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Analyst: Major SVoDs struggle in MENA

October 26, 2017

According to Max Signorelli, research analyst, home entertainment, IHS Markit, although Netflix and Amazon Prime Video launched subscription video services in the MENA region in 2016, lacklustre offerings mean the global giants will together comprise just 21 per cent of the market in 2017.

The Middle East and North Africa (MENA) region is currently a relatively small market for subscription video services, with just 1.3 million subscribers forecast by year-end 2017. But it is growing fast with a projected compound annual growth rate (CAGR) of 35 per cent from 2016 to 2021, according to IHS Markit’s report, A slow start for MENA subscription video.

Over 417 million people lived in MENA in 2016 across more than 84 million households, representing around 6 per cent of the global population. The region is home to an extreme mix of very affluent countries such as Qatar and Kuwait and those with much less disposable income such as Syria and Yemen. Similarly, North African markets are considerably different from those in the Middle East — and pay-TV, Internet and indeed subscription video penetration varies accordingly between them.

Wealth is perhaps the most fundamental point when it comes to a country’s affinity for a subscription video platform, but other socioeconomic factors such content preferences, payment and language have their impact as well. This then boils down to two main issues: accessibility and value.

Customers from wealthy Gulf States are much more able to afford expensive premium subscription packages that offer the most exclusive and highest quality content. In addition, they are more likely to purchase subscription video packages to access a greater variety of content as a complementary service to both free/pay TV and to other subscription services.

Such a collection of premium services is less likely to happen in MENA, according to Signorelli, where people are more likely to pirate their content than they are to pay for it. These factors, combined with low bankcard penetration, have resulted in subscription video services struggling to make a significant impact in the region.

Netflix and Amazon have grown substantially to become recognised household brands around the world — a direct result of both global ambition and vast arrays of high-quality shows and movies. The companies launched in the MENA region in 2016, but a lack of localisation resulted in a relatively weak entrance, leaving the giants with just a fifth of the market in 2017. Established players, too, are struggling to rack up subscribers despite some impressive integration practices with the local telecommunication companies.

The current market leaders in the MENA subscription video market are regional broadcaster MBC’s Shahid Plus and Starz Play. Local brands Icflix and Seevii, global incomers iflix and Viu, and pay-TV operator OSN’s WAVO are also competing for share.

In its current state, the MENA subscription video market is anticipated to grow relatively rapidly through 2021, but with only 4.2 million subscribers by then, it will still not stand out globally with just over 1 per cent of global standalone subscriptions.

No single player currently has the optimal portfolio to address the key issues of accessibility and value. A greater investment in local Arabic content as well as addressing the income disparities between MENA countries will be vitally important if subscription service providers are to effectively combat piracy and gain the upper hand.

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