Pay-TV operators across the Middle East believe the region could prove to be a hotbed for such services during the next few years. With more than 20 Arab nations inhabited by 250 million-plus people and 40 million TV households, the region is ripe for expansion. The population figures do not account for such countries as Iran, Iraq and Libya, which would boost the overall population to more than 360 million people.

Pay-TV penetration currently is less than 3 percent in the Middle East. Operators like Orbit Communications and Showtime are trying to exploit the opportunities. However, while the market has huge potential, there are a number of unfavorable factors that could hobble robust growth in the pay-TV market. Walid Haddad, advisor to Orbit’s chairman, calls the current market “challenging.”

“There is a whole spectrum of regulatory environments,” Haddad said. “In terms of economic development, you have everything from deep poverty to extreme wealth. There is also under-developed financial infrastructure as well as challenging logistical and distribution issues. The market has no history of subscription driven business.”

Despite these issues, Orbit, Showtime and others are forecasting that success in the mobile-communications arena could be an indication that pay-TV will fly in the region, too. There are more than 33 million GSM users in the region who send 1 billion-plus text messages per month. The importance here is that the take-up of mobile communications not only is an example of a successful subscription business but it also shows a demand for the latest technology in the region. Haddad added, “There is a sizeable and affluent ex- pat[riot] community. There are around six million ex-pats in Saudi Arabia, which has a population of 22 million. There is hunger for varied and quality content. There is a desire for the latest technology.”

Showtime is the market leader, enjoying Average Revenue Per User (ARPU) of more than $50 a month, which is one of the highest figures around. Showtime is confident its ‘best of the west’ approach will be successful. Peter Einstein, Showtime’s CEO, is confident. His company currently has 300,000 subscribers who generate ARPUs of $54 a month. In addition, Showtime became cash flow positive in 2003. The company also gives set-top boxes to its customers for free, which has proved to be a successful incentive, and it offers more than 50 channels, with 10 of these multiplexed for PPV.

In terms of when PVR will become mass market in the Middle East, both Haddad and Einstein would not assign a timeframe. However, they both agreed it likely would happen “soon.”

Israel Update

While Orbit and Showtime do battle in the Arab nations, YES Satellite TV continues to blaze a trail in Israel, with its market of 1.9 million households. YES began operations in July 2000 when it launched the first digital television service in Israel. The company already has more than 440,000 customers who generate monthly ARPUs of $39. The company hopes to reach 540,000 subscribers by the end of 2005.

According to Ofer Bloch, the company’s CEO, YES has a 30-percent market share of the pay-TV subscribers in Israel; nearly 75 percent of Israeli households subscribe to some type of pay-TV service.

The company also is looking for ways to expand its services. Bloch said, “We are doing a VOD-over -ADSL trial with more than 500 hours of video content. We are expanding this trial to between 1,000 and 2,000 inhabitants this month, and we will evaluate broadcasting habits.”

–Mark Holmes