Untapped demand for local, Arabic content will spur rapid regional media growth over the next five years, according to a new study unveiled at the Abu Dhabi Media Summit yesterday.
The joint study undertaken by management consultancy Strategy & and Media Zone Authority Abu Dhabi, twofour54 , also found that accelerated adoption of mobile technology, evolutions in paid and digital media, and a new wave of unique youth-produced content will be key factors in driving media growth in the region.
Noura Al Kaabi, CEO of Media Zone Authority Abu Dhabi, twofour54 , said: "The Middle East and North Africa (MENA) media industry is undergoing a fascinating transformation. Cultural shifts among the region's young people have spawned a tremendous creative energy, changing the way media is both consumed and created." The MENA media market's evolution is encouraging regional players to revisit their business models and explore investments in high-quality local content. With MENA one of the strongest opportunities for media industry growth, these findings should encourage global players to re-evaluate their presence in our region," she added.
The study looks in-depth at three key media sectors in the region: gaming, audio-visual content, and e-commerce.
Gaming set to grow exponentially "Gaming in the region is growing faster than the global average, exceeding even other fast-growing emerging markets such as Russia, China, and South Korea", said Jayant Bhargava, Partner with Strategy&, formerly Booz & Company.
"Gaming is also the fastest growing media segment in the Middle East, expected to nearly triple in size in the coming years -- from US$1.6 billion in 2014 to US$4.4 billion in 2022", he added.
During this period, growth in boxed games will slow down and mobile will become the dominant platform, taking the largest share of the market by 2018. Tablets will be key to this and should represent up to 20 percent of the mobile market within a year or two. The study expects the total gaming segment size to mirror the size of the TV market in seven to eight years.
To date, global games from international developers have captured the lion's share of opportunity, roughly 90 percent of the Arab market. However, games localised for the market are expected to capture over 15 percent of the market in three to five years. International players are expected to increasingly Arabise their content for the region. Regional developers are also localising global games and creating original games for the local market.
"The study highlights the influence of the Arab Digital Generation in driving the growth of gaming. On average, people between the ages of 18 and 24 in the region spend eight hours per week playing games. In many MENA countries, including Saudi Arabia, more than 50 percent of Internet users play games online. The digital facility of young people is contributing to the Middle East's emergence as a gaming development hub", added Bhargava.
New trends in audio-visual content The audio-visual content market in MENA is seeing many trends that could significantly change the industry. The most notable of these is the transition to paid media. Pay TV is forecast to grow at 10.3 percent per year, compared to ad-based TV's 7.8 percent. Satellite TV continues to dominate the sector, accounting for more than 95 percent of TV distribution.
The study predicts significant growth in digital delivery of audio-visual content, driven by the emergence of youth-produced content and proliferation of new distribution platforms such as IPTV and over-the-top (OTT) sites. For example EyshElly, a programme created by UTURN Entertainment, set up in 2010 by three Saudi university students, received approximately 2.2 million subscribers and 245 million views on YouTube.
The growth of e-commerce E-commerce will be a critical source of digital growth. The MENA e-commerce market was worth US$2.3 billion in 2014 and is expected to grow 13 percent annually to 2019. Saudi Arabia and the U.A.E. are the dominant markets, and will continue to make up almost 40 percent of the total market to 2020.
Drivers of growth in e-commerce are similar to those in other digital segments: faster connectivity, improved supply landscape and the ubiquity of smartphones. Mobile capabilities are increasingly important - mobile commerce is expected to reach 20 percent of e-commerce revenue in 2015, up from 7 percent in 2011.
Increasing numbers of young people are contributing to e-commerce revenues. Forty percent of Internet users aged between 15 and 35 made an online purchase in 2012, compared with 22 percent of users aged between 49 and 65.
Finding the way forward The media sector in the Middle East is in the early stages of a significant evolution. Regional and international players will need to focus on four areas to help the sector reach its full potential: education, talent, infrastructure and work environment, and financing.
Education in digital media will require greater recognition and support from governments. A number of jobs in the media space did not exist a decade ago, and schools in the region are generally not offering students the background they need to pursue these careers.
In addition to education, on-the-job training is a critical component of growing the talent base. With training in technologies such as movie production, 3-D effects, gaming development, companies can vastly increase the productivity of small-scale media producers.
The growth of the media sector will also demand infrastructural and work environment changes. For example, the rise of economic zones and incubators in the region in the last 15 years has made it much simpler for global media companies to quickly ramp up operations. The availability of studio space, state-of-the-art technology, and high-speed broadband has translated into limited setup costs for companies. Media cities, such as Abu Dhabi's twofour54 , also offer a favourable regulatory environment, with incentives such as tax relief, and reduced red tape. In addition to these, large players should also consider the kind of working culture they need to create to attract the Arab Digital Generation.
Lastly, independent content producers in MENA seldom have access to content financing mechanisms prevalent in mature markets. Access to debt, slate or gap/deficit (mezzanine) financing in a structured manner will be critical to meeting the demand for quality, local Arabic content.
"Although media cities like twofour54 do offer access to advantageous financing, the MENA region still lacks the structured access to financing that developed markets can boast. The availability of more funding is critical to enable the industry to meet the skyrocketing demand for local content", concluded Al Kaabi.