Digital Studio catches up with some of the best known faces in the industry to discover more about the key challenges affecting the market and where potential for growth lies.
The past couple of years have been tough for companies involved in the Middle East broadcast and production industry. Mainstream broadcasters have continued to grapple with an ongoing shift away from linear viewing combined with declining advertising revenues, while content producers have struggled amid ferocious competition and dwindling budgets from clients, who seemingly want more for less. Amid this climate Digital Studio spoke to numerous industry insiders to get a comprehensive view of where the industry is at.
One company with its finger on the pulse is Dubai-based distributor Advanced Media. Dealing with hundreds of broadcast and production brands, as well as system integration projects, Advanced Media has a solid overview of the business climate. Pooyan Farnam, sales and technical support, Advanced Media, says that business has been notably tougher for the distributor over the past year. “Talking about professional video, photo and retail, I can say due to higher product and price competition and somehow market saturation, we’ve faced more challenges than before to stay on top. Also, new technologies are coming out almost every day and we need to keep pace with it.”
One of the main challenges in the region has been declining prices in high-end digital cinema cameras as well as the introduction of cheaper HD and 4K recorders. “All this means that the video manufacturers and their distributors have been facing new challenges to keep up the brand performance. On the other hand, this change has given us a lot opportunities to capture a wider markets and attract more individuals to this industry,” Farnam says.
A further benefit is that this means that more people are now using 4K and HD, from high-end users to consumers. Furthermore the quality and creativity of production has improved significantly, and with new platforms and upgrades more content delivery options are available, according to Farnam.
Not surprisingly, Advanced Media sees opportunities opening up to supply more 4K products to high end broadcasters, rental and production houses, individual filmmakers and even prosumers.
While 4K is picking up, Farnam points out that there is still demand in some countries for HD channels, and he expects to see a reasonable level of business for HD playout, studio chains, production and editing work to continue.
He also expects to see some degree of uptick in the systems integration market. “After a slowdown we expect the business to pick up again, with more TV projects from our region and Africa, new demand for high-end digital cinema cameras and lenses and more sales and distribution of video/photo accessories,” Farnam says.
But how is the situation from the perspective of an individual brand? Avid supplies a broad range of content production tools and services, and is well established in the Middle East. Hicham Ismail, solution architect, Avid, describes investments made by clients in the Middle East as “more conservative”. However he adds that being well established in the region has insulated Avid against the worst effects of the slowdown. “For Avid, because we are well established in the region, the general slowdown in the industry hasn’t affected us as much though. We had quite a few big deals that we closed in the last 12 months mostly with the bigger broadcasters,” he said. “We have seen a hesitation in upgrades and investments from the smaller broadcasters and the post houses who have less of a financial backing but a big chunk of our customers are government related with strong financial power.”
In terms of the bigger challenges facing broadcasters in the region, Ismail points to the big technological changes that many players face, especially with 4K and IP-based systems becoming a reality. “Where the technology is heading, it will require broadcasters to make major changes to their infrastructure, which will require a significant financial investment. Furthermore, there is more than a degree of hesitancy. “From one end, this makes customers more hesitant to upgrade parts of their infrastructure now replacing their current solution with newer equipment, seeing how tomorrow is moving to virtualisation and the cloud.
“Although they all know that they will eventually need to jump on that wagon, most are waiting to see how the few leading this change will get affected first before they follow suit,” Ismail says.
“Also the huge investment that this technology brings affects opex vs. capex. The entire structure and infrastructure of businesses need to change. Everyone is waiting to see this vision develop into more concrete solutions,” he adds.
In terms of the overall business climate, Ismail does not see any significant changes in the next 12 months. “As long as the region is occupied in wars, there will be no real stability and no major changes to the climate. The broadcast business is affected by the entire economic situation in the region.”
Despite this Ismail is optimistic about prospects in the region, with “technology advancing in a very exciting direction”.
“We have been improving our product offering and are providing more advanced solutions that are in-line with where the technology is headed. As we expand our offerings, we are thinking and working with the technological advancements like virtualisation, cloud services and Video over IP,” he adds.
In terms of geography, recent regional political changes have created certain political and business challenges. As a way of overcoming these challenges, cloud-based services could create new business opportunities in affected countries, Ismail suggests.
For Darren Frearson, vice president of sales, EMEA and APAC, GatesAir, the main challenges in the region have been a combination of instability in the political arena and the drop in the oil price, which affected the decision-making process and has pushed a number of large projects out further into the future.
However, Frearson also sees signs of recovery in the region. “We are seeing something of a recovery from the financial crash we saw in the Middle East over recent times due to the reduced oil prices. Business is still not back to ‘normal’, however we are seeing positive moves and adjustments in government budgets,” he said. “We have started seeing positive moves in the last six months, and expect more positive outcomes in the coming year.”
While the recent trend in the region in general has been for projects to be pushed back, the opposite now appears to be the case in Saudi Arabia and Egypt. Clients in these countries have, according to Frearson, been “noticeably active” with large projects being awarded. This gives much reason for optimism, given that these two countries are big indicators of the activity in the region.
Blackmagic Design, a manufacturer and provider of production equipment and services, also has an upbeat take on the market. Stuart Ashton, director, Blackmagic Design EMEA, takes a pragmatic approach to the region and accepts that it requires a different strategy from Europe.
