[Satellite News 02-24-11] In 2009, Showtime Arabia and Orbit merged and created a join platform, OSN, now the dominant pay-TV service in the Middle East.
    Under the direction of David Butorac, who was named CEO of OSN in October, the company is aiming to expand its pay-TV footprint across many different markets in the Middle East and Africa in the face of a growing piracy problem. Butorac has experience in dealing with piracy from his former roles at Astro in Malaysia and Star Television in Hong Kong and spoke with Satellite News about the challenges he faces at OSN as well as the platform’s demands for new capacity to drive its HD and 3-D TV offerings.

Satellite News: What lessons have you learned from your roles at Astro and Star TV that you think will help you conquer challenges at OSN?

Butorac: There are many similarities with the markets I have worked in. In particular, you can compare the OSN situation to Malaysia, where we were transmitting to a predominantly Muslim market. With that, we had to understand the cultural sensitivities of broadcast content, particularly in bringing in cultural values from outside the region. We were a multiethnic, multi-lingual broadcaster, but the key difference is that Malaysia was a single national market, and here, we operate cross border as far west to countries like Morocco, all the way to the Gulf States as well as Iraq and Iran. It is a complex market, but there is a lot of growth potential here. Astro really took off in 2002 and then was floated in 2003. Pay-TV in Asia has really come of age, just like it did in the United Kingdom and Europe around 15 years ago and in the United States 25 years ago. Now is the time for this region, and I am pretty excited being able to lead the biggest platform in the region to be able to achieve similar levels of growth.

Satellite News: What are your plans to develop OSN’s HD services?

Butorac: HD in this market will see the same drivers that have been present in other markets. At the moment, the only place you can watch HD content is through OSN. Currently, there are around 120,000 flat-screen HD sets being sold every month in the region. We see HD as being a significant driver. We currently offer eight HD channels. We will be significantly adding to that during the coming year, with many high profile channel launches, some we are creating ourselves and some we are aggregating. I anticipate we will more than double our HD offering in the next 12 months and, over time, I can see us transitioning a lot of our SD channels into HD channels. Many of our third-party channel providers offer HD versions of the SD channels, and I see in the next 12 months that we will more than double our HD offer.
    There also is a huge take-up of reception equipment in the region. The numbers of our subscribers taking HD services are significantly growing and in line with our sales of reception equipment. We certainly see it as a significant value proposition for the platform. The percentage of subscribers will increase significantly. Over the last 12 months, we have swapped out our box base to secure our [conditional access] system, so our entire base is now HD-ready. The capacity is there for all of our subscribers to watch HD content.

Satellite News: How has your 3-D platform developed since you launched it in December?

Butorac: As the reception equipment starts to grow, we will look to expand the offering. Currently, we showcase on our on-demand service and 3-D movies when they are available and we will continue to do so. There is no one else in the market offering broadcast 3-D, so once again, this places us at the innovative end of the market. It will remain a niche product in the short-term. However, I am relatively cautious in terms of potential take-up. I think if you look at the consumer experience, it will be niche in the short-term. It depends on how fast the penetration grow, as well as the growth of the reception equipment market. I don’t see huge swathes of our subscriber base moving over to 3-D. There is not huge amount of content available and it is pretty complex market, but we certainly see it as important.

Satellite News: Will you need to acquire more satellite capacity to drive OSN’s growth?

Butorac: We don’t need capacity at the moment. We are proud to be one of the landmark tenants on Nilesat, and the 7 degrees slot. We have a number of transponders with them. Once we launch MPEG-4, we will be able to maximize our capacity still further. We are certainly pretty connected to this slot. The joy of advanced compression technologies is that we will be in position to launch MPEG-4 compression into our base in the coming months. This will allow us to maximize the efficiency of our existing transponder capacity. I can’t see us using another orbital slot. In fact, the merger of Orbit and Showtime saw us shut down one of the orbital slots to concentrate on the 7 degrees slot. However, we would likely look for capacity in the same orbital position. I think the Nilesat 7 degrees slot has become the HotBird of this region, and we are pretty proud to have a significant position.

Satellite News: When will you transition OSN to MPEG-4?

Butorac: The benefit of having a brand new box base is that we have a full suite of boxes that are fully capable of receiving MPEG-2 or MPEG-4. I anticipate we will launch MPEG-4 services in the first half of 2011.

Satellite News: Have you developed any new initiatives to deliver content?

Butorac: We will be launching iPad and Iphone applications in the short term, but a lot also depends on the rights that we have. We anticipate being able to aggregate elements of our service onto other devices. The philosophy that we follow is that we want to use the expansion of digital media formats as a way of expanding our brand so that we can interface with our customer more than over the television. If we can aggregate to them on other digital media formats, we can interface with them at other parts of the day, where ordinarily they would not have access to a TV.
    We certainly are very excited about the growth of digital media devices. I am relatively agnostic. Our primary service is DTH. We have IP and cable services, but we will aggregate on any devices that will help us build a stronger relationship with our customers.

Satellite News: How do you see the platform developing in the Middle East pay-TV landscape in the long-term?

Butorac: We expect to see a significant upswing in our subscriber base in 2011, predicated on the fact that we have secured the reception of our services. We will see a rapidly expanding take-up of our services. In 12 months time, you will see the launch of some significant new services, both at a content level as well as services. The best example I could give is that we will launch a product in the coming months that is specific to Saudi Arabia and will allow the movie studios to showcase cinema releases over the screen the same time it is released in cinemas throughout the world. As you are aware, there is no cinema distribution in Saudi Arabia and we will launch a product, SaudiCinema, which will allow us to put movies on screens the same time they are released to cinema.