Appointed president and CEO of Showtime in November 2006, Marc-Antoine d'Halluin has in the proceeding period overseen the biggest corporate shake-up in the 12 year history of the pan-Arab pay TV broadcaster. Aaron Greenwood spoke to the man charged with revitalising one of the Arab world's most recognised media brands.
In the face of rapidly shifting market dynamics, including increased fragmentation due to the continued influx of satellite free-to-air (FTA) channel operators in the region, Marc-Antoine d'Halluin and his team, upon their appointment, were charged with the task of transforming Showtime into a leaner, meaner, more competitive machine with a more sophisticated marketing and programming strategy.
From the outset, d'Halluin recognised the significant challenges that lay ahead of them.
"The previous management team had achieved a number of important goals, but like any other team installed in a position for so long, they missed some things," he says. "Undoubtedly, our biggest challenge has been adapting to the evolving dynamics of the marketplace. The industry has grown so rapidly - particularly the FTA sector - which has presented significant challenges for our business.
Launched in 1996, Showtime forged a successful path over the next decade offering a swathe of predominantly English-language content and premium first-run movies, albeit at a premium price compared with the service offerings of regional archrivals ART and Orbit.
Despite reportedly attracting in excess of 170,000 subscribers by the end of 2006, D'Halluin is the first to concede that by this time, the Showtime formula had grown stale and was lacking focus.
"We had to go back and assess our strengths and adapt to become more of a fast-paced reactionary organisation, and to ensure every aspect of our business was commercially relevant," he explains. "We also had to ensure we set a pricing strategy that reflected the true value of our programme offering.
Indeed, in a region where pay TV operators have struggled to crack double-digit percentile penetration, d'Halluin quickly realised the challenge lay not just in competing with rival service operators, but building a justifiable business case to attract new subscribers in one of the world's most densely populated FTA broadcast markets. He also recognised that Showtime's existing programming strategy simply didn't cut it.
As a result, the company settled on a multi-pronged strategy which called for the creation of new channels, the introduction of interactive services based on the latest 'push' technology and a renewed focus on premium content offerings and the reorganisation of existing programme content.
Following a frantic six months of activity, the company reached the first significant milestone in the implementation of this strategy, with the launch of its re-branded channel line-up under the 'Show' banner in April last year.
"From the outset, I realised we had been underselling the Showtime brand in the marketplace," concedes d'Halluin. "There are literally hundreds of FTA channels in this region and we are competing directly with two rival pay TV operators for a relatively small share of the overall market.
"In such a crowded sector, it's hugely important to promote your core attributes under a single brand. Twenty 'Show' branded channels generate more of an impact with subscribers than the previously diffused service offering. It's proving a key dimension for us in this multichannel environment.
The broadcaster also reorganised its premium subscription offering to include new push video-on-demand (VOD) services accessed via a digital set-top-box branded ShowBox.
The introduction of the new services, which included 15 pay-per-view movies, an electronic programme guide (EPG) and a range of near-VOD content, reflected the broadcaster's strategy of bringing new technology to market "at a pace that matches consumer expectations", says d'Halluin.
"The on-demand services have provided us with a competitive edge in the marketplace and it's a technology that has been embraced by our subscriber base," he adds.
While the rebranding strategy symbolised an important commercial shift in focus for the organisation, of greater importance was the revelation that it had snared the rights to air English Premier League (EPL) matches for the next three seasons, beating out former Middle East EPL broadcaster and archrival ART in a reported US$120 million deal.
D'Halluin, who boasts of extensive high-level management experience in the European broadcasting sector, is largely credited for this significant coup. He says securing the EPL deal represented a watershed moment in the history of Showtime, and believes it forms a lynchpin in the broadcaster's long-term strategy for domination of the regional pay TV sector.
"Looking back on 2007, I believe our achievements - particularly in regard to securing the rights to the EPL - have provided us with a really solid footing to take the company to the next level," he says. "Despite the significant cost of acquiring the EPL rights, the deal has already paid off commercially. It has enabled us to reconnect with our audience by providing a more balanced programming line-up.
While boasting of "significant growth in the vicinity of 25-30%" in 2007, d'Halluin refuses to divulge exact figures regarding subscriber numbers, nor a country-by-country breakdown of the broadcaster's audience spread.
What he will say however, is that the broadcaster's biggest markets remain the traditional pay TV strongholds of the UAE, Saudi Arabia and Kuwait, while the massive but underexploited Egyptian market trails in fourth position.
