COMMENT: Are we ready for premium OTT yet?

Tareq Masarweh talks about the future of OTT video in the region
Tareq Masarweh, senior consultant Middle East and Africa at Ovum
Tareq Masarweh, senior consultant Middle East and Africa at Ovum

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The traditional TV broadcasting medium is well established in the region, with a plethora of free-to-air TV channels available and a number of pay TV providers also competing for subscribers. Yet, the growth that mature markets have witnessed in terms of online distribution of TV content has not yet been mirrored in Middle East and Africa (MEA). As for non-traditional mediums, a number of factors contribute to the relatively limited growth of online video-on-demand (VOD) in the region, such as limited broadband penetration in certain markets, lack of interest from advertisers in the online space and high levels of piracy; though they are currently in steep decline.

With broadband showing healthy growth in MEA, advertisers are increasingly keen to capitalise on the effective ROI offered by digital platforms and piracy regulation is undergoing significant changes on a global scale. Although current speeds and penetration rates allowed for OTT streaming, the absence of aggressive OTT content strategies and the increasing abundance of FTA channels have contributed to the low demand for alternative OTT content. This is further exacerbated by the fact that the ‘local’ television content definition is broader than usual and is already compelling for most viewers.

In light of the MEA market characteristics, operators should begin investing in future-proof infrastructure that will support video content streaming requirements. Having said that, an operator does not need to explore this treacherous path alone but rather consider the possibility of partnerships with the likes of OTTs. An operator with the enabling capabilities and aforementioned relevant core assets, stands a greater chance of success in establishing great content partnerships. The depth of integration between an operator and a third party OTT service provider should depend largely on the business model being pursued.

Certain OTT service partnerships do involve deeper levels of technical and commercial integration than others. However, the common engagement models observed take the can include the operator-owned OTT model and strategic alliances with OTTs.

In the MEA context, Etisalat is a good example for the operator-owned OTT model. eLife, its IPTV service offering, available on multiple platforms and devices, leverages on its own content and fibre networks. While most operators would see this as a revenue-generating opportunity, Etisalat had a different interest in mind, as part of the overall strategy was to reduce its customers’ appetite for illegal downloads. With the popular content made available through its IPTV platform, the service ensured that content is accessed in a legitimate way while reducing the burden of the broadband network.

Strategic alliances are not commonly pursued in MENA, but many operators in the European region have embarked on this. For example, Belgacom has formed a strategic alliance with video search engine provider Blinx. This enables it to deploy the OTT’s proprietary technology across its converged entertainment platform, which in turn delivers a higher level of accuracy and relevance in Belgacom’s video and TV search capabilities.

Premium OTT content will definitely hit the MEA shores eventually – operators should weigh the different models and pursue what is best according to their respective digital strategy. The MEA situation is and will always be challenging considering the myriad of challenges, such as the threat of FTAs and free advertising-based content in the form of OTT players (e.g. MBC’s shahid.net, istikana.com, etc…) and content licensing. Content licensing is a major consideration for operators since regulatory controls of content licensing are still under-developed while piracy continues to thrive in this region. Also, acquiring content exclusivity will most likely erode an operator’s existing margin.

With that in mind, telcos should weigh the challenges carefully and perhaps consider a less risky proposition, such as the partnership model in the medium term while leveraging the attributes and assets that can uniquely position the venture for success.

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