Massive consumer uptake of high-definition (HD)-ready displays and increased interest in next-generation playback devices is turning up the heat on regional broadcasters to accelerate the roll-out of high-definition television services, writes Aaron Greenwood.
The massive growth of the Middle East television broadcasting sector in recent years is a prime example of the benefits provided by market liberalisation.
With literally hundreds of available free-to-air (FTA) satellite television channels, three subscription satellite TV service providers, a booming advertising market and an ever-increasing demand for multilingual programming being driven by the continuing influx of expatriate workers, the industry is striving ambitiously to meet consumer demands for both captivating content and world-class standards in service delivery.
The region's broadcasting sector is, however, quickly becoming one of the most saturated on the planet with small regional channels mostly competing for crumbs from the slices of advertising pie being carved up between pan-Arab multichannel operators such as MBC and Rotana and satellite service providers ART, Showtime and Orbit.
A recent study released by market analyst Booz Allen Hamilton confirmed that the growth in the number of FTA channels in the region had "outpaced the growth in TV advertising spend resulting in slowing advertising spend on a per channel basis".
The report painted a bleak outlook for small country-based FTA operators, in that more than 80% of TV advertising spending is split between just nine media groups operating 28 channels.
In the short term, the report found, "TV channels are likely to grow at a proportionally slower rate, and as the gap with growth in the advertising arena widens, consolidation may be expected over the long term".
In a bid to ensure this scenario plays out, the industry's dominant players have embarked on diversification strategies, expanding their channel roster and sourcing additional content from local and international markets in a bid to shore up their position and increase their stranglehold on advertising spend.
This strategy has been aided by the transition to digital satellite broadcasting platforms across the region, which ironically has also been largely responsible for the proliferation in the number of smaller operators entering the market.
It's important to note that the few digital terrestrial services established in the region - most notably in Saudi Arabia - have also leveraged the additional bandwidth to launch new television and radio services.
Interestingly, unlike other satellite broadcast markets such as Western Europe, few Middle East broadcasters have chosen to leverage the increased bandwidth availability provided by digital satellite technology to develop enhanced content services.
The common argument put forward by TV broadcasters across the region is that the market is not mature enough to support the development of premium digital services such as high definition television (HDTV).
This argument lacks currency given the unprecedented economic boom that has enveloped the region and the benefits it has provided in terms of the massive expansion in consumer wealth, particularly in the oil-rich economies of the GCC.
Providing no greater illustration of this fact has been the impressive uptake of digital consumer devices, particularly HD-ready flat-screen televisions and next-generation DVD players.
On a per capita basis, GCC countries such as the UAE and Saudi Arabia rival the leading global consumer markets in terms of flat-screen television penetration, with the vast majority of these capable of broadcasting HDTV services.
It is important also to note that the bulk of pan-Arab television advertising income is derived from the wealthy Gulf markets.
Internationally, the uptake of digital television services continues unabated, even in markets where advertising spend has been adversely impacted by weakening domestic economies.
In the US and Japan, which count as the leading HDTV markets worldwide, consumer uptake has been remarkable. In the US alone, upwards of 18 million households receive HDTV broadcast services over cable, satellite and terrestrial platforms.
A recent report published by market analyst Screen Digest predicted that on a global basis, more than 22% of TV households worldwide will be 'HD-ready' by 2010.
It also predicted a watershed shift in the commercial dynamics of the subscription television sector in certain markets, as pay TV subscribers' demand expanded HDTV service offerings.
"In a maturing pay TV market, operators have great expectations for HD as an effective marketing tool to increase revenue-per-subscriber, to reduce churn and to increase subscriber numbers," the report states.
"Surveys show that consumers are more than ever demanding higher quality television and are ready to pay for the necessary hardware and service. BSkyB identifies HD as a key factor in its quest to reach 10m subscribers [in the UK] by 2010."
BSkyB has achieved massive success offering premium HDTV services, such as exclusive English Premier League (EPL) coverage, effectively increasing revenue per subscriber, reducing churn and ultimately increasing subscriber numbers.
International trends suggest that the first HDTV broadcaster to market in a particular region or territory generally reaps the greatest long-term commercial benefits despite the cost of the initial infrastructure investment, which includes in some cases subsiding the development and distribution of HD-capable set-top-boxes and related hardware.
They also confirm that enhanced content services demand greater premiums from advertisers, while opening up the potential for new revenue streams generated by the development of interactive applications.
In an increasingly congested broadcast market such as the Middle East, the development of unique digital services such as HDTV would undoubtedly provide ambitious operators with a key point of difference from their rivals in the marketplace and, as international trends indicate, provide massive long-term commercial and marketing benefits in the process.
Whether Middle East broadcasters are prepared for this challenge remains the pivotal and unresolved question.
By the end of 2005 there were 19m households with HDTV sets in the US (17% of total TV households) with 11m of these watching HD broadcasts. At the same time 14% (6.7m) of TV households in Japan were HD ready.
On a global basis, by the end of 2010 the number of HD ready households will reach 174m or 22% of TV households. The figure will be 59% in the US, 66% in Japan and 30% in Western Europe.
Worldwide, there are approximately 90 HDTV channels currently on-air. By 2010, this figure is expected to exceed 200.
In the Middle East, UAE pay TV operator e-vision and KSA digital FTA network Saudi Television have both trialled HDTV services.