Growing MENA Video Streaming Market Gets Hypercompetitive

May 13, 2020

Filippo Giachi

VP – Asia, Middle East & Africa

Greg Sigel

VP – Partnerships

The nineteen countries commonly considered to make up the Middle East and North Africa (MENA) region offer a significant opportunity for over the top (OTT) video service providers, telcos and other stakeholders that can build successful partnerships to curate and distribute suitable content across multiple geographies simultaneously.

Research firm IHS Markit estimated that OTT video subscriptions in the MENA region exceeded 2m by the middle of last year [2019], up from 1.75m in 2018. And total revenue from the provision of those services expanded nearly 40% year on year to US$140m as subscribers paid for subscription video on demand (SVOD) packages from a wide range of local and international providers.

Netflix catching local streamers

Netflix launched in the ME region in 2016 and is estimated to have amassed 1.7m users by 2018. But that was still fewer than Starz Play Arabia (owned by Lionsgate) which at that time was expected to have 29% of the entire MENA subscription video on demand (SVOD) market.

Based in the United Arab Emirates (UAE), Starz Play launched in 2014 before expanding to Bahrain, Kingdom of Saudi Arabia (KSA), Kuwait, Oman, Qatar, Algeria, Djibouti, Egypt, Iraq, Jordan, Lebanon, Libya, Mauritania, Morocco, Palestine, and Tunisia. Its rapid growth has been partially facilitated by the high number of distribution and direct carrier billing (DCB) partnerships it has entered with local telcos, more than 20 in 2018. Those include operators that serve more than one country in the region like Orange, Vodafone, and Zain. At the same time, competitive subscription prices of around US$11 made up for the fact that Starz Play did not actually start producing Arabic content until 2019.

Netflix may trail Starz Play for the moment, but sources suggest it will expand its user base at a faster rate over the next four years. Indeed, Digital TV Research estimates that Netflix will have more than twice the number of subscribers as its nearest rival Starz Play (2.8m) and four times more than Shahid Plus (1.6m) by 2023. The company has recently started to provide local currency payment options in its two strongest MENA markets, the UAE and Kingdom of Saudi Arabia (KSA). It has also shifted focus to delivering more localised content in the Arabic language, such as Jinn, Al Rawabi School for Girls and Paranormal. The partnership deal and single billing arrangement forged with global pay-TV operator Orbit Showtime Network (OSN) in 2018 certainly helped Netflix push its subscription packages out to more of the region’s consumers. This success was despite cancellation of access to Netflix via OSN set-top boxes (STBs) in August 2019,and subscribers only being able to access Netflix via their smartphones, tablets and the Netflix website.

MBC’s Shahid Plus and VIP SVOD services specialise in providing Arabic language content to subscribers, offered both from its website and an iOS and Android app. The company signed a three-year deal to bring Fox Plus’ global content onto its platform in 2018, recently adding Spacetoon’s kids content dubbed into Arabic. MBC has also worked with Samsung to offer promotional deals and free trial periods for customers buying the Korean manufacturer’s smartphones, tablet devices and smart TVs. DCB arrangements with telcos such as Omantel in Oman, STC Bahrain and regional operator Etisalat, open to both post-paid and pre-paid customers, have also helped Shahid Plus grow its subscriber base both across its free advertising video on demand (AVOD) supported services and its paid VIP subscriptions, which start at around US$5 a month.

Amazon, Disney Plus poised to make a bigger impact

With Starz Play, Shahid Plus and Netflix accounting for more than three quarters of all subscription and revenue in 2018 according to IHS Markit, the MENA market is a tough place for rival providers to make headway. Having started to roll out its services across the region in 2016, Amazon Prime Video is better placed than many. Its library of mainly English language content is available for as little as around US$4.35 a month or US$39 a year. And those subscriptions look even better value since Amazon’s US$580m acquisition of UAE e-commerce company (since rebranded as in 2017 which now delivers shopping related benefits under the same subscription.

A new threat will undoubtedly come from Disney Plus, which first made it’s content available in the Gulf Cooperation Council (GCC) countries of the UAE, Saudi Arabia, Kuwait, Bahrain, Qatar and Oman for US$9.50 a month in April 2020. However, for the moment, Disney Plus appears to be available exclusively to OSN subscribers. OSN first launched its WAVO OTT platform in 2017, offering subscribers access to TV, film and sports content packages ranging from US$7 to US$14 a month, as well as Sports only versions offering daily and weekly access for US$5 and US$7. The service is available to 19 countries in the region via the company’s website or mobile app as well as selected smart TVs. WAVO was OSN’s second attempt at the OTT video streaming market, after an introductory package – Entertainment GetStarted priced between US$16 and US$21 a month – failed to attract many customers.

Tough market for smaller players

Specialist VoD streaming platform icflix has provided Jazwood, Bollywood and Hollywood movies and TV series in Arabic, English and French to subscribers in its target markets of Morocco, Egypt, Kuwait, United Arab Emirates, Tunisia, Kingdom of Saudi Arabia, and Pakistan since 2013. It has multiple partnerships with local telcos in place, including Du, Oreedoo, Orange, STC Bahrain and Zain, using a third-party payment platform to offer pre- and post-paid subscribers a way to fund monthly (around US$8), weekly (US$3.40) or daily (US$1) subscriptions through direct carrier billing charged to their mobile phone accounts.

PCCW-owned Viu is active in the region and is set to launch six originals in time for the Ramadan period. However, Kuala Lumpur-headquartered iFlix closed down its MENA operations in July 2019, pledging to refocus on its business in South East Asia. The company had established iFlix Arabia in partnership with regional telco Zain in 2017, operating in Dubai, Saudi Arabia, Jordan, Iraq, Kuwait, Bahrain, Lebanon, Egypt and Sudan.

