Interview with Johannes Larcher, MBC Managing Director, Digital

In conversation with MBC Group’s new head of Digital and Video on Demand business, Johannes Larcher to talk about his mission - making Shahid the leading OTT platform for the modern Arab viewer.

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Johannes Larcher was part of the early leadership team at Hulu, and spent five years developing the business as one of the early players in Subscription Video on Demand. Larcher was in charge of the international growth of the business, helping to scale the platform in international markets such as Japan and the Middle East.

"As I left Hulu and did a lot of work for studios and broadcasters around the world, it became very clear that there are very few regions where there is still a significant opportunity to build a large and sustainable OTT business and the Middle East is one of them. So when Sam (Barnett, MBC CEO) got in touch with me, I was immediately interested,” explains Larcher, when asked why he decided to join MBC.

“Unlike other places like Europe and South East Asia where the market is taken up by global scale players, in the Middle East, the opportunity still exists to build something great and MBC is in prime position to do that,” continues Larcher.

“I think it’s a fascinating opportunity – MBC has some advantages that are really significant, to foray into the OTT business.”
Elaborating on these advantages, Larcher says the very large audience that MBC enjoys is a big advantage: “This gives MBC the opportunity to be a catch up platform, where Shahid can be the digital platform of choice for MBC viewers to catch-up on MBC content via their mobiles and PCs.”

“From there we can upsell to our subscription layer - that’s our first advantage. The second advantage is we really know content creation for the market. Thanks to 25 years in the business, MBC really understands the modern Arab consumer better than anyone else,” adds Larcher. He is aware that MBC Shahid won’t be the only player in on-demand video, but says the regional market is underserved currently and very large: “I believe we have a great chance and still have a window of opportunity to be successful.”

Larcher says his mission and focus in the role is clear: “Making Shahid super successful is the prime objective of why Sam brought me here. We realize digital distribution over-the-top is the future and we feel we need to have a strong horse in that race, and Shahid is that horse.”

“Certainly live TV has the advantage of this campfire type of moment where audiences gather in real time to enjoy content. Like MBC’s Arabs Got Talent show which is coming back in February - people get together to enjoy something. That’s the power of live TV.”

However looking at the future of television, Larcher is quite sure that over the top is the superior platform because he says, “the consumer gets the ability to decide and OTT puts the user in control of the experience of their entertainment life.”


MBC is banking on flagship shows like Arab's Got Talent to help Shahid gain popularity catch-up OTT platform

Original Content on the way

Larcher explains the need for bringing great content with the modern Arab audience in mind and says MBC realizes the importance of having premium exclusive content on the platform. “Great stories are great stories, wherever they are distributed. Whether it’s on free-to-air or on digital OTT.”

Producing ‘Shahid Original’ shows are a very important part of the strategy acknowledges Larcher. He reveals that the first Original series has already been commissioned and is currently in production. Although not yet ready to reveal details of the production, Larcher says, “we are in production for our first Original live series. It will launch later this year and we are extremely excited about it.”

Elaborating on his approach to original content production Larcher says, “we look for content that makes our service distinct from other services and one way of achieving that to have content constantly fresh and exclusive and new original content. Content that is serialised, scripted, and not necessarily dependent on a live audience. We have a great lineup of content on Shahid and Shahid Plus and we aim to supplement that with additional content that we will license and produce.”

The goal for Shahid is to develop a consistent flow of original programming that comes to the Shahid Plus subscription platform. “Additionally we will also be licensing a significant amount of content that is not originally produced by us. With Ramadan coming we are definitely intent on making sure that Shahid remains the place for OTT Ramadan content,” Larcher adds.

The MBC executive explains how their video on demand strategy is built around two tiers – Shahid, which is primarily an AVOD catchup service, “giving our free-to-air audience the ability to connect on a different platform and get into a show where they have missed some episodes.”

“Really premium exclusive content unique will move into Shahid Plus,” he says, because that’s where it has to live in order to extract the most value. Apart from content, product features and other services will also be used to differentiate the two services clearly apart.

“Premium content such as the Shahid Originals would sit behind the paywall because we want to monetize through SVOD rather than free AVOD,” explains Larcher. They could experiment with opportunities to put some exclusive content outside the paywall to convince the consumers to subscribe. “Experimenting is desirable because the beauty of OTT is that the data is all there, and you can see what works and doesn’t work,” explains Larcher.

