economic recession effect on pan arab media
DESCRIPTION
An overview of the Arab World’s Media industry in the current Economic downturnTRANSCRIPT
Sources: Industry Reports
Pan Arab Media Landscape ( Recession Effect)
Shariq [email protected]
An overview of the Arab World’s Media industry in the current Economic downturn
August 2009
2
Contents
Media Industry Context
Economic Recession Effect
References
3
Current Global Media Context
Global Media & Entertainment Industry ValueTotal $ 1.3 Trillion ($1.3 Thousand billion; $ 13 Thousand Million
Split of Total Global Value created by Various Media
Percentage Split of Total Global Value Created by Various Media
Source: Picard 02
Europe, Middle East & Africa 35%
US & Canada 45%
Asia pacific 20%
Latin America 0%
Internet Service20%
Cable Subscription
19%Motion Pictures
15%
Newspapers10%
Books10%
Television7%
Radio2%
Videogames5%Audio
Recordings5%
Magazines7%
Traditional Media 64%
Sports & Amusement Parks 15%
New Media 21%
4
Cut-throat Pan Arab FTA market faces declining Ad-spend in current scenario
MENA TV market increased by 1400% over what analogue framework accommodated a decade ago.
High number of Free To Air channelsSelected countries – 2009
Sources: Picard 2002
US MENA UK Asia Pacific France Canada
385 428 >200 38 18 17
The increasing number of channels is resulting in audience fragmentation. Increase in multi-channel penetration and the lower CPMs on thematic channels accelerate this deflationary pressure on TV advertising prices
Effect of Increasing Channels On Average Share Of Television Audience
Pan Arab illustration
Increased Number of Channels
Reduced Average Audience per Program
Reduced Advertising Revenue/Channel/ Hour
Increased Program Cost per Audience Member
Reduced Profit per Channel
Worsened further because of economic crisis
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20
No. Of Channels
Aver
age
Shar
e O
f Tel
evis
ion
Audi
ence
5
Satellite Broadcast in the Pan Arab WorldFree to Air Satellite Channels by Languages Free to Air Satellite Channels by Regions
Free to Air Satellite Channels by Ownership FTA Satellite Channels riding Multiple Satellite to amplify reach
83%7%
7%
3%
ArabicEnglishOtherArabic/English
1%
27%
72%
MixedGovernmentPrivate
20%
23%
46%
6%
5%LevantAfricaGulfUS/EuropeOther
Nilesat Arabsat
Noorsat
6
Clearing the haze by categorizing 428 FTA channels on Reach & Profitability
SWF under the patronage of Royals
Public Broadcasters funded by Government
2% (10 channels)- The Profitable Sovereign Wealth Fund Channels getting 80% of ad-revenue
27% (114 channels) Public broadcasters under Government patronage ,not dependent but seek for remaining 20% ad-spend
2%
27%
71%
Profitable SWFPublic BroadcastersNo Profit Channels
Struggle for leftover 20% ad-revenue & viewership
Enjoy approx 80% of the ad-revenue & viewership!
Loss making entities to a large extent
71% (304 channels) The No Profit Channels -loss making strive for pie of 20% ad-spend plus SMS business model
Regional illustration
Source: Arab Advisors Group
View
ersh
ip &
Rev
enue
Number of FTA Channels
Pan Arab FTA Market the Long Tail Phenomenon
Source: Chris Anderson, 2008
Top 2%
Remaining Channels- Long Tail
( but demand cycle is not repetitive in broadcasting)
7
Pan Arab TV Industry 2009 Exit list
In the past 4 years 81 FTA have shutdown, of which :
24 General Entertainment
17 Variety
10 Music
7 News
4 Sports
3 Movie Channels
Sr. No. General Country
1 AEN KSA
2 Al Madina TV Egypt
3 Al Hadaf TV Egypt
4 Al Hekayat TV UAE
5 Al Mirbad TV Iraq
Variety Entertainment
6 Al Ganadria TV KSA
7 Fun Satellite Egypt
8 Maktoob TV Jordan
9 Al Shashah UAE
10Kulloun Al Kuwait TV
Kuwait
Music
11 Venus TV Egypt
12 Escape TVJordan
13 Shaharzad TV Lebanon
14 M Live UAE
15 Kunouz UAE Source: Booz Allen Hamilton
Regional TV Industry is Churning
Convergence in Regional Media
Digital Convergence
Audiorecordings
Broadcast
Convergence is being actively resisted
Convergence Situations Involving Media Platforms and Producers
Motionpictures
Some convergence is spurred by common interests in
soundtracks and distribution systems
Strong linkages have been formed in visual entertainment
sectors
Online
Convergence producing limited benefits
Convergence producing limited benefits
Global illustration
Source: Picard 05
10
2009 witnesses Convergence & Consolidation strategies in Pan Arab market
