Author:

Samer MajzoubCEO, Elev8 Consultancy

OTT Video Success Path in MENA

CVCV

How can SVOD be more relevant and create long-term value

Publication date: September 2021

CVCV

The hype level has been increasing dramatically around the growth of OTT Videos as a global trend and consequently the proliferation of the cord-cutting phenomena, i.e., the consumer behavior of “cutting” pay-tv services at home which started in the US in the last decade and spread across other markets notably the MENA region and UAE.

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Statistics are phenomenal, SVOD subscribers reached a little more than 1 Billion subscriptions globally in 2021-Q1 and expected to grow by 50% by 2026. We have seen in less than 2 years the entry in the US market of Disney+ and Apple TV+, Warner Media and NBC Universal launched HBO Max and Peacock and recently Viacom CBS launched Paramount+, and Discovery with Discovery+. Many are rolling out globally and are expected to enter the Middle East markets in the future challenging the existing regional players in an already crowded video streaming market.

The emergence of this new digital media reality created tremendous pressure on the content owners and big studios, forcing them out of their comfort zone to break up with their traditional way of doing business. Many started to get into the race of launching their DTC streaming platforms, with one objective in mind: Stop Netflix, but realizing later than copying the ramping up Netflix model is a strategic decision to survive and grow in this new emerging media world.

In parallel to this OTT video hype, a feeling is emerging that could jeopardize this media revolution. Viewers are overwhelmed with all ofthe new options available; the Horowitz survey finds that 50% of TV content viewers feel that there are too many streaming services and are confused and struggling to keep connected to their favorite content.

Success Path Framework

In this paper we will understand the SVOD situation in the MENA region, discuss strategic tips and the framework path to success for existing and new SVOD streaming players in MENA. How they need to adapt their strategy to be able to grow, compete, monetize their assets better and combat emerging streaming fragmentation.

SVOD is now the new norm in the TV/Video industry becoming a preferred way for customers to consume their content lead by the emergence of Netflix and the disruption it commanded in the entertainment landscape and the overall media value chain through its Direct to Consumer (D2C) model.

INTRODUCTION

OTT Video Success Path in MENA: How can SVOD be more relevant and create long-term value

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Figure 1:Gross SVOD & Net SVOD Subs (Millions)

The streaming war is inevitable!Emerging Challenge

This aggressive market penetration strategy is coming with an increasing threat. Indeed, High acquisition cost and low customer lifetime value in a landscape dominated by little content differentiation and brand loyalty will further dilute the market. That said, looking for different business models and new strategic levers has become the primary challenge to be able to monetize content and develop a long-term path for healthy growth.

SVOD companies in the region should make the above challenges their first consideration while developing a long-term strategy for healthy growth

Like all other parts of the world, in MENA the number of SVOD OTT players is growing. Regional OTTs have managed creating a big success story so far in leading the battle of subscriber share over their international counterparts, and enjoyed a phenomenal increase in their number of subs, accelerated as of 2020 by the pandemic: We have seen subscribers more than doubling for Starzplayand Shahid VIP, 2020 was also marked by the strategic decision of the regional pay TV OSN to launch their SVOD service with OSN streaming app.

Current Strategy

The growth strategy deployed by regional SVOD players in the last 2 years has been revolving commonly around an aggressive subscribers’ acquisition strategy across 3 main pillars: 1- Customer price affordability vs leading international players; 2- Telco partnerships across different market of the region with hard bundling; and 3- an Increased investment in premium local and global content, and an early humble original production.

SVOD MENA subscribers across 13 Arabic countries (covering GCC, Levant and North Africa) grew by 77% YoY and revenue by 55% YoY in 2020 to reach $350M, with Saudi Arabia and UAE capturing nearly 60% of total subscriptions. This could be only the beginning as the Arab market potential is huge and is expected to grow at CAGR of 12% by 2026, reaching 15 million subscribers up from 8.61M forecasted in 2021. Competition will further intensify as more regional and international OTT video platforms are expected to enter the market with more variety of choice to customers, but also more market fragmentation, making a streaming war inevitable in the region.