“The Middle East has always been a region that develops at its own pace, whether it be the rapid development and integration of new technology 10 years ago, or the more calculated approach of recent times,” he says. “One thing for certain is our activity and engagement in the Middle East has always required its own specific strategy that doesn’t necessarily mirror that of the European market. We have been very fortunate though to have an excellent distributor in the UAE that shares our values of developing and supporting creative people that has seen us grow organically.”
Ashton sees plenty of opportunities for growth in the Middle East. “The awareness around our products continually develops and as we delve deeper into the region we are finding there is more and more opportunity. We are seeing new emerging markets, and countries that have previously been inaccessible are excited by what Blackmagic can now offer them. As these countries develop and resellers emerge we expect the grey import markets will reduce in favour of local partners that can offer greater added value.”
In terms of content production, the challenges faced are very different from those faced by manufacturers and broadcasters. Reim El Houni, owner of production company Ti22 Films, said her team has seen the market change significantly during the past year. “Clients are looking for new solutions and specifically new ways of reaching their audiences on digital platforms. It also feels like clients are moving at a slower pace and taking longer to make decisions,” she says.
But the major challenge, and one that most producers of corporate and client-based content can relate to, is the pressure being exerted by clients on price, especially when it comes to content for online campaigns.
“The growth in social media consumption means that clients need more video content. However, they perceive social media videos to be ‘cheaper’ and have a lack of understanding that the production process remains the same,” El Houni says. “The market has become more interested in quantity than quality. At Ti22 Films, we’ve prided ourselves on delivering high-quality videos that deliver an impact and needing to find new creative solutions at a fraction of a cost can be challenging.”
With social media campaigns still a relatively new phenomenon, Reim believes the industry is going through a “learning phase” and that clients are experimenting with the best ways to create content, which includes trying to find cost effective solutions. “I would like to believe that after some experimentation, they will revert back to realising that to get an impactful result they still need to engage with a professional video production entity and go through a proper production process. Just because your audience has moved to online, they still need to be treated in a similar way. Perception is reality; cheap marketing will result in your audience perceiving your brand cheaply, and I believe that organisations will realise this and revert back to quality.”
El Houni sees some room for optimism and views the formation of the UAE Production Forum under the IAA earlier this year as a positive development. “It’s the first time I have seen the industry come together to work on common goals and establish a framework for all of us to work in and co-exist happily. I am proud to be a member and excited to see what collaborating with my competitors can bring to improve the production industry for all of us.”
The sheer amount of video content being consumed in the Middle East is also a cause for optimism, El Houni says. “The region’s consumption of video content is at an all-time high and growing rapidly with the MENA region consuming double the amount of video as the rest of the world, which means that we are finally in the right industry at the right time in the right place. It’s the time to be as nimble as possible to create cost effective solutions for customers as they now need more video than ever before. I strongly believe that we’ve only scratched the surface with branded content and influencer marketing and the combination of the two is a growth opportunity, which is why we’ve focussed our energy at Ti22 Films on developing our own solutions through online channels like dubai ON demand, which gives brands an opportunity to create engaging content with well-known local personalities at the helm.”
Alaa Al Akawi, founder and creative film director at Artology Creative, agrees that client budgets for corporate films are under pressure, and he believes the onus is on production companies to offer some solutions. “The market is a bit difficult in terms of budget cuts, but the clients still want to do the best they can and have the highest quality ever,” Akawi says. In such situations, Artology Creative works closely with the client to understand what they want and then looks at ways of achieving the desired goals in the allocated budget. Often, there are ways of reducing costs without harming the quality of the work. For example, for one client, Akawi and his team decided that they could use some stock footage alongside CGI to create the effect the client wanted. This reduced the amount of production work required and brought the cost down. The client was delighted with the outcome, according to Akawi.
In other instances, Akawi says that if a client wants to do two projects, the shoots can sometimes be combined to save resources. “If the client wants to produce x and y, let’s lock the concepts and combine them as one project instead of two. Maybe we can give the client a package deal and cut off a day of shooting.”
Mig Cardamone, director of sales and marketing at Sennheiser Middle East, offers a far more upbeat appraisal than most of his peers. Indeed, while most industry insiders see few signs of recovery this year, Cardamone believes 2017 so far has been better than 2016, in terms of confidence at least. “While 2016 was characterised by economic uncertainty, confidence has returned to the market and 2017 is shaping up to be a good year for business. At Sennheiser, we have witnessed 20% year-on-year (YoY) growth of our business-to-business (B2B) and prosumer segments.”
Cardamone is also clear on the main challenges his company faces. “One of the challenges is the inability to create reliable forecasts as business is often impacted by unforeseen political and economic factors. From our years of experience in the Middle East market, an important learning has been that even in challenging times, businesses must continue to invest in the region to ensure local relevance and to build trust and confidence with your customers,” Cardamone says.
Last year, Sennheiser expanded its team in-line with its plan and also conducted several roadshows and training events and participated at industry trade shows including CABSAT, InfoComm MEA, and Prolight + Sound Middle East. These proved to be sound investments. “As soon as market conditions began to improve, we were well positioned to capitalise on new opportunities,” Cardamone says. “We remain optimistic as there is a growing demand for feature-rich, cost-effective solutions, and renewed investment in large projects within the region. The sectors that present the biggest opportunity to the AV-industry include hospitality, retail, education, and meetings, incentives, conferences and exhibitions.
Cardamone adds that Sennheiser has also been driving new business in the prosumer segment with a focus on products that use the latest technologies and features to bring value to the applications that people need.