On Partnerships

Larcher says he will continue to put an emphasis on forging successful partnerships to help Shahid scale in terms of content and distribution, such as the recent agreement with Fox Middle East.

“Relationships are super important not only for content rights holders in the Arab world but also from international markets like Bollywood or Korean content. We have deep relationships in the region with producers and distributors from Lebanon to Egypt and across GCC,” he says.

“The goal is to make Shahid available whenever wherever and however consumers want it – that means we have got to be on all devices, TV sets, set top boxes, gaming consoles etc. And also on the distribution side we need to partner with telcos and operators who have access to consumers. Partnerships are important and there is a lot more to do there than we have done in the past,” says the MD of MBC’s digital and video on demand business.

MBC's new studios in Dubai Studio City

The Rising Tide of OTT

Given the boom in OTT services in the region, we discuss why global players like Netflix have not yet seen the kind of rapid subscriber growth in the Middle East as they have done in other regions?

“Netflix is a great service with great content.” says Larcher. “But you’ve got to be realistic that at this point in this region Netflix is primarily targeting a segment that is wealthier and western oriented in their tastes and preferences - they have a great product which is global in nature. The same goes for Amazon Prime and Starz Play – they are very much targeted at audiences who are into western content and not as price sensitive – they can easily pay the subscription price.”

Larcher points out that Shahid on the other hand is a service for the average modern Arab consumer not only in MENA but around the world. “A good part of our subscriber come from the diaspora so we focus on regional and local content relevant to the mass audience here. We’re also priced differently at a level that is more value based,” he explains.

“But I want to be clear that in our business, the rising tide lifts all boats. So it’s good they (global OTT players) are here, because it will make the product of OTT much more acceptable to the average consumer and expand the overall addressable market. We want Shahid to be the premium video service for Arab viewers wherever they are.”

Larcher knows of course the global OTT platforms are also investing heavily in Arab language content. He points out that Netflix’s content already comes from around the world and only 40% is produced in the US at this point. However the content they invest in targets a global audience. As an example, Larcher points out that when Netlifx makes a drama like Dogs of Berlin, it’s not created just for the German market, but really aimed at getting viewers across the global market.
“When we create originals they really are for the Arab speaking market. They will produce original shows and so will we and may the best show win. May the better show find the audience!”

Winning the Digital Experience

Upgrading the Shahid user experience will be a major focus for Larcher in his new role. Larcher believes that while OTT services depend on really great content, “without a great product to deliver and make the content discoverable and enjoyable, even the best content doesn’t help you.”
Therefore upgrading the product and technology is critical to a great viewer experience: “We have something that works today but it needs to get better,” he adds.

Larcher wants to take the Shahid experience to best-in-class levels so that viewers can enjoy an intuitive and friction-free experience. A better experience for the viewer around discoverability, personalisation and recommendations are some of the ways technology can play a part in the success of Shahid. As well, the aim will be to invest in getting on more devices and making it easier to subscribe to the service.

“We have our own technology team and will continue to invest in that. We are proud of that team and good part of it sits up in Amman, Jordan. This is a real area where investment and focus is needed.”

When he started at Hulu, the OTT space was brand new he says, and there were limited OTT solutions that could be procured. Today, there are existing solutions and OTT technologies that are widely available. Larcher will be making some key hires on the technology front as they embark on a process to make the Shahid viewer experience the best in the business. “Today it is okay, but not where we need it to be for our consumers,” he concludes.

Embracing the digital future: Linear TV vs. OTT

Weighing in on the whole linear vs. OTT debate, Larcher says live TV is still extremely important and will not go away, especially for live event type broadcasts like sports, news and big ticket events. “These are ‘campfire’ moments where people want to watch live and talk about it the next morning at the water cooler. So those won’t go away, but how it gets delivered might change.”

“Satellite free-to-air TV has had a tremendous impact in the region, more than anywhere else perhaps,” Larcher believes. But he adds, “As infrastructure improves, delivery of all premium video should move to the internet. The advantages are just so massive in terms of track-ability, target-ability and interactivity, that there is no real reason why 10-20 years from now, premium video content should still go over copper wires or satellite.”

