Taking the show forward

In a candid interview with BroadcastPro Middle East, OSN CEO Marc-Antoine d’Halluin discusses the impact of shutting down the pay TV network’s Bahrain facility and malpractices in the Middle East’s television market

A year ago during the merger, you mentioned that it was an advantage to have two broadcast facilities. Why did you decide to close your Bahrain operations and move to Dubai now?

At the time of the merger a year ago, our priority was to address the customer-facing services including the number of channels that were made available to the broadest number of our existing subscriber base and to new subscribers. As soon as we announced the merger in August last year, we offered a section of channels to our subscribers on seven degrees Nilesat. We started the process of upgrading and migrating our existing subscribers while bringing in new subs. We were also very fast by international criteria to re-launch our channels under the OSN brand and launch HD channels. Today, we have nine HD channels. In addition to this, we have launched a new generation of HD decoder boxes and started rolling them out to our subscribers. We have installed more than 70,000 boxes so far and will swap the rest by the end of the year. We are currently moving more than 25,000 boxes a month. It’s a massive effort as you can imagine.

We recognised then that we could not process every project at the very same time. Therefore, we decided to postpone to a later time the question of whether we should keep one or two broadcast facilities. We used outside consultants to help us arrive at a decision and about a month ago, our board approved the decision to keep our main broadcast headquarters in Dubai.

Going back to your question, there was a consideration to retain both broadcast centres but we ruled it out as it was too costly. A merger is also designed to enable cost savings and we felt that one site would be a lot more efficient than two. The question was always which one.

What percentage of people will be sacrificed in the process?

I can’t say at the moment. This move will impact our people in Bahrain and Dubai. Many employees working in our Bahrain operations will relocate to Dubai.

We know for sure that we will have to reduce the number of people working in OSN. There is some duplication between the two broadcast centres. We will retain the best of employees inside OSN. The selection process for those staying will be based on who is the best for the job. We are in the process of planning for this and this will happen over the next few months.

Will you retain a small portion of your operations in Bahrain?

We will retain a regional sales office in Bahrain to service our customer base there. It is an important market for us and we expect to grow further in Bahrain. It is not impossible that we keep some broadcast activity in Bahrain even though the idea is not fully firmed up at this point. It looks likely that we will retain a small portion of our operations.

What will happen to Orbit’s sister company that has been creating the Arabic productions for OSN?

The programmes on the Arabic channels that we carry on OSN are produced by MediaGate. It operates out of Beirut and Cairo and these channels are mostly produced in these two cities although they are assembled in Bahrain. Note that they are not produced, only assembled in Bahrain. The question is whether we will continue assembling them in Bahrain. These channels do not belong to OSN but to MediaGate. We are reviewing our options with these channels but we have not made any decisions on this front yet.

What will happen to your technical facility you have in Bahrain?

We are still reviewing our options right now. It is too early to say whether we will keep some of this active.

There were rumours that you had partnered with Al Jazeera to allow your subscribers to watch the World Cup on the OSN bouquet?

This is not true. The Al Jazeera channels are not part of the OSN package but the boxes we have deployed have two slots and can accommodate a second card should we enter into an agreement with another broadcaster.

How are you repositioning OSN in the Middle East market?

Our uniqueness lies in the fact that we carry movies exclusively from every single Hollywood studio. There is not one single movie or series that does not make it first to OSN and it’s usually not at least until 18 months to two years that you can watch these on free-to-air. We are also the biggest provider of HD content in the region. A core part of our strategy is to provide on-demand HD programmes. We are launching what we call the showbox HD, which is the very best HD box in the region. We will begin pushing into the box OSN on demand, what we call push subscriber video on demand (SVOD) offer. Our premium subscribers will have free access to a large selection of movies that will be constantly refreshed and replaced with new movies and series.

How can subscribers access this service?

They just need to have the new HD PVR called Show Box. We have more than 30,000 of these in the market right now.

What are your 3D plans?

From a business perspective, 3D is an opportunity. We will also push 3D into our Showbox HD which means those who have a 3D set with glasses will be able to watch 3D content by selecting the movie and playing it.

Recently, you decried anti-competitive practices in the TV advertising market. What are the issues here?

There are several issues that need to be addressed from a TV advertising perspective. When there is one dominant player that has a critical mass, they qualify to be a de facto monopoly. In any sector where you have a monopoly, you also see a significant distortion in the market.

Secondly, there are some practices below the radar in the ad market that are not acceptable in international markets. In France, for instance, a law was passed about 16 years ago whereby the rules of the game between the middle man (the agency); their clients (the advertiser) and the broadcaster is transparent so that the broadcaster has access to the invoice which is being sent by the middle man to the advertiser. This ensures that the middle man is not tempted to take a larger cut of the pie for himself than he is entitled to. However, malpractices by the middle men are widely prevalent in the Middle East.

Media buying agencies ideally keep about 10 t 15% of the media buying project of the advertiser so that 90 or 85% reaches the broadcaster. This is the normal international practice. But if the cut goes up because there is no transparency to 30, 50 and in some cases, even upto 80%, then there is clearly a problem in the market and we see this here often. A further disruption in this market is the lack of transparent means to measure audiences. Between a dominant player, anti-competitive practices and the lack of a reliable audience measurement tool based on people metre, you have the explanation of why you have a dysfunctional advertising market in the Middle East.

What is the chief hurdle to putting in place a people metre?

We have a pan regional market in the Arab world thanks to satellite technology. Therefore, deploying this requires some cross border decisions. There are parties in the industry, however, who clearly do not wish to have a people metre in place despite their claims that they would love to have it. These parties play a leading role in disrupting the process by simply making the issue more complex and playing up the role of country differences.

Do you think a people metre can easily be deployed?

With a bit of good will and some articulated pressure from two or three governments, it would take no more than two or three weeks to deploy.

One of the biggest issues in this region has been piracy. What is the modus operandi for pirates here?

The main form of pay TV piracy in the region happens through control word sharing. Pay TV works on encrypted codes. The codes used to encrypt our channels are being stolen from us today and are being streamed on the internet by criminal organisations through hundreds of servers across the region. These servers are effectively connected to millions of dream boxes which are the most popularly used decoder boxes by pirates. When the box is connected through the internet through a pirated server, they get a stream of our encryption codes and from here, they decrypt our channels. This is a very sophisticated form of piracy.

How are you fighting it?

We have identified very clearly how to fight it and it took a company like OSN to bring in a new generation of decoder boxes  that support HD and even, 3D streams while also countering piracy. By the end of the year, we will have swapped all the old boxes with the new and then, we will close the old platform entirely. We want to be fair to our legitimate subs and ensure that each one of them has a legitimate box before we switch off the legacy encryption codes that are being pirated today.

You have always maintained that it’s easier to migrate illegal subs to pay TV than FTA viewers. Why?

FTA viewers do not pay to view anyway so it’s difficult to get them on board. There is a greater chance that people who pay pirated organisations to watch our channels illegally will gradually become legitimate subscribers if this is the only way for them to access our channels. Many of them are used to accessing our channels without paying the right prices although they are paying the pirate organisations. In a few months, the only way to watch our channels will be to subscribe to them in a legitimate way.

What percentage of illegitimate subs do you expect will become legitimate?

That is anybody’s guess but we think at least 30% should become legitimate. There are more than a million people accessing our content illegitimately so it’s a massive number for us to get back on board.