DPme.com brings you everything you wanted to know about the Showtime-Orbit deal
Recently, two of the Middle East’s biggest pay TV operators, Showtime and Orbit, announced that they had merged. Although the announcement was made only last month, preparations to integrate the channels have been ongoing for months and only known to a few key players within both organisations. Digital Studio brings you all the FAQs from Marc-Antoine d’Halluin, the CEO and Sami Abdulhadi, vice chairman of the newly-merged company, which has been affectionately dubbed NewCo.
What is the key reason for this merger?
The key reason we combined these two companies is because of our conviction that we will be able to grow our consolidated business in a far more dynamic manner than in isolation. In terms of DTH mergers in the world, these are probably two of the biggest and most symbolic pay TV brands in the world. With this merger, cost savings can at last be streamlined and passed on to the subscriber.
It has been a delicate exercise to engineer this merger. It took a lot of time to get here. We want to stress that reason No. 1 for the merger is that we want to create value for the customer and grow the business.
There is tremendous potential in the region because of the fact that pay TV penetration is really low. There are issues that we can now tackle more efficiently in the future such as piracy especially with the lineup of the new platform, which will have 70 channels.
Will there be any job losses?
There is lot to do for us before we get to the streamlining of the operations. Of course, extracting synergies is a priority also and will take place in this case as it did in other cases. But it will be done gradually so that we focus on preserving the quality of the content we broadcast; we are looking at the migration and integration of the two subscriber bases and that this transition will be smooth. We will build on the experiences of similar mergers.
It will be a one-and-a-half year integration process that’s going to be complex but we are well equipped to deliver very strong results. We have the content, the know-how and the technology to move forward.
How many pay TV operators can the Middle East region handle?
Three or four players in the pay TV market are far too many. Maybe one or two could co-exist. It’s not something that the consumer would benefit from. The customer must get the best value for his money.
How much do you expect your subscriber base to grow with this merger?
Each one of us has hundreds of thousands of subscribers and the combination of the two will be essentially multipled by two. By doubling subscriber bases, we immediately move to the top of the ranking in size and revenues in the MENA region.
What will the new company be called?
There might be an evolution down the road but it is not an immediate priority at this stage. The goal is to essentially integrate the two platforms while maintaining the two brands as long as it makes sense commercially for our subscribers to understand that they really get one plus one equals three.
Do you plan to shift your headquarters to Dubai or Bahrain?
We have two broadcast centres; one in Bahrain and one in Dubai. This creates an important position of strength for the company as it is fundamental for pay TV operations to have the resilience and the backup, which both of us did not really have in an optimal way. We will more than likely preserve that and consider it as a great asset to have. Obviously, there will be some degree of optimisation between the two centres but in the immediate future, the goal is to successfully integrate from a content perspective and technology perspective.
Now that you have merged, will MBC Plus be removed from the Showtime bouquet?
In general, the Arabic content has been a weakness on the Showtime platform, which is why although we have Sasha, which is our Arabic channel, we struck a relationship with MBC to have MBC Plus. That is a relationship that is at the beginning of its lifecycle and it is doing very well. We will see how it develops.
With this new dimension of the combination between Showtime and Orbit, all of a sudden, we have some of the best Arabic channels that are exclusive and encrypted, which are provided by Media Gate, which is an associate to the Orbit Group.
Having said that, the new platform will be open to carrying content from other providers that bring quality and exclusivity to its audience. There is no restriction in what we can do and will explore other relationships further.
The Orbit Group, however, is made of several entities – one is the pay operation that is merged with Showtime. Outside of this deal are Media Gate, Noorsat and Orbit Data Systems. Media Gate produces Arabic content, puts together channels and produces channels that offer some of the best Arabic programming in the Middle East.
These channels will be exclusive to the NewCo. The relationship with Media Gate will be developed further.
Will this merger attract a new set of subscribers?
We believe it will. There’s always a segment of the market that does not subscribe to pay TV when there are several operators. The reason being they are looking for convenience and simplicity. And when they have something in each bouquet they like but have to subscribe to three or four bouquets to get it, they won’t take anything.
We have now given them a one-stop shop with convenience and simplicity at the core of the proposition. A certain segment of the market will suddenly open up to consider this one-stop shop. There is another segment of the market which today has grown in the last few years who use pirated cards to receive pay TV.
The NewCo will very clearly address the issues of piracy. We will disclose initiatives by the NewCo in due course to address piracy in a radical way.
In the UAE, we are already working with the telecom regulators to block servers and we will have more ammunition in the future to fight piracy. And this will bring a chunk of the market back to Pay TV, which is currently exploited by criminal organisations. The fact that we are starting from only 10% gives me a very strong belief that we will reach, over the next five years, about 20% or more of the market. That will be a tremendous achievement if we can deliver on that.
How big is piracy here?
It is bigger compared to any other market in the world. It is bigger because there are less regulators and has not been treated as a priority by the authorities so far. There is a gradual awareness that this will be done in Saudi, in the UAE, Kuwait (which happens to be our largest market) and Egypt. Piracy losses run into hundreds of millions of dollars.
Did the recession play a role in this merger?
It is a one of the factors but not the main one. At the same time, we both were growing with double digit figures but that was not enough. We needed to triple it and grow it and the best way of achieving that was to combine our operations.
What about catering to other expatriates?
We have added Hindi movies of late with Arabic subtitles and this deserves further exploration as it has been well received. We are aware of other language requirements such as Hindi and Tagalog and it is a market that is untapped. We hope to explore this further in the coming months.
Is HD something that the NewCo will look at?
Yes, Showtime HD is already available on cable on the E-vision network. Soon, it will join the du network and will eventually go on satellite. To have a good business model with HD as a pay platform, you need to have the right HD box out there at an affordable price so that a chunk of your subscriber base will migrate to enjoy HD movies and sports. We were planning this separately and now, jointly. We will have a bouquet of HD channels that will be part of the new company before the end of the year.