Deloitte’s 2015 Technology, Media and Telecommunications report assesses television’s current performance and outlook from the perspective of four developments: Subscription video-on-demand (SVOD), sports, video clips and innovation.
The assessment of each of these areas suggests that television remains in fine health, and its near-term outlook remains positive. SVOD is growing fast, but is currently less than two per cent of the European pay TV market, and an even smaller share of Europe’s TV revenues. Television remains the home of premium sports, with rights values globally forecast to rise by 12 per cent in 2015 to $28 billion, following a double-digit rise in 2014. Long-form traditional TV content remains dominant relative to short-form in terms of viewing hours and advertising. Long-form ads generate about $200 billion annually worldwide, about 40 times greater than estimated revenues from video clips. As for innovation, the TV industry has long proven adept at exploiting a range of technological advances – more critically the television industry has delivered consistent innovation in its prime role – that of storytelling.
The assessment for the Middle East region also yields a similar near-term outlook for television in the region: healthy and positive, but also with its own nuances. SVOD is much smaller at less than 1 per cent of the world SVOD market, but is growing much faster. Premium sports in the region are set to outperform global sports in terms of growth for the second year running. YouTube has broken the ice for short form in the region but long-form content still remains king. And in innovation, the GCC region’s unique demographics, high smartphone penetration and engagement with social media is driving innovative approaches to TV content idea generation, production and distribution.
An in-depth focus of each of the four major digital challengers follows:
- Subscription video-on-demand: a complement, competitor and a channel
Subscription video-on-demand (SVOD) is seen primarily as a challenge to traditional pay TV providers, but is also perceived as a potential threat to free-to-air broadcasters. SVOD competes for spend, as well as for on-screen talent, program producers and writers, and viewer attention. However, there are thousands of SVOD services, of which only a handful may be commercially viable in the long run. SVOD will both compete with and complement other TV services, and TV broadcasters need to determine just how much of a threat – or a partner – SVOD services may be.
Even though the Middle East is considered to be a high growth market, subscriptions for SVOD services significantly lag behind other more established Western markets. The challenge remains that the SVOD offering in the region is as yet limited, especially when comparing the size and quality of the library of local providers with the likes of Netflix or Hulu. However, with online streaming already at 40-50 per cent penetration, especially in the Gulf, there is much room for the SVOD market to grow.
- Broadcast sports rights
The development of pay TV in particular has transformed the broadcasting of premium sports leagues. Live content is a key subscription driver and underpins pay TV business models. As the pay TV subscriber base rises and revenue per user grows, operators are investing increasing sums to secure this key content.
In the Middle East, Deloitte estimates that in 2015 and beyond the value of premium region-specific sports rights will continue to increase by at least 15-20 per cent, exceeding the 12 per cent rise of all premium sports rights estimated globally. The much lower base in the value of regional premium sports rights will still require significant investment, development and at least a decade to reach anywhere close to the levels being witnessed with the big Western leagues.
- Television should not go short on long-form
One of the most successful traditional TV shows in the US at present, Big Bang Theory, attracted an average audience of 17.5 million viewers in its most recent season. In comparison, Gangnam Style has amassed over two billion views since its release in 2012. However, television viewing is typically quantified by viewers (live, or within a few days) and online video by views (all-time). There are fundamental differences between these two metrics which are occasionally overlooked when comparing traditional TV with newer forms of video format – if we convert both viewers and views to total hours viewed, the results vary significantly.
With 70 per cent penetration in the Middle East, it is YouTube’s second largest market worldwide – short-form has gained traction in the region. However, despite short form’s rise and success, compared to traditional long-form TV shows such as Arab Idol, which amassed over 100 million viewers in just its second year in 2013, we can see that traditional TV in the Middle East is also here to stay.
- Innovation: can the television industry compete?
Television’s innovations are typically smaller in scale and greater in quantity. The TV industry has survived this decade of change through reinventing itself technologically across multiple aspects, such as production quality, distribution of content and program financing.
In the Middle East, television has maintained its position as the dominant media platform, despite digital disruptions including the rise of online streaming, social media, and mobile gaming as well as smartphone and Smart TV penetration. This is reflected in the evolution of television’s average viewing time and total advertising spend. Both have remained quite consistent in the past few years.
Television has fared positively in an increasingly digital Middle East, but should be conscious of the ever-changing digital environment and the power it can provide in advancing regional television.
By: Santino Saguto, partner and TMT leader at Deloitte Middle East
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