Middle East satellite operator Orbit Satellite Television and Radio Network is getting ready to roll out a satellite broadband service more expansively across the region. It already offers a two-way broadband service in Saudi Arabia but will launch the service across other territories early this year.

Ali Ajouz, vice president of marketing and one of Orbit’s top executives told Satellite News, “We will probably roll out these services to other countries in the first half of this year. High quality Internet services are not readily available in the region. Many places are still accessing the Internet on 28.8 kilobits per second connection or even less. We are offering broadband speeds up to one megabit per second via satellite at very reasonable prices. The benefits will be enormous financially and from an anti-churn point of view.”

While the Internet market will be a key focus for the company in 2005, the main focal point will continue to be pay-TV markets across the region. Orbit’s network is fully digital, enabling it to provide multi-channel, multi-lingual, pay-television service, which is available in 23 territories across North Africa and the Middle East.

Here it competes against Showtime among others, which have proved very conducive to pay-TV. Where Showtime is pioneering a “Best of the West” approach with a focus on U.S. and European mainstream content, Orbit hopes a focus on local content will ultimately pay dividends. Ajouz said, “Basically, to differentiate yourself you have to create content that people can relate to and people want. The content that people can relate to is locally customized content. We have a lot of local shows. For example we have the only show that broadcasts live from Saudi Arabia hosted by a woman and that is very challenging and daring.”

He continued, “We have one of the top shows in the Middle East, which is called ‘Cairo Today’. It broadcasts live from Cairo. It talks about the social issues in Egypt. But, it is also the number one show in Saudi Arabia and in the Gulf. So, it is not only popular in Cairo. We have another daily live show from Beirut. We have three shows produced in Kuwait, many in Beirut and Cairo.” Certainly, the emphasis on local content is critical for the operator since Showtime would appear to have the advantage on international content.

Analysts View

However, the market conditions in the Middle East are interesting and Orbit competes vigorously against Showtime and ART. One analyst, Alan Constant an ex- Showtime and BSkyB executive who is now the managing director of Constant Consulting, believes the operator is still in the shadows of Showtime in the Middle East.

“In my view, Showtime has outperformed Orbit. Orbit had a 1-2 years head start on Showtime,” Constant told Satellite News. “If the information I possess is correct, Showtime has a higher subscriber base than Orbit has. Showtime is outperforming Orbit. I think in reality it is about marketing and content. Showtime had better marketing and has better content.”

The other question is whether the market can sustain three pay-TV platforms going forward. While consolidation would make sense in the region, Constant believes it is unlikely to happen. He said, “There is not room for three pay-TV operators in the Middle East. No market in the world can really have three operators. You are dividing the subscriber base too small. DTH television is exceedingly expensive and you need every subscriber you can lay your hands on. Three should become two but I think there are too many egos involved. In this market, you have lots of egos with deep pockets. They should join together but it is unlikely to happen. In Orbit’s position, I would try and merge with Showtime or ART.”

Judeh Siwady, a media analyst for Arab Advisors said to Satellite News, “There has been public statements by directors in the operators that have indeed suggested that the market maybe too small for three pay TV operators. Whether this will cause consolidation is really something for the operators themselves to decide, although we agree that consolidation will improve their financial performance.”

In fact, Arab Advisors has just completed a survey in the region where it has analyzed the pay-TV environment in Cairo, Egypt. In its media survey, the company reports that 46 percent of Cairo households have a satellite TV dish and more than 90 percent still also watch terrestrial TV broadcasting. Their research also indicated the scale of piracy in Egypt. It calculates that around a third of pay-TV users are using illegally pirated cable neighborhood providers.

Targeting Local Sports

Orbit itself has many challenges as it aims to build its presence in the region. One area where the operator is looking to improve its service is in sports, particularly local sports. Orbit has focused on Saudi Arabia here. It acquired the full Saudi League exclusively and is working on deals for other local leagues. Ajouz says, “We are the only pay-TV network that has the full Saudi League exclusively today. This is the largest football league in the region. We have made those commitments to our subscribers.”

In terms of other new initiatives, a lot of satellite pay-TV operators are looking at services such as Personal Video Recorder (PVR) and High-Definition TV (HDTV). In terms of when the operator might launch HDTV in the Middle East, Ajouz said, “Let us see how HDTV develops globally first. Here you now have more than 120 FTA satellite channels that have just invested a lot of money in equipment, which is not HD compatible. If we go in that direction, we need to have HDTV TV sets and decoders. It is a lot of work and investment right now and I think the Middle East market is still premature for HDTV. In five years, we might start to see some HDTV applications, channels or programming. But, right now I do not think it will be a factor.”

Orbit could possibly launch PVR services before the end of 2005. Ajouz comments, “As far as PVR is concerned, we have a PVR box in the pipeline. It is going through the development stage and once it passes all the tests, we will start to see it in the market. For now, it is still in the pipeline. Hopefully, it will be on the market in 12 months.”

The market for pay-TV in the region continues to be strong, although with a number of new FTA satellite channels, Ajouz believes it will be tough for some of these channels to be profitable. He comments, “We are funded by subscription and as long as we grow our base, we will continue to be healthy. The problem lies with the FTA satellite channels because advertising rates and advertising budgets are not increasing at the same rate as TV networks. The TV industry grew from five to 120 FTA satellite channels in 10 years. However, the budgets did not grow that fast and the eyeballs did not grow that fast. So, FTA channels will have a lot of problems and challenges simply because of a lack of budgets and because advertising rates are too negotiable.”

However, with so many markets in the region, there is still a huge potential in the region. Orbit, with its digital network, plus its entrance into the satellite Internet arena, could be well-placed to take advantage, particularly if there is a greater stability in the region. Ajouz is optimistic for the prospects for pay-TV in the region in the next 12 months.

He said, “We are all looking forward to 2005. As long as no more wars break out. I think 2005 will be very positive for everybody. There likely be more peace in the region and with that, there will likely be economic growth, prosperity, more disposable income in households, and more propensity to buy goods such as pay-TV.”

–Mark Holmes (Judeh Siwady, Arab Advisors, judeh@arabadvisors.com; Alan Constant, Constant Consulting, alan@constantconsulting.co.uk; Alia Shaikho, Orbit, alia.shaikho@orbit.net)