Market Insight

Saudi Arabia to become OSN's largest market as Arabic focus increases

June 13, 2013

Constantinos Papavassilopoulos Constantinos Papavassilopoulos Principal Research Analyst, Service Providers & Platforms
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The pay TV market of the Kingdom of Saudi Arabia is set to become the most important single market for satellite pay TV operator Orbit Showtime Network (OSN) in the Middle East and North Africa (MENA) region. In an interview with Arab News, OSN chief executive officer David Butorac said that Saudi Arabia is the country which has seen the largest increase in numbers of OSN subscribers. He predicted that within the next few months Saudi Arabia will overtake the UAE as its largest single market.

OSN enjoyed a strong year in 2012, reporting 734,000 subscribers at the end of 2012, a year-on-year increase of 30 per cent. Revenues were $387m (€225m) in 2012, an estimated 34.63 per cent increase on 2011. While OSN does not provide a regional breakdown, IHS MENA Media and Telecoms Intelligence estimates that in Saudi Arabia, OSN's subscriber base was up 24.82 per cent to 176,000 at Q4 2012.

The high rate of growth, not only in Saudi Arabia but across the MENA countries, is primarily based on the expansion of Arabic content offering from the part of the operator. OSN's strategy is to engage more with a premium Arabic content offering. Some 93 per cent of OSN's new customers are Arabic speakers and around 84 per cent of the operator's entire client base speaks Arabic. OSN planning to increase the awareness of its brand and products through a marketing campaign that will focus on magazines and newspapers.

OSN was formed in August 2009 from the merger of Showtime and Orbit. Initially the operator's main target group was the large Western expat communy in the Gulf States (primarily the UAE and Qatar) offering the latest Hollywood movies and TV series. OSN increased its investment in Arabic content in November 2011, with the launch of OSN Yahala, its first Arabic-language channel. This move proved to be highly beneficial to OSN as Yahala is now the second most popular channel among its more than 100 channels. OSN has created two more Arabic-language channels, OSN Yahala Shabab (targeting the Egyptian market) and OSN Yahala Arabella.

Another factor which helps to explain this growth is that OSN is investing heavily into building its brand and expanding its presence in the MENA countries. Malls, consumer electronics shops and hypermarkets are primary targets for to ensure the operator's presence and visibility to consumers in markets like Saudi Arabia, UAE, Qatar, Kuwait and Egypt. OSN is aggressively spreading new retail touch points across MENA that bring the operator closer to its subscribers. Currently, OSN has created and manages over 425 touch points all over the Arab countries and it is characteristic of that trend that six new retail showrooms have opened the last 18 months in Kuwait alone. Saudi Arabia is a key market for OSN and the operator plans to expand its presence in this country (by creating more showrooms) by 20 per cent during 2013. Most of OSN's showrooms have a home theatre area, as well as specially designed demo spaces where OSN's new products like the hybrid internet-enabled 3D-HD set-top box are displayed.

According to IHS MENA data, UAE customers totalled 213,000 at the end of 2012. Since the rate of growth is much higher in Saudi Arabia (25 per cent from 2011 compared 17 per cent in the UAE), Saudi Arabia is expected to overtake UAE either by the end of 2013 or at the beginning of 2014. While the Gulf States will continue in the forthcoming years to provide the bulk of OSN subscribers, the Dubai-based operator is striving to expand its appeal in other areas like the French-speaking Maghreb countries, Tunisia, Algeria and Morocco. OSN is in talks with French channels in order to ink exclusive deals and carry those channels in OSN packages. OSN's focus on these markets is indicative of the existence of opportunities to expand its customer base and for the high growth potential for pay TV in the Maghreb. Tunisia, Algeria and Morocco have a combined 19m TV households with meagre pay TV penetration (less than four per cent, according to IHS MENA).

Organization
OSN
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