Strategiesillustrations
Launch new services / investigate new business models
Consolidation & Vertical Integration
Partnership with new players
(Horizontal –Integration)
Leverage content on new distribution channels (New media, mobile, …)
Monetization of non linear content (VoD, DVR)
Merger of similar businesses to realize economies of scales
Acquisition of players having complementary services
Convergence partnerships with Telcos
Partner with MNOs in order to provide content and share the distribution revenues with the operator
Partner with an infrastructure wholesaler in order to launch a MVNO by leveraging on the Brand and the content
Having succeeded in building a true Pan Arab audience on TV, Arabic media majors are leveraging their content on the internet
• MBC Group and Etisalat announced over 8 million videos being viewed by over 3 million visitors 65% from Middle East alone through internet TV” platform ww.mbc.net/shahid since its launch in 2008
• Ten Sports has signed an agreement with UAE-based du to launch its international beam to mobile TV subscribers in the Middle East
In highly competitive pay TV markets, as a result of FTV players are consolidating their presence through M&A activity
Showtime & Orbit
In highly competitive pay TV markets, as a result of FTV players, Pay TV operators are consolidating their presence through M&A activity
Showtime & Orbit announced merger in July
Zee TV is considering taking control of Taj TV, which owns Ten Sports. Zee had acquired 50% stake in the Taj TV-owned Dubai-based
Spacetoon in cooperation with Zain telecom is to initiate project of mobile SIM cards for kids And also in mobile contents production
AMG) has selected never.no's Interactivity Suite to support a participation-TV venture by AMG's Arab Television Network (ATN) to encourage audience interactivity
Source : Trade Reports 09
11Sources: Arab Advisor Group & PWC Arab Media Outlook 2008-2012
Driving Force behind Coverging trend in the regional Industry
The PWC Arab Media Outlook: 2008-2012 predicts that digital platforms in the Arab world could account for 80% of Advertising market in the coming years.
With various dynamics, Internet penetration is developing fast in MENA
Arab countries by GDP/capita; Mobile & Broadband penetration
Broadband penetration of pop (%) With a population of 300mn and 2/3 of them under 30 ME is key
growth area for New media. The region’s major media groups are targeting lucrative Arab youth market with user generated content, social network sites and multiplatform content on demand
Mob
ile p
enet
ratio
n of
pop
(%)
12
NMC(Regulatory
Body)
Viewers
Syndicators
Advertisers Channels
Program Producers
Money
Money
Audiences
Programs TimePolitical Process
Licenses
Compliance with guidance
ProgramsMoney
Money
Programs
MoneyPrograms
Inter dynamics within the contemporary Pan Arabian TV industry
Weak Strong Sources: Harold L. Vogel; 2007
13
Advertising spend in the Middle East and African (MEA) region is projected to increase 25 percent from 2008 to 2013 as per trade reports.
MBC moves into film finance with its first venture a short film The Circle, which was shown at the Gulf Film Festival.
PESTEL Developments for Regional Media Industry
1st Quarter 2009
Abu Dhabi Government launched a £1bn film fund.Under its patronage Imagenation Abu Dhabi, the film division of the ADMC, announced financing two new films through its five-year partnership with Participant Media: a family comedy titled "Furry Vengeance" and a remake of George A. Romero's 1974 cult classic, "The Crazies."
Po
liti
cal
2nd Quarter 2009
• His Highness Sheikh Mohammed bin Rashid Al Maktoum, Vice-President and Prime Minister of the UAE and Ruler of Dubai, inaugurated the eighth edition of the Arab Media Forum
• Fallout in KSA royal circle with regards to media expansion of the Kingdom Holding Group
Tec
hn
olo
gic
alS
oci
alE
con
om
ical
4th Jeddah Film Festival cancelled in KSA after public protests.
• Funding, from the US$ 50mn Intel Capital Middle East and Turkey Fund, owned by Intel Capital, Intel Corporation
• Nielsen to launch People metering service in Dubai
Dubai refused permission to film sequel of TV series “Sex and the City” in the Emirate due to cultural factors.
LBC Office in KSA shut down over airing of content deemed culturally inappropriate.