What is clear is that direct relationship with customers is a global opportunity and streaming is slowly dominating video viewing across the region; However, is the mere fact of going directly to consumers and launching its own branded OTT platform with an acquired general content enough for competing in the fragmented market?

Situation in the MENA Region

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Figure 2:Forecast 15M SVOD Subs by 2026 in the Arab World

Figure 3:Regional Players leading in SVOD Market Share

2020 Growth Revenues: 55% YoY

Subscrption: 77% YoY

OTT Video Success Path in MENA: How can SVOD be more relevant and create long-term value

*MENA region covered: 13 Arabic countries in Levant, GCC and North Africa

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We will describe in more details how to create value to customers by being relevant across different strategic levers. SVOD companies in the MENA markets need to employ a variety of strategies with informed data around the following identified Success Path Framework :

u Occupy a specific content territory for strategic differentiation around thematic content to avoid content saturation

u Offer a premium user app experience that adapts to consumer emerging viewing multi-screen habits with a strong content discovery techniques

u Be present across the preferred consumer streaming platforms to optimize target segment reach beyond D2C through leveraging strength of connected devices and seamless on-boarding strategy

u Win the consumer screen time battle by understanding consumer free time behavior across all verticals within the overall Entertainment landscape

u Challenge existing barrier of the SVOD business model for content monetization in view of the changing viewership habits

Be Relevant or Die!

Win the consumer “share of time”

Direct-to-Consumer is not enough

Create value to customersfree time

SVOD and OTT streaming platforms need to think of a strategy beyond the “D2C box” by coping with the ever-changing consumers’ habits, lifestyle and entertainment needs. The key success factors to be competitive and stay in the game for the following years is to understand the bigger competitive entertainment landscape and trend to be able to capture higher share of consumer free time. In very simple words D2C is not enough and the name of the game is to be relevant to consumer time.

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OTT Video Success Path in MENA: How can SVOD be more relevant and create long-term value

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A non-differentiation Content strategyleads to content saturation

One fits all tastes approachwill further dilute the market

Avoid content saturation, market dilution and streaming fatigue

Content is not Always King!

Research in the US and Europe show that content is still the main factor influencing consumer’s choice of video service – this includes the availability of specific shows, content catalogue or the original programming available. How can this approach be valuable for a customer acquisition and retention strategy in this part of the world?

SVOD players in the region are all well-aware that content relevance is key for growth and for most of them either exclusive content acquisition or international partnerships was the main lever for penetrating the markets and their main strategy revolves around an extended content library in drama. However, in a more cluttered and competitive environment where most players are offering little differentiated product in entertainment to a more fragmented audience, a content strategy is less likely to be relevant by solely relying on acquiring a content library that is believed to fit all tastes and genres with less consideration about the genre preference of the audience that works best for the GCC or Arab market.

If the above market scenario is to continue in the longer term, the risk is content saturation from one side and making it for SVOD not to be found by potential customers bombarded with different content provider, and the only winner will be the player with the deepest pocket or voice, like international players with their established big brands Disney+ that will be a top-of-mind winner.

Occupy your content genre territory for healthy market growthReality is that preferred content genres differ by age segments, nationality groups and many other attributes. Research shows for instance that news and non-fiction content is popular among senior age brackets and has the least appeal among youngsters who score highest on the anime and Science fiction content, contrary to older aging tiers.

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OTT Video Success Path in MENA: How can SVOD be more relevant and create long-term value

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Content genre differentiation Streaming localized sport is an example of competitve relevance: Starzplay inked the deal with Abu Dhabi Media to stream exclusively Asian Football Confederation matches

In this later market scenario where positioning territories are well defined around sizable content genre key to the segment preference, we will more likely expect to see a valuable and healthy market growth away from price war that protects the bottom-line value. However, even in the above positioning attempts from regional players, we are yet to see in a MENA growing streaming service positioned as a niche or thematic players, a strategy that contributes better to SVOD’s content monetization.