After first launching its BeIN On Demand service in 2017, pay-TV and satellite broadcaster BeIN Media Group has since added a dedicated movie channel in time for Ramadan, costing US$4 per film, as well as a sports archive service covering classic FIFA World Cup, UEFA Champions League, English Premier League and El Clasico matches to fill the gap left by the absence of live football in the wake of the COVID-19 pandemic. Access is tied to one of the company’s beIN set-top-boxes.

Elsewhere E-Vison, a subsidiary of Etisalat Group, partnered Egyptian MNO Etisalat Misr to launch Etisalat TV in April this year. Initially available only as a mobile app before migrating to the web and smart TVs, the OTT video streaming services offer content in English and Arabic, and English with Arabic subtitles. Rather than producing its own content, however, E-Vision appears to rely on content partnerships with OTT providers Starz Play and MBC, as well as Rotana, Fox, ART and Good News 4 ME.

KSA OTT provider Selevision debuted Seevi in 2016, a hybrid platform available on STBs, a web portal and smartphone apps. Based in Beirut, Cinemoz is a free VOD platform curates a select library of films, TV series, documentaries and shorts customised for Arabic speakers, while offering full integration of social media features. Apple TV+ subscriptions are available for around US$4 a month for Apple users in the region. Zee Entertainment also offers a freemium AVOD service – Weyyak – offering a collection of Arabic- and Turkish language and Bollywood content funded either by advertising or subscriptions costing either US$1.50 a week or US$5 a month.

AVOD and piracy pose a constant challenge

Certainly, a preference amongst some consumers for free AVOD services is having an impact on SVOD revenue in the MENA region, one reason why so many OTT streaming providers offer both options to their subscribers. Digital TV Research estimates that revenue from AVOD services in the MENA region totalled US$162m in 2017, but will have grown at a CAGR or almost 26% to be worth US$402m by 2021 (compared to US$342m for SVOD/TVOD).

However, the growth of OTT video streaming revenue in the MENA region is also heavily impacted by content piracy. The most famous example is BeoutQ a pirate TV network accessed by millions of low-cost STBs or illicit streaming devices (ISDs) which continues to fuel a global dispute on intellectual property and an ongoing row between different Arab states. Starting as a ‘standard’ pirate streaming service, by October 2017 beoutQ was transmitting ten live HD channels, curated largely from beIN content, via satellite across the MENA region. The company quickly set itself up as a legitimate-looking broadcaster, selling BeoutQ-branded boxes, beoutQ annual subscriptions and publishing a rate card for ads to be inserted into its programming.

BeoutQ is not the only source of pirated video content, however. MBC estimates it has taken down 245 pirate channels since 2014 through the Broadcast Antipiracy Coalition, as well as millions of pirated content videos on YouTube and other social media sites over the last three years. An online consumer piracy survey conducted by digital platform security firm Irdeto in 2017 found that half of MENA respondents – 59% in Egypt and 53% in the GCC countries – had watched pirated video content in the previous 12 months, figures which rose to 62% amongst 18-24-year-olds specifically.

Further growth driven by increased network capacity

Despite the commercial threat posed by pirated content and AVOD services, SVOD subscriptions and revenue are forecast to expand further in the MENA region over the next three years. By the end of 2023, paying subscribers are expected to number 4.75m, generating around US$400m in revenue, according to IHS Market. Estimates from Digital TV Research are more bullish, with paying SVOD customers numbered at 5.2m in 2018 set to reach 21m by the end of 2023. The disparity is likely to stem from which countries either company (and other analyst firms) include within their definition of MENA however, particularly when it comes to densely populated territories like Turkey.

The expansion of OTT video content provisioningwill undoubtedly be helped by improvements in fixed and mobile network capacity in the region. Some MENA countries already have some of the fastest fixed broadband connections in the world, while others have the slowest. So while download speeds can reach up to 100Mbit/s in some of the Arab states likes Qatar and the UAE for instance and 82Mbit/s in Israel, less developed nations can be as low as 4Mbit/s (Yemen and Algeria) according to Ookla speed tests conducted in April 2020. The same disparity is evident in respective countries mobile network capacity, which again range from 7Mbit/s in Palestine and 9Mbit/s in Libya through to 78Mbit/s in Qatar and 83Mbit/s in UAE.

The emergence of fifth-generation (5G) mobile networks may eventually close the gap between different countries coverage and transmission speeds, though progress is likely to be slow. According to the GSMA’s 5G in MENA: GCC Operators Set for Global Leadership report, 15 countries in the region will have launched 5G mobile services by 2025, with operators mostly adding 5G capabilities to existing 4G mast infrastructure. Initial consumer use cases from operators including du, Etisalat, Ooredoo, STC, Turkcell and Zain are expected to revolve around applications and content for immersive reality, eSports, and enhanced digital entertainment within stadia and music venues. The GSMA estimates that 5G adoption will reach 16% in the GCC Arab States by 2025, slightly ahead of the global average.

To date, the majority of OTT video consumption and revenue has come from the smaller, better connected and more economically developed states of the GCC and Israel. But 5G could change that dynamic and bring video services onto faster, more reliable mobile networks to greater numbers of people in the more populous MENA territories such as Egypt, Iran, Algeria, Iraq, Morocco, and Yemen.

DCB has already proved a successful tool for regional providers which can roll out their digital content services to multiple countries simultaneously in partnership with local telcos. And that time to market can be accelerated further using third party payment platforms that can negotiate DCB deals between both parties, while navigating often complex national regulations and processing payments on their behalf.

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