Larcher says we haven’t seen that much movement into internet based content delivery in the Middle East, “partially because the infrastructure is not really well prepared to support that yet. But if you look at the US, there are almost a dozen so called Virtual MVPDs (multichannel video programming distributors) – Hulu, Dish to name a few. They are all offering live over the top TV in a shrink wrapped package that is very consumer friendly. We will see that in this region over a period of time.”

We discuss the impending launch of Disney+ which could really shake up the market and intensify streaming video competition. A company like Disney almost suffers from too much choice feels Larcher. They now control ESPN, Hulu with the Fox acquisition, and major studios like Marvel, Lucas Film. “With so many franchises it’s hard for them to choose what content to keep for premium OTT.”

Larcher says it is typically harder for traditional media companies to get in direct-to-consumer (DTC) models. “But in Disney’s case it’s different – they have such a customer obsession in how they think about their theme parks for example. It is going to be interesting to see how they navigate the market. They are basically foregoing a lot of short term revenue for subscriptions, which is the DTC consumption model. Other players have made different choices, like Time Warner. You saw the deal they did for ‘Friends’ with Netflix.”

Larcher feels the DTC wave is firmly underway but it’s important is to remember two things: “First, consumers have a finite appetite of how many services they can subscribe to, typically 2-4 premium subscriptions per household. No one will subscribe to 12-15 services. The other thing is that to operate profitably requires scale. We’ve seen lot of niche services like CrunchyRoll for Japanese animation, or Tribeca Shortlist for indie films. It is really challenging for small services to find the scale they need to be profitable.”

“My prediction is in this region multiple players will succeed but it’s not going to be a big number. We want to be one of them left standing when the music stops.”

Surely having huge production budgets matters when it comes to premium content?
Larcher explains that unlike Netflix, “We’re not producing western content in Europe for global audiences – “The Queen” for example costs around 12 million dollars per TV hour. We’re not producing at this level and we don’t need to be. We can afford to produce at a significantly lower cost per hour than many other places in the world. We are confident that we can produce content that resonates with our audience.”

The digital side of the business is a priority for MBC Group as part of its five year vision plan

Taking on the MENA Challenge

MBC wants to serve Arab audience around the world but of course, the focus is on the MENA region says Larcher. Within MENA he adds, “you got to focus on the markets where the audience and money intersect although we will serve all 23 markets in the MENA region.”

Larcher does not name any specific countries but says when it comes to investing marketing dollars, the focus is on where the best potential is: “Content will come from all over and the service will be available everywhere but monetisation will happen where the dollars are and the audience intersect.” The focus will be where we can attract the largest number of customers. That kind of gives you the direction of where the focus will be,” concludes Larcher.

Speaking about the biggest challenges he will need to overcome, Larcher thinks there are a few problems in the region common to all potential OTT services. “Poor telecommunications and internet infrastructure, which makes it hard for consumers to access our service and makes it expensive if you’re using mobile data. There is, of course, a lot of work to do in product and technology to get it to where we need to be,” he reminds us.

Looking at the advertising market, he thinks the region has gone through tremendous changes: “Social media platforms have made a big impact on advertising, and since Shahid is ad-supported it does have an impact on revenues. But he says, “We think we have a great story to tell there and we believe in our advertisers.”

In terms of investing in productions, he says the challenge is not necessarily getting the green light to go and spend: “Our shareholders are very committed and that why they brought me on because we want to do this the right way with the right resources. But getting it right is not easy and it takes a lot of time to get there.”

“With Shahid Originals also we have some obvious advantages, but it’s not easy to be consistent and successful in premium video content – drama in particular. Look at the history of Netflix and Hulu – it took them a long time to get there and it’s still not consistent either. But these are the challenges and it’s exciting to sink our teeth into them and make a difference.”

Larcher is happy with the creative talent he has seen so far, saying great content is being produced across the region. And he points out that “good content and the OTT revolution will lead to even more content produced, and will lift all boats and lead to better quality as well.”

“I’m excited to be here!” says Larcher, as we end the interview. “It’s one of the most fascinating and challenging media markets in the world. A lot of potential and challenges and we will see what role Shahid will play in it!”

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