Content is not Always King!On a horizontal positioning scale starting with international drama content on one side vs more niche content on the other edge, we notice that many existing regional OTT SVOD content proposition are still skewed towards the first edge. SVOD players should seize the opportunity of creating a competitive advantage around content genre differentiation relevant to the preference of the local targeted market –to name a few, Arabic drama, Family content, anime, Reality and Non-scripted content are competitive fields regional OTTs should better tab into. In this context, we have seen a momentum from Starzplay by leading the way in differentiating and securing its position with the highest number of deals in the region, tailoring products like reality TV (through Discovery+), also positioning itself well as “home of anime” and bringing relevant regional sports (like UFC and Asian Football World cup 2022 qualifying matches), while Shahid VIP has fully occupied the territory in the Arabic drama content.

Niche genre positioning Opportunity to stand out from the crowd: Starzplay bringing “Demon Slayer”, the series based on the popular manga and top japan grossing film in 2020

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OTT Video Success Path in MENA: How can SVOD be more relevant and create long-term value

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Enhaced User ExperienceKey to customer retention

Building a strong recommendation engineKey to content discovery

Premium User Experience

Offer seamless app experience and use AI for content discoveryHaving a relevant content proposition is one great pillar, but with an inevitable streaming war in the region, new and international entrants in the MENA especially global players with deep pockets will be working on an aggressive D2C acquisition strategy. In this context the established regional OTTs should turn more on the defensive side intensifying their retention strategy and engaging customers through their CLM activation plans and creating more value to their customers throughout their streaming journey.

Churn has become a big issue in the global market, SVOD streamers are witnessing higher growth in churn rates more than increase in subscriber growth rates.Regional SVOD players should keep investing in the experience to keep the value of their content by optimizing their valuable content discovery to their customers and better showcasing their existing content catalogue via robust recommendation engines building on AI and ML and in offering better user experiences on the different platforms they support. In this context, prominent players like OSN and Shahid VIP have seen YoY growth of more than 500% as both have undergone recently a fresh revamp and upgrade of their user app, Shahid VIP crossed the 1Million subs in no time after its revamp from Shahid Plus in 2020.

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New Apps with optimized experienceOSN replaced their old SVOD Wavo product with OSN streaming, while Shahid VIP replaced Shahid Plus. Both new apps leverage advanced content discovery and customer recommendation tools.

OTT Video Success Path in MENA: How can SVOD be more relevant and create long-term value

Equally important for an acquisition strategy is to understand the streaming platform landscape i.e., the methods that customers are using to stream their preferred videos. To simplify, these can be a connected TV, streaming box or a stick, PC, mobile or a playing console, ...etc. We are witnessing a big rise in connected TV (CTV) becoming a driving force in overall OTT subscription. As per Park Associates 30% of new SVOD subscription in US in Q1-2021 are driven through connected platforms. In MENA, we are seeing lately some prominent SVOD regional players starting to integrate their platform with the main IPTV players (UAE and Saudi) which is a good start, but this integration is yet to be seamless and the need of having a sound partnership strategy with other connected TV device is becoming more crucial for the growth strategy in the long run .

The adaptability to this changing viewership behavior is key and providing a seamless user experience is a determinant strategic pillar to stay relevant to core segments; whether it is on TV, mobile or PC , regional OTTs should make sure that their content can be watched seamlessly on all screen formats to keep up with the dymanic lifestyle pace of their audience in the need of consuming their content either on a mobile when they are out on the go or on at home on more static big screens and having an omnichannel strategy for support.

Adaptability to Viewing Behavior

Be present accross all streaming devices and offer an Ominchannel support Based on the International Media Consumption Report 2021 by YouGov, 35 percent of UAE residents watched a streaming service on a TV set in a week, viewing experiences are becoming an integral part of everyday lives, leading to new screen technology preferences being influenced by size and portability. The multiscreen viewing behavior where consumers use different screen format to watch their preferred video is on the rise specially among the young segments. As per recent statistics from Park Associate in the US, more than 80% of millennials and Gen Z report that they view video on more than one platform at least monthly.