Some critics have argued that the biggest barrier to Showtime's commercial growth is its costly subscription charges. Indeed, the broadcaster's premium package, Showtime Platinum, is priced more than 50% higher the equivalent package offered by Orbit.
While acknowledging this fact, d'Halluin repeats the mantra that premium content demands premium subscription rates.
"The rate of growth in our subscriber base over the past 12 months is even more remarkable given the fact our package prices are considerably higher than those of our competitors," he adds.
On the flipside, d'Halluin argues that higher subscription rates actually improve the broadcaster's ability to attract the support of premium consumer brands looking to promote their goods and services on the network.
"As a pay TV operator, you'll never match the audience numbers of your FTA rivals," he concedes.
But what you will have is access to an elite sector of the consumer market. At the very top-end of the scale, our subscribers spend in excess of US$1000 a year on our product. We can offer advertisers a direct route for promoting their products to high net-worth consumers.
Showtime has also been accused of investing too heavily in acquiring Western-sourced English-language content at the expense of local Arabic productions. The irony expressed by some quarters lies in the fact that 80 percent of Showtime subscribers are Arabs.
D'Halluin says the broadcaster is committed to shifting this perception by increasing its in-house production output. It also plans to investigate the commercial viability of working with local production companies in the future.
The seeds of this strategy have already been sown with the recent addition of the Arabic serial channel Showshasa and the Arabic-language Showsports channel to the Showtime bouquet.
"Our audience is predominantly bilingual," says d'Halluin. "However, our Arab subscribers appreciate the efforts we are making in providing more Arabic-language content, even where it's simply a case of us overdubbing Western content, as we have done with [US series] Ugly Betty, which airs on Showshasa.
"Producing more local content is an important challenge we are committed to addressing. We may look to produce series content in the future either alone or in partnership with local production companies.
So what of the potential of a HBO-style service offering for the Arab world? D'Halluin believes it is only a question of time before the market could sustain a premium channel airing high-quality, locally produced content.
"Eventually, there will be demand for this type of service," he says. "You need a certain critical mass in terms of subscriber numbers and demand for content that would be broadcast solely on a subscription channel. There is already a potential audience for locally produced programming of that quality.
Of more pressing concern however is the significant issue of increasing market penetration for pay TV services in the Middle East.
D'Halluin has been an outspoken supporter of market consolidation for some time, arguing that the region simply cannot commercially sustain three rival subscription television service providers in the long-term.
He also believes that continued jostling between the three archrivals has proven a major hindrance to increased service penetration, which has allowed FTA rivals to flourish at the grassroots level.
"It's been well-documented that pay TV services suffer from a very low penetration rate across the region," he says. "It's tough to gain greater market penetration for the entire industry when we spend so much time fighting amongst each other. I think each of us (Showtime, Orbit and ART) are more aware of this now than we were in the early days.
"However, I've made the point previously that there's no other market in the world where you have three rival pay TV operators. Given that more than a decade has passed since pay TV services were launched here, my thoughts are that the key stakeholders will move to embrace some form of consolidation within the next two or three years.
"Success is never guaranteed. But, in saying that, I would very much like for Showtime to act as a potential market consolidator in the future. Whether we manage to achieve this goal remains to be seen.
Similarly to other commercial sectors in the Middle East affected by the greater economic boom that has enveloped the region in recent years, the rapid expansion of the broadcast industry has exposed underlying deficiencies in the regulatory environment.
The introduction and subsequent wholesale adoption of digital satellite services earlier this decade saw an explosion in the number of FTA channels entering the market, creating a unique - albeit highly disorganised - multichannel environment previously unheralded worldwide.
"The broadcast sector is an incredibly complex market to operate in if you're a pan-regional entity," concedes d'Halluin. "The broadcast industry here is simply not as well organised as it should be. Certainly, the sheer number of channels available offer viewers a great deal of choice. Yet, much of the programming is of poor quality.
"The other major issue relates to the windowing of content. With Arabic-language content, it's simply non-existent, which often results in a lot of first-run programming being aired by rival channels at the same time.
Marc-Antoine d'Halluin had forged a formidable reputation as one of the European broadcast industry's major players prior to joining Showtime as president and CEO in 2006. Having graduated from Harvard Business School in 1994, d'Halluin joined Sony Pictures as manager and director of the corporate development group in 1995. From this point, his career trajectory rose rapidly.
• 1997: d'Halluin joins Fox Kids France as managing director.
• 1999: Joins the management board of Fox Kids Europe as group managing director supervising the channel division.