• Etisalat & du announced the launch of a (HDTV) service • MBC Group and Etisalat announced over 8 million videos have been
viewed through their internet TV” platform on ww.mbc.net/shahid• Ten Sports signed an agreement with du to launch its international
beam to mobile TV subscribers in the MENA.
Leg
al
MBC network has penned a deal with Warner Brothers studios which has granted the broadcaster exclusive rights to content produced by the company until 2011.
• US Lawmakers proposed legislation to label satellite providers Arabsat & Nilesat as terrorist organizations because of TV stations they carry like al-Aqsa, al-Manar TV and al-Rafidayn TV
• MBC ordered to pay AED 2.5 million in compensation by Dubai Courts to the heirs of late legendary singer Abdul Haleem Hafiz for breach of copyright.
Sources: Trade Reports 2009
14
Contents
Media Industry Context
Economic Recession Effect
Appendix
15
Spiral of Decline for Media Companies created by Economic Downturn
Advertising corresponds to general Economic Conditions
Media companies are affected differently
Sources: Picard, 05; Doyle, 02
2
Low Retail Sales Low advertising revenue
Reduced expenditure on content, personnel, equipment marketing
Selling or possible closure Further reductions in financial resources
Less desirable audiences less ad-revenues
Lack of ad-revenue/ Profitability for broadcasters/publisher
Low GDP
1 3
456
7 8
Advertising SalesRetail Sales GDP
With the effects of economic downturn clearly hitting retailers everywhere, they have slashed their advertising budgets (as advertisers set budgets based on the percentage of retail sales) and are advertising as little as possible..
Currently there is no means to effectively project how deep the recession will be, but whatever the depth it will be difficult for media.
Most media can survive the collapse of credit markets because they have high cash flows and typically require less short term credit than manufacturing / retail firms. Because most can acquire their most important resources without accessing credit lines or issuing commercial paper, banks struggling to keep their heads above water are not a major short-term concern. However, those Media firms with large debts due short-term that were hoping to refinance face significant hurdles. Some will be rapidly shedding media properties in order to stay afloat as seen with some Business Partners of DSC
16
Middle East Television market embraces for a downturn
Rule1: A 1 percent decline in GDP produces 3-5 percent decline in advertising expenditure.
This is clearly visible in Middle East market projections for 2009-2012.
Revenue Growth rates of Top Media Players Q2 08-Q2 09
6.6 6.37.0 7.4
6.3
-0.2
2.74.2
5.8
10.5
5.96.7
8.1
0.2
-11.2
-1.6
1.4
7.1
5.35.4
2004 2005 2006 2007 2008 2009 2010 2011 2012 2013
GDP Growth
Adspend Growth
Till 07 when GDP was soaring so was Ad-spend
The CAGR projections for UAE in 2009 are bleak (a mere 6% growth optimistically) not surprisingly Ad-spend slum is projected for a 60% abatement
When US goes down the world follows.
For detailed projections see
Appendix slides 58-59
17
Print media are more affected than other media in Economic downturn
• Newspaper and magazine decline tend to be 3 to 4 times as deep as television
• The phenomenon is clearly visible in Pan Arab Markets• Spurred by soaring ad-budgets of the region’s property
and financial companies, the number of publications in the Middle East almost doubled in the past three years to 1,800 by the end of Y2008
• Broadsheets given their domestic reach were preferred way above Pan Arab satellite platform with a much larger reach. Emaaar alone spent around AED 55 million on advertising in 2008.
• Cash strapped media organizations owe half a billion AED as unpaid advertising fee
• As of today More than 100 Middle East based Magazines have shutdown since the start of recession.
• Gulf news which weighed more than a kilo in Nov 2008
weighs 650 grams today!
Total advertising revenues and growthMENA region, $Millions and %, 2007 – e2009 as estimated on
third quarter of 08
Advertising market growth is to slow down in MENA
)
6.6 6.37.0
7.4
6.3
-0.2
2.7
4.2
5.83.5 3.3
2.43.2
-2.5
-8.8
-2.8
0.1
1.62.4
5.4
2004 2005 2006 2007 2008 2009 2010 2011 2012 2013
GDP Growth
Adspend Growth
For detailed projections see
Appendix slides 60-61
18
Lessons from the past….Effects of Recession on Consumer Expenditures for
Books in the UK 1992-1994 (U.S. $ Millions)Advertising Revenue of the US Newspaper Industry during
the 1990-1991 Recession (U.S. $ Millions)
29,000
29,500
30,000
30,500
31,000
31,500
32,000
32,500
1990 1991 1992 1993
4,100
4,200
4,300
4,400
4,500
4,600
4,700
4,800
4,900
1992 1993 1994
Although Indian film industry released 1000 movies in 2007 compared to 590 for Hollywood, Bollywood is still a smaller market with its domestic box office takings of $1.8bn and $214mn overseas in 2007 and compared to Hollywood’s $9.6bn and $17.1bn
Before the Economic crisis Bollywood was witnessing an increase of 15% in its domestic box office earnings to $1.8bn compared with a growth of just 2% in US. The growth was driven by rise in construction of multiplexes; boom in Pay TV Industry with 350 channels on air waves (of which 201 are news and current affairs,180 non-news ,67 private channels uplinked from abroad). International investors such as Viacom, NBC, Disney invested $1.5bn in Pay Tv & Movie ventures.
