Shifting sands

How Saudi Arabia could emerge as a regional hub for media production.
King Abdullah Bin Abdul Aziz of Saudi Arabia (centre) and Syrian President Bashar al-Assad (front right) at the launch of the King Abdullah University
King Abdullah Bin Abdul Aziz of Saudi Arabia (centre) and Syrian President Bashar al-Assad (front right) at the launch of the King Abdullah University
Jamal al Sharif, executive director of Dubai Studio City. The facility includes sound stages and other infrastructure to lure tenants to the precinct.
Jamal al Sharif, executive director of Dubai Studio City. The facility includes sound stages and other infrastructure to lure tenants to the precinct.
Dubai Media City has been running at capacity for several years now.
Dubai Media City has been running at capacity for several years now.

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Building a media industry requires more than a real estate development. Digital Broadcast explores Saudi Arabia’s King Abdullah Economic City’s (KAEC) upcoming media precinct, which could dramatically shift the powerbase of the Middle East media industry.

For many, Saudi Arabia may seem like a strange choice as the location for a new media production hub. International media coverage frequently (and misleadingly) portrays the Kingdom as a vacuum for the media and entertainment industries.

In truth, the country has lead the way in the development of some new media platforms, it houses the largest number of pay TV subscribers, broadband subscribers and all the signs suggest that a ban on cinemas is likely to be lifted in the near future.

“Three of the top five TV media organisations are Saudi owned, MBC, ART and Rotana,” says Matthieu De Clercq, project manager, A.T. Kearney, the consultancy working closely with the Saudi Arabian government on KAEC.

“They only need the environment to be correct for them. Regulation is one element, and lifestyle. If those conditions are correct then those major Saudi-owned organisations will come to the Media City at KAEC. Whether they move all of their operations or only a portion, is up to them. The important thing is that the key Saudi players will come back to the Kingdom and that will change the dynamic of the region.”

The theme of creating a set of conditions under which the media can operate is a recurring one. It is clear that the appetite for media in Saudi is as healthy as elsewhere in the region.

The pan-regional pay TV operators see significant portions of their subscriber bases in Saudi Arabia. According to Pyramid Research the country’s communications market is worth US $9.9 billion in service revenue. The country represents around 68 percent of the GCC’s total population.

“On a regional level it is agreed that media’s contribution to the economy could be greater. The media sector is experiencing immense growth and the biggest market is Saudi Arabia, the key players are all Saudi.

Despite this they all work from outside the Kingdom in order to serve it. So, the concept of the precinct is in part to bring back these Saudi-owned, Saudi-designed operations, which makes a lot of sense,” says De Clercq.

When asked directly about the prospect of moving to KAEC, MBC COO and general manager Sam Barnett reveals that the network has already had discussions with KAEC.

“We agreed that we would begin with a branch office out there,” says Barnett. “We are producing a lot of Saudi drama and comedy in Jeddah and we will see how things develop there. It would be quite easy to move that kind of production from their present locations into KAEC.

“Certainly in terms of the support they are offering, it could prove to be quite an attractive way for us to develop our production infrastructure in Saudi Arabia.”

So what is it that has prevented these companies from returning to their domestic market in the past?

MBC was originally based in London, when it relocated to the Middle East, it did so to Dubai. Orbit was originally based in Rome and chose Bahrain as the destination for its Middle East headquarters when it returned to the region.

“It is clear that the main challenge relates to policy,” explains De Clercq. “At present, foreign-owned media entities are simply not allowed to have a license in KSA.
 

The domestic media are highly regulated by the MOCI with a written law that dates from the 1960s and 1970s. This is not up to date with modern content or technology, which creates a lot of grey areas.

For example, should certain forms of broadcasting be considered as IT activities or media operations? These grey areas are a barrier to the growth of the media in KSA.”

So is the answer to strip away the existing regulatory framework entirely? What will be deemed acceptable in one of the region’s more conservative societies and will it be enough to permit a healthy media industry?

“Countries such as China and Singapore have a similar level of freedom of speech as you find in KSA, however, with the right legislation clearly stating what you can and can not do, they are able to support very strong digital media industries,” says De Clercq.

“The key for KSA is not to try to become another Dubai or replicate standards seen in Europe or the US. It should continue to respect its own culture and identity whilst encouraging the media.

This means defining on paper the kind of media industry that you want to develop – sports, family entertainment, business news – and define the boundaries that they must operate within, then you will see some activity among those areas.”

Stories in the international press often draw attention to restrictions on certain elements within the media, with the actions of a Saudi journalist on LBC recently grabbing headlines worldwide.

“People tend to focus on the 10 percent of the media that is controversial in the country. Yes there are certain things that you will never be able to do in KSA, but many of these are already catered for in Dubai or Jordan and other locations.

Everything from newspapers to books to internet to video games can be done in an environment as open as other locations in the region and at the same level as any country that has created the right environment,” says De Clercq.

“The bad news is that there is a complex regulatory system needed, which is not in place yet. Once these regulations are reformed KSA will be able to dramatically increase its attractiveness as a location for the media industry,” claims De Clercq.

“Any operator that is not already in Saudi Arabia is not there for a specific reason and it is most likely that this reason is regulation,” he continues.

“The last thing an investor wants to do is invest believing that they are within the scope of the regulations, only to discover once they commence that they are not and are shut down.

