Steve Copestake talks to Marylou Andrew about the growth of pay TV in the MENA region, the challenges posed by free to air TV and the recent launch of Netflix.

MARYLOU ANDREW: What factors have propelled OSN’s growth in this region?
STEVE COPESTAKE: Essentially we are in the content business. There are many ways to watch TV but at the end of the day it comes down to having compelling content. We probably have the broadest portfolio of content available in any one place and that is obviously the value of pay. A big part of our success is the extent to which we are able to negotiate and deal with the best content providers across the world. Technology is another factor – technology that is applied and in context. What we say is that we have all of the things that make your life most convenient in terms of a TV watching experience and allow you to be, in a sense, in control. More than anyone else we offer the types of things that allow you to watch TV in the comfort of your own home and that brings in the family dynamic, or you can take it on your iPad, watch it on your phone, you can use your device to record something when you are away from home. The challenge is to explain all this in simple terms and in context. Then there are people; over the years we have attracted some fairly smart people who have experienced the TV world from a previous geography, so they bring with them ideas. Dubai is still a developing business from the consumer and supplier side, so we borrow the right bits and pieces from around the world. The brand idea is very important and we have been pretty smart about consistently communicating to people what OSN stands for. I call this the penny drop moment, and although we are never fully there, we want OSN to be in that category of brands.

MLA: How challenging is it for a pay TV platform to operate in a world where people don’t necessarily want to pay for content?
SC: I am not sure that statement is entirely true, although there is an expectation that content should fall from the sky, so it is challenging. So you need to have a clear point of difference in the way you deliver content, the way you behave when you deliver it (i.e. your brand identity) and what you actually deliver. There are a lot of people who are prepared to pay for good content seen in the right way, very quickly after it is first produced and we still have not tapped all those people yet. There are still a lot of households we are going after.

MLA: What is the size of the pay TV market in this region?
SC: Sixty to seventy percent of MENA households have pay TV and we think there are still another seven to eight million households who are premium targets that we are still not touching. So that is another way of looking at whether people are prepared to pay. All our indicators suggest that those households are prepared to pay because they pay for other services. They might be watching free to air TV, they might be Netflix consumers, they might be accessing services from outside the region etc. If you grow up in a region where free to air is so prominent – in Saudi Arabia 65% of all content is viewed online and YouTube is huge and whether or not they are happy to pay for it or not, people get into the habit of expecting that stuff will be free. So we have to work hard on educating and telling them clearly that if they want the ultimate TV watching experience, we are the only way you should be watching TV, not literally but… it is all about value. We are not quite there yet but that is what we aspire to do.

MLA: Where does the largest chunk of consumers come from in this region?
SC: Saudi is our leading market and one of the more interesting markets we deal with in terms of censorship and other things. The UAE is very important and after Saudi, Egypt is our second largest market. So the GCC is obviously the bulk of what we do. We do have smaller businesses in North Africa and Sudan and up in the Levant as well.

MLA: What are the challenges of getting people to subscribe to pay TV?
SC: There are many. Off the top of my head one is awareness, because a large number of people don’t understand what pay TV means which partly tracks back to this thought that TV and content is free. There are some people who think that OSN is a channel. They have seen the letters and they recognise the colours but they don’t understand where we fit into that because it is kind of bewildering and everyone is offering TV including Etisalat. We have some challenges in terms of the value thing we talked about. We have some challenges around payment because credit card use is not established in this region. Competition is also a challenge.

“When economies are slightly fragile and competition is tough it is time to spend more. We have to be confident and brave, otherwise we will fall behind."

MLA: Who is the competition?
SC: In the pay TV space, BN, a company out of Qatar, is our main competitor. They initially launched as a sports proposition but now they are into general entertainment. Free to air is competition. There is Netflix which is essentially a player in OTT (over the top content) so internet access if you like. This is going to be a factor for us although we have a reasonably well established product in that space called Go. I would not say that it is a brand that is as well established as Netflix internationally and that will be a challenge for us.

MLA: Pan Arab TV is quite popular in this region; does OSN offer Arabic content?
SC: We do. A few years ago the perception about us was Western rather than local but we have worked hard to turn that around. We have a number of dedicated Arab channels now like Yahalla Cinema and a few others and we are starting to commission our own locally produced content. We are also making our own version of Saturday Night Live Arabia. We buy a lot of locally produced content from the region, extending as far as Turkey. So the mix of our marketing investment and focus is moving towards Arabic content and we are doing a lot more Arabic language marketing as well.

MLA: Does OSN spend significantly on advertising?
SC: We do and it is growing. When economies are slightly fragile and competition is tough it is time to spend more. We have to be confident and brave, otherwise we will fall behind. More than half of our money is invested on TV, digital spend is growing and we are very active on social media because of the nature, diversity and current-ness of our content. A large part of the people in this region are young people; 60% are under 25. These people watch TV and talk to their friends via smartphones simultaneously and for our brand to be credible and a little bit cool, we have to be part of the conversation. So about 15% of our marketing investment this year will be on the website, search and social space. Outdoor is significant for brand awareness and it is the main medium we use to project confidence. Radio is important in two primary ways; it is a lot more part of the conversation of life than people realise, if you drive to work or listen to it at home, you listen to stuff that tends to stick with you during the day. Then we have also have relationships with radio stations where if you want to listen to radio, you can do it through your TV, which by the way is the best stereo device in your house.

"In Saudi Arabia 65% of all content is viewed online and YouTube is huge and whether or not they are happy to pay for it or not, people get into the habit of expecting that stuff will be free. So we have to work hard on educating and telling them clearly that if they want the ultimate TV watching experience, we are the only way you should be watching TV, not literally but… it is all about value."

MLA: Are advertisers keen to be on pay TV where free to air TV is so pervasive?
SC: Every time we talk about this internally we say that pay TV is the right place to advertise because within the households that watch it there are a group of channels where there is extreme loyalty to those channels. OSN is a great place to do that because our audience is on our channels at certain times of the day. If you boil it down and look at the analysis in that way, pay TV is the way to go. But ad revenues are a relatively small part of OSN, we are a subscription business.

MLA: What are your predictions regarding the growth of pay TV in the next few years?
SC: Right now there are about 100 million households in the region and only 11 million use pay TV. Our subscription base has grown steadily every year but there is a lot more to come. One of the things we like about Netflix coming in is that it heightens people’s awareness on what we do; it is not necessarily good news for MBC but it is good news for OSN because these are paid-for services and they are both in-home and out of home and there are different ways of getting content. In a strange way it puts the focus back on content; it is just a question of how you get it. Everyone is the region is talking about Netflix, we sent them one simple tweet saying ‘welcome’ and we were not trying to be clever, we were sincerely saying that competition is good for us. We are not going anywhere so let’s see how well they do.

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