• Mid-2003: Partners with Baker Capital and Nordic Capital to acquire Canal+ Nordic from Vivendi. D'Halluin is named CEO of the company, which is renamed C More Entertainment. Following extensive restructuring, C More is sold to SBS Broadcasting in 2005 at a substantial premium on its acquisition price.
• 2006: Is appointed president and CEO of Showtime Arabia.
Historically, there's a precedent, largely set during the peak Ramadan period, whereby production companies tried to maximise revenues by selling their first-run programming to multiple operators. The problem lies in the fact that country-based broadcasters now enjoy pan-Arab distribution thanks to digitisation.
"As pay TV operators, we do have a 12 to 15 month window in terms of exclusivity, but once that period has elapsed, most of the content makes its way on to multiple FTA channels, where its commercial value becomes largely diluted.
"Success is never guaranteed. But, in saying that, I would very much like for Showtime to act as a potential market consolidator in the future. Whether we manage to achieve that goal remains to be seen. - Marc-Antoine d'Halluin, CEO, Showtime."
D'Halluin says the other fundamental issue facing the pay TV industry is piracy, whether it be in terms of stealing subscription channels via satellite signal decryption or counterfeit DVDs, which impact demand for first-run films available via pay-per-view services such as ShowCinema.
"Piracy is a huge problem in the Middle East," he declares. "What we need is a commitment from the local authorities to really go beyond the initial steps of superficial legal frameworks. As pay TV operators we can only go so far in terms of fighting this illegal activity, because the legal framework has not been sufficiently developed to really address the main issues.
"In some markets such as Egypt and Lebanon, we are aware of the existence of quasi-cable operations, which are totally illegal. We've been trying to pursue these operators in conjunction with the relevant authorities but it's no easy task.
There's also a significant business in people trying to crack our encrypted STB cards in a bid to sell them, which is something we're working very hard to disrupt. We operate in an environment where the notion of IPR is not that well understood or recognised, so the prospect of fighting against something where the technicalities are not grasped is challenging."
Given the impressive commercial progress made by Showtime over the past year, d'Halluin could be excused for viewing the next 12 months as an opportunity for consolidation.
This is far from the case, he says.
"The next 12 months represent a hugely important period for the company," he says. "We need to capitalise further on the benefits the purchase of the EPL rights have provided us in terms of increasing our subscription base.
"The next year is really about selling the value proposition of Showtime. We have acquired the right content and implemented the correct marketing strategy to really justify our position as the premium pay TV operator serving the region.
Given d'Halluin's lofty aspirations for Showtime, one would expect the network to be at the cutting-edge of digital broadcasting technology.
However, the Showtime CEO says the broadcaster will not rush to embrace the latest digital technologies - including high definition television services - for the sheer sake of being the first to market.
• On the rollout of new DTV applications
We could accelerate the development and introduction of new digital technologies, but question marks linger in terms of return-on-investment (ROI) and the market's willingness to wholeheartedly embrace these technologies.
• On The introduction of HDTV services
HD is a technology that will eventually be introduced to this market, but it's something that we're looking at in the next 12-24 month phase, not three to six months. The reason being that we've introduced so many new features to the platform that audience numbers haven't really stabilised yet.
As a pay TV operator, the question we have to ask ourselves is what sort of ROI or incremental growth will we enjoy by making the considerable investment in the technology. Also, do we want to reduce the number of channels we offer to accommodate these spectrum hungry HD services in our line-up?
When we do launch HD services, we will assess what relevant content we have access to - movies and sport, for instance - and launch one or two HD channels based on this programming.
• On Interactive gaming
I'm well aware that other pay TV platforms offer interactive games, but to be honest, these services simply don't stack up technically against the latest PlayStation or Xbox games.
The younger generations in this region, particularly in KSA, are very fond of video games. But it's one thing to be playing a sophisticated video game on a PS3 to playing a very basic game via an interactive STB. We don't believe there's value there.
• On the development of IPTV
We view [IPTV as] primarily a distribution network. It's very much in the early stages of development in this region, but if IPTV operators establish operations here we would obviously be keen to supply them with content. We perceive the technology as more an opportunity than a threat.
The biggest challenge facing the development of IPTV services in the Middle East is the complete commercial dominance of satellite DTH distribution services. More than 95 percent of homes in the GCC use satellite dishes to receive TV services.
IPTV operators will no doubt look to combine broadband and IP telephony services to lure customers, but given the massive number of channels available in this region, what could IPTV seriously offer in terms of additional value to the consumer? Our belief is that it's relatively limited.