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Update Orbit-Showtime faced ‘financial ruin’ - 22-July-2009, 12:11

Orbit-Showtime faced ‘financial ruin’

Chris Forrester

There are many enthusiasts at Orbit and Showtime singing the praises of the recently announced merger, but one key local insider says critically “The merger of two minor acts does not make them a big act.” The planned merger is formally expected to close on or around August 1.

The merger is widely reported in Gulf newspapers as being “worth $2bn”. Rapid TV News finds this hard to reconcile, given that both broadcasters were known to be struggling very badly in the period leading up to the merger. One highly respected analyst, Gabriel Chahine, a senior partner at management consultancy Booz & Co, told local journalists that neither company was making solid revenues as separate companies. “It would be very difficult to imagine they are making money, especially with the amount they pay for sports rights,” he told Arabian Business.

“The packages they put in the market place (for consumers) are very low, especially Orbit which has a $5 one in Egypt. With these packages and the content they are buying, it would be very difficult for them to make money,” he said, adding that with Showtime and Orbit struggling to make money, a long “overdue” merger was the best outcome for both companies. “From an economic standpoint, three [pay] TV networks (in the Middle East) was way too much and it’s very difficult for them to differentiate their content from free-to-air.”

It is also widely acknowledged that the merger – at least for many well-heeled viewers – is not new in that some viewers were already subscribing to both systems. Viewers to the Du and E-Vision wired systems in the Emirates, and the Q-Tel digital TV system in Qatar, also had access to as many of the channels as they wished.

Indeed, one well-placed Arab Radio & Television senior insider is happy to remind people that ART’s pay-TV platform is “far larger” than the combined Showtime and Orbit pairing, and insists ART would not be joining the merged operation.

Last week ‘Shorbit’s’ new CEO Marc-Antoine d’Halluin insisted that both parties to the merger had hundreds of thousands of subscribers and the combination of the two will essentially multiply by two the size of each one of the entity. “By that I mean the subscriber bases were not far apart, so at the very least it is a multiplication by two and in fact it’s more than that for revenues. It is a very strong leading media player that we are building together, which will immediately be at the top of the ranking in terms of size and revenues in the Middle East and MENA region.”

Our source was dismissive of the claim. His view was that ART already has advanced plans for a new, significantly upgraded set-top box for the Middle East with a new Conditional Access system (France Telecom’s Viaccess) in order to break away from the widely-hacked Irdeto encryption system. Moreover, high-definition plays a prominent part in ART’s new plan (as it does with Showtime and Orbit).

HDTV is important elsewhere. Dubai’s DSL operator Du will go ‘live’ with a new PVR on August 15, and is strongly hinting that its new box will be an advanced model. E-Vision, also active in Dubai, is already offering HDTV, while newcomer Echostar is making similar hints that its HD offering will be on air soon.

It is probable that the combined Showtime-Orbit package will now move speedily into high-def, but at the same time it is equally likely that the new company’s trade distributors (the likes of Du, E-Vision and Q-Tel, for example) will also be seeking a reduction in the fees they pay for what is now a unified platform.

In other words ‘Shorbit’ had better get its HDTV act together pretty quickly, or else it risks being left behind in this new Middle East television battleground. A battleground where there will probably still be 3 rival pay-TV platforms: ART, ‘Shorbit’ and Echostar.

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