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30% of SVOD subs in US originated from CTVCTV a main lever for growth beyond D2C need to be emphasized better among regional players

OTT Video Success Path in MENA: How can SVOD be more relevant and create long-term value

Zooming out within the overall entertainment landscape we see that competing on the “consumer free time” is heating up more as video content players are not alone and they are challenged by other entertainment especially video games. This threat is even more pronounced among the youngsters and particularly millennials, who spend a third of their free time playing video games. International OTT video companies are realizing the growing competition from the other entertainment verticals. The answer here is either to compete or to partner, and many international SVOD companies stated to evolve their long-term strategy accordingly in the attempt to occupy the highest share of time among their audience by tabbing into the Video gaming market. We have seen recently Netflix moving into gaming with the objective of acquiring more customers by making its overall subscription proposition more valuable vs its direct competition like Disney+, HBO Max. Netflix views gaming as another content category for them and it is believed that this serves the more strategical objective to lead in the battle of consumer share of free time. We have also seen other OTT streaming players like Amazon or Apple acquiring or launching their own platforms (i.e., Twitch and Apple Arcade).

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Video Gaming: The new SVOD Oil?Win the battle of screen time: Compete or Partner with other media verticals

In the MENA markets, we have seen recently some partnership in this direction with the recent OSN partnership with PUBG mobile. This could be a good start but for this “entertainment consolidation” to be more strategic, regional SVODs should create real value to their main target audience (existing and potential) by having a clear gaming bundled differentiated proposition as part of their content strategy.

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Video Game could increase value and engagement for SVODsNetflix seeks to extend its customers’ relationships with movies they love into the game world, starting with its IP Stranger Things. A strategy believed to help customers spend more time on streaming services capturing from other games they might play

OTT Video Success Path in MENA: How can SVOD be more relevant and create long-term value

With the increasing market saturation, churn has become one of the main concerns of SVOD services globally and cancelling an SVOD service has never been easier compared to Pay TV subscription. In this context, we see different customers behavior from hooping around the different platform or simply cancelling out their service from the saturation of the number of subscription. As per Park associates, we see very high concurrent SVOD subscriptions in the US that can reach a mean average of more than 6 per household and it found that in in Q1 2021, the average OTT subscription in US is roughly 2.5 years and correlates with age - Older consumers were found to subscribe to fewer services but keep them for a longer period. By contrast, younger consumers may subscribe to a larger number of services but are more likely to churn through them. That said, the similar crowded landscape in MENA will result in overwhelmed consumers in the region will become more aware about their “self-created bundle” of SVOD services and the composition of the streaming service bundle they consume on a monthly basis could become more “seasonal”, with consumers tracking specif show content they want to watch and going in and out of services based on that.

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Customers are self-budnling SVOD.Lead to customer hoping among services

Multiple Subscription is complementary.Opportunity for service aggregation business model

New Monetization Models?

On a positive note, data shows that customers adding new additional OTT services to their self-bundle is mainly for complementary content reasons rather than

substitutional. This should open up new realities in the media ecosystem among existing and new OTT Video players for partnering among themselves through big bundling opportunities

as well as the emergence of SVOD content aggregator platforms offering a universal search feature to help customers navigate among their bundled subscription.

SVOD subscription saturationLeads to Customers churning

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Aggregate & bundle complementary content… an opportunity yet to be well explored

SVOD services bundling potential

OTT Video Success Path in MENA: How can SVOD be more relevant and create long-term value

As highlighted above there is a limit on the number ofsubscription services that customers are willing to pay, and wesee the new alternatives where customers are consuming theircontent on Ad-supported Video on Demand services (AVOD)slowly gaining in popularity globally across the US and othermarkets as of 2020. This reality is simply fueled by cost ascustomers want to save money. The streaming war 2021 studysuggested that consumers are very open to advertising in thestreaming space—perhaps even more so than they were in thetraditional, linear space as there was more tolerance whenwatching content that is available for free or at low costespecially the more customised, personalised advertisingexperience they are getting through streaming. Toaccommodate, we have seen also big players like HBO Max andParamount+ moving into new tiering subscription models withan ad-supported tier by providing $5 discount on thesubscription fee.All regional SVOD providers need to monetize their content, it isa matter of survival for all media companies in this newecosystem. In this context AVOD has been increasingly seen as ashelter for a low-budget content consumption and it canbecome a strategic asset relevant in a lot of MENA markets withlow per capita income to increase penetration by reaching thebroader mass market. Adopting a new service tiering strategy byintroducing ad-supported packages could be seen as short-termtrade off that will lead to a winning strategy for acquiring morecustomers and generating higher ARPU over time.That said, existing and new OTT video entrants shouldunderstand well the nature of the market, and its viewing trendsby considering a hybrid business model that should be in linewith consumer needs and desires for ultimate marketpenetration.