As Economic crisis set in advertising & sponsorship revenue has dried up. Pay TV stations slashed their price by 60% to get film rights. Slowdown has halted big investors like Reliance expansion plans and co funding project with Spielberg worth $500-million. The market trend of internationalization is negative currently. India's entertainment industry, appears to be thriving nonetheless as compared to others given its growth phase in industry life cycle .
The slump in consumer spending due to the economic downturn has hit the European media and entertainment industries. PwC estimates that the average net debt to earnings ratio for European media companies has risen from 2.8 times to 3.1 times over the past year. Economic crisis has aggravated the potential financing threat faced by media companies should the macro-economic conditions persist.
Hollywood runs on credit. $15 billion was invested into films btw 2005-08 by Wall Street banks and hedge funds . The financial crisis is forcing these investors to pull out of billions of dollars worth of film deals; opening the door for specialty investors to scoop up Hollywood assets at discount prices. Securing financing in the new environment has become much harder shrinking supply chain. Approx 200 films are slated to hit theaters in 2009, down from about 219 major studio releases in 2008 and 236 in 2007.
Int’l Media Market Post Recession’ Onset
20
Contents
Media Industry Context
Economic Recession Effect
References
Methodology -Secondary Research Basic References
• The Economics and financing of Media Companies: Robert G. Picard ;2002
• Competitive Strategy for Media Firms: Sylvia M. Chan-Olmsted; 2006
• Entertainment Industry Economics: A Guide for Financial Analysis :Harold L. Vogel; 2007
• The Long Tail: Why the Future of Business is Selling Less of More by Chris Anderson (Hardcover - Jul 11, 2006) • Arab Media Outlook: 2008-2012 (2nd Edition)
• Bad news dominates media business: Financial Times, Feb 2009 http://www.ft.com/cms/s/bb2a7a06-fc31-11dd-aed8-000077b07658
• Curtain Falls on Bollywood Boom: Financial Times , May 2009 http://www.ft.com/cms/s/0/7bba7bdc-390d-11de-8cfe-00144feabdc0.html?nclick_check=1
• Bollywood dreams on: Financial Times , May 2009 http://www.ft.com/cms/s/0/3ddea8d6-4ac1-11de-87c2-00144feabdc0.html
• Debt burdens stifle European media activity : Financial Times , Feb 2009 http://www.ft.com/cms/s/d4086f20-f230-11dd-9678-0000779fd2ac.html
• Over 100 media titles shut down in Mideast , Maktoob, July 2009 http://business.maktoob.com/20090000007450/Over_100_media_titles_shut_down_in_Mideast/Article.htm
Methodology -Secondary Research Basic References (cont’d)
• After Years of Rah-Rah Growth, Media Firms Present a Grim Picture: Wharton, March, 2009• http://knowledge.wharton.upenn.edu/india/article.cfm?articleid=4359
• Subdued Market at Cannes , The Wall street Journal, May 2009 http://online.wsj.com/article/SB124260307795828519.html
• Kylie does Bollywood: Stars go east to beat the Hollywood crunch, The Guardian, March, 2009 http://www.guardian.co.uk/film/2009/mar/14/bollywood-kylie-minogue
• Media industry in the region braces for one more sluggish quarter, Zawya, May, 2009 http://www.zawya.com/story.cfm/sidZAWYA20090503033413/Sluggish%20Quarter
• Research agencies differ on regional ad spend fall, Zawya, July 2009 http://www.zawya.com/Story.cfm/sidZAWYA20090713044604/Research%20agencies%20differ%20on%20regional%20ad%20spend%20fall%20%20/
• Middle east Merger addressing Fragmentation, Rapid News, July 2009 http://www.rapidtvnews.com/index.php/200907134245/middle-east-merger-addressing-fragmentation.html