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When rival pay-TV operators Showtime Arabia and Orbit merged earlier this year a new chapter in Middle East media history was written. Orbit-Showtime President and CEO Marc-Antoine d’Halluin, reveals to Diana Milne what really went on behind the scenes when the screen giants joined forces.

“It's about respecting our viewers because in no way do we ever want to produce content that could be perceived as being offensive. That would be counterproductive and idiotic”
-Marc-Antoine d'Halluin

For Marc-Antoine d'Halluin, the Frenchman at the centre of the biggest merger in Middle East media history, 2009 has been a year of highs and lows. In July the broadcaster faced potential ruin after bidding unsuccessfully to extend a lucrative three-year deal for the rights to show live English Premier League (EPL) football matches. Just one month later the channel announced the successful completion of a merger with its biggest rival in the MENA pay-TV sector, Orbit. Now officially re-branded Orbit-Showtime, the channel offers 75 channels, including 15 movie channels and has "hundreds of thousands" of subscribers across the region, leaving little room for competition in the market. The alternative to the monopoly created by this merger, says d'Halluin, was a situation in which both channels lost out in a bidding war, which only succeeded in benefiting the programming suppliers: "This was a merger between two companies that had been competing fiercely for the last 15 years in trying to attract pay TV subscribers in the MENA region. Usually when such competition lasts longer, the only winners are the programming suppliers who have actively benefited through a succession of price bidding wars in terms of content," he says. "The merger makes sense from a purely business point of view, as it puts to an end the crazy content price wars that take place otherwise." 

While such a merger may be new to the Middle East region, it emulates a pattern demonstrated in the West, starting with the merger of British Satellite Broadcasting and Sky Television in 1990. "It's an established fact in Europe that each of the markets that have had direct two to-home (DTH) satellite platforms have experienced a consolidation. We are the sixth or seventh DTH merger to have taken place."

Regional challenges
While Orbit-Showtime may have aped the behaviour of its European counterparts, it operates in a far less mature media market and faces unique challenges as a result. One of the greatest of these is piracy – a problem exacerbated in the Middle East, according to d'Halluin, by under developed technology and a lack of legal deterrents. The problem is so bad, says d'Halluin, that it costs his company losses equivalent to several times Orbit-Showtime's total annual revenue. "It is between one and two times our total revenue and this is extremely significant." He goes on to say that piracy also leads to culturally inappropriate material being broadcast into Middle East viewers' homes: "It hurts as a business but it also enables the households in the region to receive content that is culturally inadequate such as pornographic channels." D'Halluin says that rampant piracy was one of the reasons behind the merger with Orbit and that the two companies will now join forces to fight against it using the best technology available: "Piracy is present in every market but it is truly developed here because it takes advantage of two weaknesses. One is the technology we are using and the other is the lack of law enforcement and regulations helping us to fight piracy. One of the benefits of us coming together is being able to fight a much more effective war against this piracy using the latest technology. We intend, in particular, to deploy new decoder boxes that will be more secure and so will defeat piracy. They will also help consumers to receive higher definition channels."

A captive audience
Because Showtime is a private company it will not disclose figures for the number of subscribers it has or where they are located. However, d'Halluin will reveal that its main markets are in the GCC, with the bulk of its customers located in Saudi Arabia, Kuwait and the UAE. He says the company is now directing its efforts on growing its subscriber base in smaller but fast growing areas of the Middle East: "We focus our main efforts on our biggest markets but we are now also looking at some smaller markets such as Bahrain, Qatar, Egypt and the Levant, all of which are developing very well."

He says the channel's subscription numbers have not been negatively affected by the economic downturn but have in fact benefited from increased demand for home entertainment as an alternative to more expensive pastimes. "At the end of the day, when people are cautious about spending their money on entertainment the last thing they are going to cut out is their TV entertainment. It provides a broader form of entertainment at a cheaper cost, especially now we offer 75 channels in one package. We've certainly not suffered as much impact as other industries such as banking and finance or real estate." There is particular demand, he says, for video-on-demand packages: "There is a growing demand for watching what you want when you want. We have developed a subscription for video-on-demand and we now bring a variety of movies and series into DVR [Digital Video Recorder] boxes. We have now deployed tens of thousands of these and we know viewers are very happy being able to watch exactly what they have paid for."

Winning content
In terms of the content it broadcasts, Showtime has brought top international shows to the Middle East, including Eastenders, Saturday Night Live and The Simpsons. Balancing the need to meet demand for Western entertainment whilst also respecting the region's cultural sensitivities has never been a challenge, claims d'Halluin, adding that to achieve this it is important to ensure the Arab audience is represented. "We broadcast everything you would find in the West and mix it with content that has been produced in the region. We have exclusive deals with around 10 Arabic content channels. We find that as a result there is the right balance between Arabic and Western content. It's about respecting our viewers because in no way do we ever want to produce content that could be perceived as being offensive. That would be counterproductive and idiotic."

However, Showtime is not always able to provide viewers with the content they demand: losing out to Abu Dhabi Media Company for the rights to show EPL games was a major blow for the company and a subsequent poll by Arabianbusiness.com indicated that 50 percent of subscribers would cancel their subscription if the broadcasts continued to fail to provide access to the games. D'Halluin's frustration at the situation is obvious, though he claims he is confident a deal will be struck to allow Orbit-Showtime continued access to the games. "The government has to some degree brought some disruption, particularly when it takes exclusive rights to broadcast sports programmes when there is no commercial ROI perspective for a state-owned broadcaster to do this. There's no commercial ROI in some cases, other than just marketing and branding and associating your brand or city with a certain leading league. We understand, however, the need to brand certain countries that are being developed and we believe there is a way for us to work with that. We think we'll find a way to work with them so that the subscriber base will keep accessing the Premier League." He goes on to say that while it may be disruptive, the UAE government's interest in developing the region's broadcasting industry, is one step on the way to a more mature market for free-to-air and pay TV operators alike. "We have seen lots of rapid evolution in the television market in the region. The free-to-air market is developing rapidly, with government and private money being invested in it. We are seeing an increase in the amount of entertainment that is being made available for free. This is educating the overall market to appreciate a significant amount of the Western content that is broadcast which indirectly helps the pay TV players who offer more exclusive content to the viewers. We [the free-to-air and pay-TV operators] play to each other and that's a very positive trend." It's another example of the business philosophy behind Showtime and Orbit's merger – if you can't beat them, join them. And with the two former rivals now a formidable force in the Middle East television market, it seems they can overcome just about any challenge that is thrown at them.