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Customers are shifting to AVODfor cost related reasons

Customers are open to advertisng which offers more personalized experience than traditional linear

Hybrid StrategyAVOD + SVODrelevant for content monetization

Final Words• Regional SVOD OTTs in MENA have started their path with a strong subscriber growth momentum and

are successfully leading the race over international players in terms of volume market share. Although thisacquisition strategy was key for generating higher revenue and increase in customer base in the last 2years, however this growth proved to be costly, and is yet to be profitable. The market in the MENA regioncould be facing an inevitable streaming war, with the expected entrance of more OTT video players in thefuture, exerting more threats on existing players with further market fragmentation and increasing churn.

• That said, SVOD regional players should work on being continuously relevant through creating a long-term binding customer relation by deploying a strategic monetization path: It is crucial to differentiatetheir content offering with a clear positioning, adapt to viewing experience and behavior, understandbetter customer screen time and create more value to their customers by extending in adjacententertainment verticals, and lastly challenge their existing SVOD model by adopting new business models(AVOD for instance) that could resonate much better with viewers across the MENA markets and lead theway to bigger opportunity in term of value and volume growth.

10New Monetization Models?Ad-supported model… a long-term opportunity for growth in MENA markets

OTT Video Success Path in MENA: How can SVOD be more relevant and create long-term value

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References

Park Associate, Research: The evolving Digital media Landscape, Q3 2021, https://online.flippingbook.com/view/719440768/, (accessed on 26/8/2021)

Simon Murray, Principal Analyst, Digital TV Research: Digital TV News, Global SVOD subscriptions to grow to 1.5 billion by 2026, Digital TV News, May 10, 2021,https://www.digitaltvnews.net/?p=36398, (accessed on 27/8/2021)

Horowitz, Research: State of Pay TV, OTT & SVOD 2021, U.S. consumers feeling pain of streaming service fragmentation, Digital TV News, June 23, 2021,https://www.digitaltvnews.net/?p=36624, (accessed on 27/8/2021)

Max Signorelli, Sr. Analyst, TBI Tech & Analysis: Digging into the MENA OTT boom, TBI, June 14, 2021,https://tbivision.com/2021/06/14/tbi-tech-analysis-digging-into-the-mena-ott-boom/, (accessed on 30/8/2021)

Simon Murray, Principal Analyst, Digital TV Research: 15 million Arabic SVOD subscribers by 2026, Digital TV News, August 31, 2021, https://www.digitaltvnews.net/?p=37006, (accessed on 1/9/2021)

Karishma Hingorani, Demon Slayer now available for streaming on STARZPLAY, digitalStudiome.com,August 19, 2021,https://www.digitalstudiome.com/broadcast/delivery-transmission/demon-slayer-now-streaming-on-starzplay/, (accessed on 1/9/2021)

Reporter, STARZPLAY to stream AFC matches in UAE, Advanced Television, August 31, 2021,https://advanced-television.com/2021/08/31/starzplay-to-stream-afc-matches-in-uae/, (accessed on 1/9/2021)

Staff Reporter, OSN collaborates with PUBG Mobile, Broadcast Pro Middle East, June 22, 2021,https://www.broadcastprome.com/news/osn-collaborates-with-pubg-mobile/, (accessed on 1/9/2021)

Press Release, U.S. Households With a Top SVOD Service Steady at 78%, LRG, August 31, 2021,https://www.leichtmanresearch.com/u-s-households-with-a-top-svod-service-steady-at-78/, (accessed on 2/9/2021)

Colin Dixon, The real reason Netflix is introducing a games service, nScreenMedia, August 2, 2021, https://nscreenmedia.com/netflixs-game-service/, (accessed on 2/9/2021)

Colin Dixon, Netflix remains unapologetically a one-revenue-trick company, nScreenMedia, July 20, 2021,https://nscreenmedia.com/netflix-q2-2021/, (accessed on 2/9/2021)

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OTT Video Success Path in MENA: How can SVOD be more relevant and create long-term value