Cairo, Egypt at night. Photo: Guillén Pérez (Flickr)

[Via Satellite 04-07-2015] High Definition (HD) channels are giving pay-TV operators in the Middle East a growing competitive edge in a market largely dominated by Free-to-Air (FTA) broadcasts, according Arab Advisors Group. The research firm identified HD channels as one of the most important factors fueling satellite broadcasting throughout the region.

According to Arab Advisor’s latest report, 18 percent of channels reaching the Arab world are in HD. The study, which covered Arabsat, Es’hailsat, Eutelsat, Gulfsat, Nilesat, Noorsat, and Yahlive, found the number of HD channels carried as of March 2015 reached 195, up considerably from 134 channels in February 2014.

“HD has triggered a more engaging experience for viewers across the region, and it also represents a competitive edge for channels that introduce it at the beginning. Moreover, the satellite broadcasting landscape is also witnessing higher levels of adoption for pay-TV services, which come hand in hand with a number of additional features that encourage the viewing experience such as [Video on Demand] VOD, storage capacity, Dolby digital plus, and control of Live TV,” Mohammed Al Shawwa, research manager at Arab Advisors, told Via Satellite.

Arab Advisors expects pay-TV adoption to continue to increase across the Middle East in coming years. Al Shawwa attributed this growth to new providers such as MyHD, and the advantage of more features that come with pay TV compared to FTA channels. Furthermore, pay-TV operators are often more capable of affording HD options for their customers.

“The relatively high cost of broadcast in HD makes it somewhat more feasible for pay-TV channels to adopt HD broadcast than their free counterparts,” added Al Shawwa. “The availability of a larger percentage of HD channels through pay-TV networks drives the adoption, as these features provide a more engaging experience.”

FTA still remains the favored method of accessing television content in the Middle East, however. The region is already supported by a large number of FTA channels with a wide variety of content. Operators of satellite FTA channels can leverage the fact that a significant fraction of the Arab audience is not ready or willing to pay for services they can get for free, according to Al Shawwa.

“We expect this difference in adoption levels to remain for the coming few years, since viewers in general are not expected to suddenly start paying for TV channels and content, unless there is a major advantage of doing so,” he said. “However, the adoption of pay TV is projected to increase in the future, although it is not projected to be dominant in the market for the coming few years.”

In 2013 Arab Advisors conducted a series of surveys in Egypt, Iraq and the United Arab Emirates (UAE) to gauge media usage patterns, including pay-TV. Using Computer Assisted Telephone Interviews (CATI), the research group surveyed 749 respondents in Egypt, 750 in the UAE, and 741 in Iraq, providing a confidence level of 99 percent with a margin of error below 5 percent, Al Shawwa said.

The survey found the UAE had the largest pay-TV audience, with 37.3 percent of respondents watching pay-TV, with either legitimate or pirated subscriptions. Iraq was next with 10.7 percent of respondents saying they watched pay-TV, and Egypt was the least with 8.8 percent. Egypt also has the most FTA satellite channels available among Arab nations based on 2014 data.

Piracy remains a substantial problem in the Middle East and Northern Africa (MENA) for pay-TV, which threatens to inhibit growth. Citing pay-TV broadcaster OSN, the company estimates around $500 million in revenues is lost annually to pirated content. This creates a situation that must be addressed, and broadcasters are taking action.

“One of the largest attempts taken by OSN was the ‘swap project’ in 2010, when OSN had announced on December 19, 2010 that Dreambox and other pirate satellite users would no longer be able to watch OSN channels. All old set boxes in the MENA region were replaced with ‘silicone-secure’ boxes which are, reportedly, impossible to crack. The new encryption system includes tying the encryption code with the actual machine for which it works. Similar initiatives have also taken place in the region by other operators like beIN,” he said.

Ultimately Arab Advisors expects satellite pay-TV adoption in the Arab world to continue to grow in popularity, particularly as pay-TV operators introduce features that FTA options lack. And, being trailblazers for HD, the research group anticipates pay-TV operators will likely drive the first Ultra-HD channels in the region. As of March 2015, Arab Advisors did not track any Ultra-HD channels in the Arab world, but by 2020 the research group anticipates that there will be broadcasts.

“We expect a large percentage of channels — both FTA and paid, to have turned to HD and Ultra-HD broadcast, supported by increasing adoption in consumers households of technologies that support these standards. Additionally, we expect a wider variety of satellites to be available for broadcasters to choose from. This will be mainly triggered by initiatives taken in the region to establish and launch satellites that cater to the Arab world. This, in turn, would encourage more channels to start targeting the region,” said Al Shawwa.