Arab Media Outlook 1st International Media Conference Riyadh 18 May 2009 Marcel Fenez Global Leader, Entertainment & Media PwC Agenda/Contents 1. Introducing the Arab Media Outlook 2. Key themes from this year‟s publication 3. Regional update – projections & case studies 4. Implications for the media, investors and governments Slide 2 1 Introducing the Arab Media Outlook Bringing PwC‟s global media thought leadership to the Middle East Slide 3 1 Introducing the Arab Media Outlook The Second Edition: Arab Media Outlook 2008-2012… Section One: Worldview Section Two: Regional update 12 countries: Bahrain, Egypt, Jordan, Kuwait, Lebanon, Morocco, Oman, Qatar, Saudi Arabia, Tunisia, the UAE and Yemen Section Three: Unlocking value – the technology challenge Copies can be obtained from www.pwc.com/me Slide 4 2 Key themes Powerful forces are influencing the media, entertainment & telecoms sectors worldwide….. • The digitisation of all content (voice, text, music, pictures, movies, maps etc) • The increasing importance of broadband infrastructure • Convergence of broadcasting and the internet • Delivery of digital content to mobile devices • The development of Web 2.0 and user-generated content • The rise of the “Net Generation” consumer • Measurement of trading currencies is even more critical • The impact of the global financial crisis 2 Key themes AMO 2008-2012 focuses in particular on two of these forces and their impact on media in the region 1. The development of Web 2.0 and associated rise of the rise of user generated content 2. The delivery of content to mobile devices with broadband access to the Internet Underpinning both of these developments are the ubiquitous digitisation of all forms of content The delivery of content to mobile devices opens up exciting new opportunities for investors across the region Unlocking value will require close collaboration across the content production and delivery value chain Slide 6 2 Key themes The development of Web 2.0 • Refers to changes in the ways that software developers and end-users use the internet • Web 2.0 services seek to leverage the viral nature of social networks to enable the distribution and creation of content relevant to a specific niche in a self sustaining manner • Lead to the development of social networks, blogs etc • This results in creation, posting and viewing of video of media marketplaces • Social networks have become important marketing channels and present competition for advertising dollars 2 Key themes The rise of the Net Generation Consumer • Consumers aged 15 to 25 who have grown up with the Internet and with mobile – around 20% of consumers in most of the region (and growing) • Addicted to mobile devices – expect content Anytime, Anywhere • Limited consumption of print media • Limited consumption of conventional broadcast media • Decreasing purchases of CD and DVDs • Increasingly multi-tasking • Increasingly snacking 2 Key themes All these developments require high quality, affordable broadband access , but broadband availability is limited in of countries by GDP per capita, much Arab the region……. mobile and broadband penetration of population 200% Size based on GDP per cap UAE Bahrain Mobile penetration of pop (%) 150% Qatar Saudi Arabia Oman 100% Kuwait Jordan Tunisia Morocco 50% Egypt Lebanon Yemen 0% 0% 2% 4% 6% 8% 10% 12% Broadband penetration of pop (%) Source: PwC analysis based on data from Point Topic (2008-2Q), Global Mobile (2008-2Q), IMF. 2 Key themes The Middle East does not yet have adequate broadband connectivity to the global Internet… • January 2008 - breaks in four key undersea cables serving the region: FLAG (Reliance Globalcom) Europe Asia cable, Falcon cable (x2) , SEA-ME-WE 4 cable • Severe disruption to internet access across the region - Only one terrestrial route left working • Highlighted weakness in regional internet infrastructure and vulnerability • New cable systems are being built - eg Du‟s investment in the new US$700m Europe India Gateway (EIG) consortium cable system • Further breaks in December 2008 (SEA-ME-WE 4, SEA-ME-WE 3 and FLAG FEA) 3 Regional update Despite the economic downturn, the five year outlook for media in the region is comparatively positive… • Mobile phones will emerge as the main route to the internet in most countries in the region with penetration rates greater than 100% in 8 of the 12 countries by 2010 • Despite the growth in Internet access, newspaper circulation will continue to grow – at between 1% and 2% a year for most countries in the region • Growth in advertising revenues will fall significantly in all the countries in 2009 but should pick up in second half 2010 - although not at the very high levels seen in 2007 and the first half of 2008. • In real terms advertising revenue growth in 2009 will be negative in most countries in the region 3 Regional update Implications for newspaper publishing • Consumers see breaking news as commodities – high value in a online or mobile • Consumers see high value in deep in-sight and analysis • Newspapers have earned readers trust and loyalty and can follow then online as a „trusted brand‟ • Use of video in on-line news sites • Focus on cost reduction • Advertisers spend on-line needs to be captured by attractive advertising packages for both print and on-line • Niche audiences require specialised content and need hyper-sites to address this 3 Regional update Regional case studies: Success stories from around the region……… HE Queen Rania’s Video Maktook.com Blog (Vlog) •Based in Amman, Jordan •Vlog on YouTube, started in •Originated as Maktoob.mail (2000) 2007 •Now developed into diverse •Promotes message of community of messaging and Wed 2.0 international understanding services •Talks directly to the camera •Claims to be most popular Arab •Invites viewers to contribute website content •Over 9m unique users in April 2008 (audited figure) Mobile TV: UAE, Qatar •Early commercial trials of SNRT, Morocco mobile TV on the 3G •Founded following networks deregulation in 2005 •Evaluating different •Pioneer in mobile TV technologies •Training agreement with •Licensing underway BBC World Service •Strong future potential 4 Implications Future success depends on strong commitment and close collaboration between all participants in the content creating and distribution value chain…… Priorities for traditional media: • Develop strategies for online and mobile content production and distribution • Review archive entertainment content and assess potential for mobile distribution • Repurpose content for distribution to mobile devices • Develop “snack TV” content for mobile-TV distribution • Develop best-practice online presences incorporating interactivity, RSS, video etc. • Commence the implementation of processes for audience measurement 4 Implications Commitment and collaboration…… Priorities for broadband network operators and investors: • Expand broadband coverage and quality • Increase the region‟s connectivity to the global internet • Build micro-payment payment platforms for digital content 4 Implications Commitment and collaboration…… Priorities for government policy makers and regulators: • Actively monitor global developments in content creation and distribution • Create the regulatory environment required to encourage broadband investment • License mobile-TV network operators • Initiate dialogues with the private sector on the “digital dividend” – the re-use of analogue TV spectrum • Develop practical training programs for Arabic media professionals at all levels 4 Implications And finally I leave you with some questions….. • Is your brand identity clear and focused on what differentiates it from competition? • Are print and new media run separately or as a core activity with different distribution? • Is the ad sales team integrated? • Are you suing on-line to expand core audience? • Will video journalism and print journalism co-exist? • What does you audience want and what will they pay for? • Can areas of non-differentiation be outsourced? • Are there any non core activities that can be downsized?.......and finally • What sort of business will you be running in 5 years?