It is better if everything is in writing and approved and then no one can shut you down. I don’t think we are talking about a daunting 600 page piece of regulation.

In Singapore they have a 20 page media code. The crucial thing is what is written, not how much. It must be sufficiently detailed to give companies the confidence to know what they can and cannot do.”

Aside from the regulatory situation, there is also the issue of doing business in the Kingdom.

Many companies view Dubai and Doha as the automatic choice to base a regional branch office, often without considering any of the alternatives.

They may be surprised to know that Saudi Arabia is actually the easiest place in the MENA region to do business, according to a recent report.

“KSA has made some very strong moves towards becoming a more business friendly environment. The latest World Bank Ease of Doing Business index ranked KSA 13th globally, which is way ahead of anyone else in the region,” says Christophe Firth, strategy consultant at A.T. Kearney.

“It is a long-term play. Look at where Dubai was 20 years ago and where it is now, it just shows that with the right people driving change in the right direction and the necessary infrastructure in place, anything is possible.

“KSA has another huge advantage in the size of its domestic market, ” he adds.
 

A key component of Dubai’s strategy in the media sector and others, is the development of freezones with business friendly regulations and incentives.

“The term ‘Freezone’ is a bit of a buzzword,” says De Clercq. “A freezone in Abu Dhabi does not automatically replicate the same conditions as one in the next territory.

If you are talking about the idea of a location that is business friendly, where regulations are more business orientated and where incentives are available, be it in the form of real estate or financial help to encourage growth, then yes, in that sense, KAEC a freezone.”

The support that will be offered to businesses that set up in the KAEC media city are intended to kick start its development however, rather than as a permanent, long-term instrument to ensure tenants remain.

“When you build a new city – literally out of the desert – and you want to attract a new media industry, or any other sector for that matter, there needs to be some incentives just to get it started. Investors will realise very quickly that the proposition is good and once this happens the incentives can dissipate naturally,” explains Firth.

“The advantage of building from scratch is that you start with a clean slate in terms of infrastructure. This means we do not have to contend with legacy copper wire networks, for example.

“In terms of transport infrastructure there is a new national train network on the way connecting Jeddah through to Damman, airport links are already good nationally, when you put this all together you start to get a very attractive proposition,” according to Firth.

The long-term aim of the development is not to snatch existing jobs from other parts of the region or to attract expats, says De Clercq.

“One important comment to make on the goal of these initiatives it is not only to bring expatriates to work in the specific industry it is also about bringing the local talent into the industry.

KSA has a, young, strong pool of talent seeking employment. I expect the media sector to find its own identity in the region as it continues to develop its own content.

We have seen some success in the GCC already. Shows like Freej and Tash Ma Tash, are just some examples of what the Middle East production industry will become as it develops its own talent and grows less dependent on foreign content. It is more natural for this creation to happen for the region, in the region.”

De Clercq gives the example of Saudi productions filmed in Egypt with Egyptian actors, using sets designed to look like the Saudi Arabia.

“At the moment, Egyptian actors are being asked to speak with Saudi Arabian accents on sets in Egypt designed to look like the Kingdom. It would be cheaper, easier and better for the Saudi economy to do this on home soil with Saudi actors,” he claims.

Taming the web
“Online media is a bit of a paradox,” says A.T.Kearney’s Christophe Firth.

“It is seen as the future growth driver in this region and certainly in Western markets. It will take ad revenue and viewership away from traditional media as well as acting as a platform for future growth.

On the other hand, it is also by far the hardest medium to regulate. In this region it is necessary to think how to put out regulation for online content and infrastructure that can promote internet-based media, but respect cultural and societal factors in this region.”

As broadband penetration improves throughout the region, the immediate benefits for establishing such a system are obvious, as De Clercq points out.

“Fifty percent of the population is under 25, connectivity is high, the internet is very open, applications like Facebook and Twitter are flourishing.

We shouldn’t underestimate the will of those people to respect their identity but also to replicate the standards that they see in other parts of the world or what they see in other countries in the GCC.”

 The eight key components for the development of a media city

Domestic Market

For a steady source of media consumers and a potential audience for advertisers.

Proximity to clients

Media buyers, PR agencies and advertising firms must be close at hand.

Infrastructure

Transportation and media specific facilities must be in place.

Incentive and ease of business

Fast and easy visa, registration and licensing procedures, a competitive system of tax and duties and a structured body to settle commercial disputes.

Access to financing

Public subsidies, sturdy financial system, venture funds and the legal framework to support these.

Local talent pool

Both foreign and local talent availability plus the intention to train the local population in the skills necessary for a career in the media industry.

Costs

From raw materials to broadband prices.

Regulatory environment and lifestyle

Identified regulators, simple and explicit censorship rules, transparent licensing, audience measurement and intellectual property rights protection rules. 

Operational

  • Dubai International Media
  • Production Zone
  • Dubai Media City
  • Dubai Studio City
  • Fujairah Creative City
  • Ras AlKhaimah Media City
  • Twofour54 (Abu Dhabi)

(All UAE)

  • Jordan Media City
  • Egyptian Media Production City

Proposed*

  • Bahrain
  • Lebanon (Beirut Media City)
  • Kuwait
  • Qatar
  • Sudan

Under construction

  • KAEC – Media City

*According to Arab Advisors 2009

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