibition notwithstanding, satellite penetration in Saudi Arabia and some other MENA countries is above 90% as authorities not actively enforce the ban. This lack of enforcement legitimises illegal satellite TV reception in the eyes of many consumers. 3. Fighting piracy is not a priority for the regulatory authorities responsible for TV in MENA countries. Some countries in the region do not even have a TV regulatory authority. 4. Only a minority of countries in the region have put in place a legislative framework protecting Intellectual Property, one such example being Egypt. 5. There is sometimes a conflict of interest, as some of the shareholders in legitimate pay TV providers also to have controlling stakes in satellite operators carrying channels offering pirated content. Also, members of the ruling elite in some MENA countries have stakes in some of these bootleg channels. 6. The large price differential between the packages offered

by legitimate and by unauthorised operators. t 4PNF VOJMBUFSBM BDUJPOT UP BEESFTT UIF QJSBDZ QSPCMFN o such as the swapping-out of set-top boxes by OSN in 2010 – have achieved some success. There are higher hopes for a multilateral initiative: the formation of the Broadcasters & Satellite Anti- Piracy Coalition by OSN and MBC in 2014. The Coalition’s goals is to fight piracy by: a) Co-ordinated legal action b) Education campaigns and c) Bringing on-board and committing all key industry

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bootleg channels in 2014. t 1SJPS UP UIF MBVODI PG /FUGMJY JO .&/" DPVOUSJFT in January 2016, there were already several wellestablished online-video services, both free and pay, available in the region. t 5IJT JODMVEFT UXP QBO SFHJPOBM PGGFSJOHT *TUJLBOB which primarily offering classic Arabic films and TV series not usually available on DVD or VOD and launched in 2011; and Icflix, which offers a range of non-premium Arabic, Bollywood and US content and launched 2013. t .#$ UIF MBSHFTU '5" CSPBEDBTUFS JO UIF .&/" SFHJPO launched the ad-funded VOD portal Shahid in 2010, offering a catch-up TV service together with Arabic and US movies and TV series. In 2014, MBC launched an SVOD version of the portal branded Shahid Plus. Shahid Plus offers more recent movies and TV series, plus more content in HD and 3D. t 04/ JT UIF POMZ QBZ 57 PQFSBUPS JO .&/" UP PGGFS a pay TV lite, standalone online-video service – it launched ‘Go by OSN’ in 2014. The offering is centered around US and Arabic movies and TV series and is priced at $10 per month. t *O "QSJM 64 FOUFSUBJONFOU DPNQBOZ 4UBS[ launched Starz Play, an SVOD service offering more than 3,000 movies and TV series releasing episodes at the same time as in the US. t $PNQFUJUJPO XJMM OPU CF UIF POMZ IVSEMF GPS /FUGMJY Other factors that may hinder its success, at least initially, are: 1. The lack of local-arabic content 2. The huge gap between the number of movies and TV series offered in the UAE – 611 – compared to the US catalog of 5,379. 3. Netflix does not have the MENA rights for two of its flagship TV series, House of Cards and Orange is the New Black. 4. Broadband penetration disparity in the MENA region: high penetration in the Gulf, low in Levant and North Africa. 5. The cost of the service (at $9.99 per month) is considered to be expensive outside the Gulf countries 6. In spite of these limiting factors, the growth potential for MENA’S online-video market is high and Netflix will be an important player contributing to this. The service’s high profile serves to educate consumers on the availability of video-streaming services, and also make them more receptive to subscription pricing models.