In search of mass appeal

The number of subscribers to IPTV services remains low in the region.

The two years prior to the Great Financial Crisis saw a spate of IPTV rollouts by the region’s biggest telecommunications operators. Facing market saturation for bread-and-butter voice services, telcos including the UAE’s du and Etisalat, Qatar’s Qtel and Morocco’s Maroc Telecom scrambled to launch IPTV services in 2006-07 in an effort to uncover new revenue streams and boost their average revenue per user (ARPU) margins.

Some services have proven more successful than others. Du and Etisalat’s causes have been significantly aided by the fact that their IP network services are mandatory offerings in a considerable number of newer residential areas of Dubai and Abu Dhabi, providing a ready start-up audience for their respective du TV and e-Life IPTV services.

Story continues below

Advertisement

FEATURED COMMENT Please click here to comment on this article

Others, such as Maroc Telecom’s, have achieved limited penetration while contending with the usual regional bugbears of mass satellite TV penetration and pay TV piracy.

Still, the total number of IPTV service subscribers in the MENA region was estimated to be around 220,000 at the end of 2010, compared to more than 45 million worldwide. Given the region’s combined population of 300 million and the domination of free-to-air satellite television services, there is a growing belief within the broadcast industry that IPTV will remain a niche service whose future growth prospects appear marginal.

“IPTV remains a relatively niche platform internationally and in the region,” says Emmanuel Durou, principal of market analyst Value Partners. “In its most successful markets like France and Hong Kong, IPTV has managed to reach 30% household penetration.But generally, IPTV accounts for 1-2% of TV households in markets where it is available.

“The MENA region is no exception: a couple of countries like Qatar and UAE have reached 10 to 15% penetration – mostly driven by transition from cable, FTTH roll-out and new real-estate developments – but overall IPTV penetration remains low, especially compared to satellite FTA services.”

One of the biggest challenges facing the region’s IPTV providers is guaranteeing a strong value equation in their service pitch. To date, a typical basic IPTV package consists of standard definition and high-definition channels, VoD and EPG services, charged at a nominal monthly rate.

Subscribers can choose to take up other pay TV packages supplied by the likes of OSN and Al Jazeera, making the total monthly cost considerably more than satellite only services supplied by the same broadcasters.

Another challenge facing IPTV services relates to advertising spend. Despite IPTV’s reputation for delivering a niche, well-defined core of high-net worth subscribers, the confined geographical spread of IPTV services in the MENA region has conspired to dampen interest from potential advertisers.

“IPTV services have had limited impact on traditional advertising platforms,” Jassim Ali, Omnicom Media Group (OMG) MENA’s regional director for Digital Development, told Digital Broadcast earlier this year. “Penetration is minimal which makes it pointless for clients to advertise.”

Given these collective issues, it would be easy to dismiss IPTV as largely a commercial irrelevance. However, others still believe the technology – if fully leveraged – can become a force in the regional broadcasting sector, and make good on its lauded potential as a cash cow for its telco masters.

“IPTV allows operators to transform themselves from mere connectivity players into media companies that offer content,” notes Booz&Co in a 2010 report into IPTV services in the Middle East. “This shift has been instrumental in relieving some of the revenue pressures caused by the declining value of traditional voice and data services. In this way, IPTV represents the latest step in media convergence.

“Just as cable operators have entered the telecom space and offer non-traditional services like internet access and voice-over-IP via cable-broadband connections, telecom operators now have an opportunity to expand into the kind of television and video-delivery service that was once the exclusive province of media companies. The scope of their roles along the value chain depends on market conditions and telecom operators’ capabilities.”