Middle East poised for surge in OTT video market

Audience in Gulf States offers both youth and an appetite for online entertainment
(Picture for illustrative purposes only)
(Picture for illustrative purposes only)

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New data collated by global technology research and advisory firm, Ovum, suggests that the launch of the first non-native subscription online video service in the Middle East heralds a new phase in the evolution of the premium OTT video market in the region. This evolution will see traditional cultural barriers that previously made outside companies hesitant about launching in the region, starting to fall and the industry reacting to this.

Ovum profiled the 11 leading premium subscription streaming services in the Middle East and forecast regional consumer spending on OTT video. It found that, while current spending levels are low at five per cent of total global OTT video spending, the sector is primed for rapid growth. The launch of US pay TV network Starz is expected to be the first of many foreign subscription online video (SVOD) providers’ incursions into the region.

Ismail Patel, analyst in Ovum’s TV Practice, commented: “Middle Eastern subscription streaming is set to grow dramatically compared to other regional markets over the coming years. SVOD revenues will grow by over 25 per cent annually to 2019, accounting for over 70 per cent of all OTT revenues in the region. A dramatic increase in subscriber numbers is forecast in the next few years and 2019 will see more than one million Middle Eastern subscribers watching streaming services, complementing a growing overall market for visual entertainment."

He adds: "Long-held reservations when considering a MENA launch are no longer game breakers, as censorship controls are relaxed for pay-TV operators and streaming services.”

According to the information released by Ovum, two-thirds of the world’s Arab population is under 30, making it a prime target for online video entertainment. While there are vigorous free and pay-TV sectors serving the region, there is a dearth of high-quality Western TV and movie content at the low prices offered by subscription streaming.

While current SVOD services in the region originate from established telcos, pay TV operators, and broadcasters, Ovum suggests that non-native services will increase competition, meaning local services looking to compete will have to invest in original content, a constantly improving user experience, and competitive pricing to maintain market share.

Whereas live sports will continue to attract the biggest audiences in the Middle East, exclusive movies and high-end dramas can significantly differentiate individual streaming services. Additionally, subscription streaming can target narrow interest groups and monetise niche native and expatriate audiences more effectively than traditional distribution channels.

While credible subscription streaming services with strong content will be well-positioned in a rapidly growing sector over the next five years, market leadership will be hard-won given new service launches.

Tony Gunnarsson, senior analyst in Ovum’s TV Practice, says: “In Western markets, SVOD is now a mature business, which is why US broadcasters such as HBO and CBS have launched direct-to-consumer SVOD services. We are experiencing the early stages of the race to pre-empt the entry of global streaming leader Netflix in developing markets across the globe. Netflix is currently committed to achieve global coverage by the end of 2016 with launches in Spain, Portugal, Italy, and Japan planned by the end of 2015."

He continues: "We expect Starz Arabia to thrive in the MENA region given the quality of its catalogue and its timing. It will be under pressure, however, as will the rest of the industry, with the almost inevitable entry of Netflix. As the global expansion of SVOD services continues apace, Ovum believes that there are currently over 100 million SVOD subscribers globally, and that this number will grow to 180 million in 2019.”

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