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Showtime-Orbit merger: Will it work?
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Showtime-Orbit merger: Will it work? - 13-August-2009, 01:20

Showtime-Orbit merger: Will it work?
Chris Forrester

Kipco, backers of the Showtime Arabia pay-TV service in the Middle East, confirmed Monday that the merger with rival Orbit has now been completed. Where does this leave pay-TV in the Middle East?

First up, it is worth remembering that despite Kipcos statement, this merger does not create the largest pay-TV operator in the region. That privilege, if referring to Arabic content, stays firmly with Arab Radio & Television (ART), owned by billionaire Saudi Sheikh Salah Kamel. Indeed, ART while the undoubted Arabic pay-TV market leader is closely followed by Israels Yes operation with some 562,000 subscribers (as at June 30). ART and Yes dwarf the new Shorbit combination.

But there are other challenges in the Middle East, not the least of which is piracy. Orbits CEO Samir Abdulhardi has publicly admitted that piracy has badly affected Orbit (and by implication Showtime) and that handling piracy in an unspecified but radical new way will be one of the new companys primary objectives.

Piracy of broadcast content can take many forms. Theres smart card piracy, mostly in the form of card sharing on technology like the Dreambox and its imitators. The Dreambox problem dominates Irdeto transmissions, and one well-informed local said last week that the Dreambox-type card-sharing problem is mushrooming and spreading like wildfire. It is one of the reasons why ART is dumping Irdeto and switching to France Telecom-backed Viaccess. Viaccess has been used by Canal+ Overseas for its North African pay-TV service, but not wholly immune from card sharing piracy. It will be interesting to see how ART plans to combat this piracy with their new super box.

Theres also a more troublesome form of piracy, widespread in the Lebanon and increasingly used in Egypt, where informal (although often highly professional) cable pirates steal the signals and redistribute them for a fraction of the official price and with zero revenue benefit to the programming owners.

But there are two other events that might pose an even greater threat to Shorbit, and theyre in the shape of rival pay-TV operations. There is not much by way of clarity in the plans of Abu Dhabi Media or Echostar, but both believe they can make inroads into the Middle East. Abu Dhabi Media is understood to be planning a sports-based entry into pay-TV, while Echostar believes it can use high-definition TV as a springboard into the region. It is known that Echostar has had exploratory discussions with many of the regions free-to-air broadcasters about boosting HD output and carrying the new programming on an Echostar service. The new HD output would then be carried by Echostar on its North American Dish Network.

Meanwhile, of course, normal free to air broadcasting continues to be a hugely popular with viewers and thus provides a natural barrier to victory for pay-TV. ARTs limited success is based on sport, and theres no doubt that sport especially soccer is extremely important to Middle East viewers.

The next 6-12 months will be key for all of the players mentioned: ART has to transition from Irdeto to Viaccess and introduce its new highly-specified set-top box. Showtime and Orbit have to settle their merger down and start earning synergies for their backers. Abu Dhabi Media needs to make its plans public, and speedily if it is to capitalise on the 2010 English Premiership signing. And Echostar has to win HD support from a sufficiently large portfolio of key free-to-air broadcasters.

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