MENA youngsters to spur rapid growth in digital video revenues

13 February 2018 5 min. read

Online video revenues are ready for a growth spurt in the Middle East and North Africa according to professional services firm EY, with increases of as much as 35% per annum in some markets, driven by a sizeable youth population entering into maturity.

MENA’s collective video content market of today is worth just over $3 billion according to a new report from assurance and advisory providers EY, with the Big Four firm expecting the market to grow 40% to reach ~$4.3 billion by 2021. As it stands, TV advertising and TV subscriptions account for roughly $1.2 billion and $1.58 billion of the current pie, projected to rise to $1.61 billion and $1.95 billion in the coming period with respective annual compound growth rates (CAGR) of 5.5% and 7.4%.

Regional revenues in Advertising Video on Demand (AVoD) and Subscription/Transactional Video on Demand (SVoD/TVoD), however, are forecast by the consulting firm at a CAGR of 25.5% and 26.2% in the coming three years, with AVoD rising from $162 million in revenues in 2017 to $402 million for 2021, and the combined subscription and transactional take to jump from $135 million to $342 million in the same period.MENA’s video marketTogether, this more than doubling of revenues will see digital’s market-share climb from 9% to 17.3% in just three years. With most regional markets set to record a rise of between 22% and 35% in online video growth, the digital consumption growth rates in MENA are among the highest in the world, driven by a sizeable youth population, high rates of or fast-improving mobile connectivity, and an influx of new streaming platforms into the market.

Meanwhile, Pay TV is expected to drive the growth of MENA’s television market, as the region’s  900 free-to-air channels – including approximately 500 added over the past decade – contribute to slowing growth in advertising revenues and the suggestion of saturation. The report further notes that the content of free-to-air channels in the region is typically Arabic and geared toward the mass market, whereas Pay TV is beginning to fill the gap for the region’s young and increasingly discerning viewers, with channels such as MTV Arabia having converted to a paid content model already.MENA's linear TV landscapeThe markets of the GCC together with Jordan and Lebanon and combined with Algeria, Egypt, Tunisia and Morocco currently represent over 48 million TV households, yet less than one tenth of these homes are believed to be paid television subscribers, and only one fifth are said to regularly watch online video. There are, however, significant differences in the media landscape between the countries examined.

For example, Egypt, with more than 20 million estimated TV households, and Algeria (7.5 million) and Morocco (6.3 million) all have Pay TV subscription rates of below or around 5%. Bahrain, Qatar and the UAE on the other hand are closer to one half or above (with the UAE nearing two thirds), albeit with far fewer TV households at between 200,000 for Bahrain and 1.8 million in the Emirates. These three nations also record high rates of online viewing, at around 40% or above of their TV households, compared to around 15% for Egypt and lower again for Algeria and Morocco.MENA's online video landscapeYet, with the projected 22%-35% three-year growth-rate in revenues across most MENA markets in mind, the authors note that the more mature Pay TV and online video ecosystems, such as those in Qatar, Bahrain and the UAE, will be expected to register stronger average revenues per user (ARPU) growth, while increasing subscriber numbers will fuel the growth in the cited countries of North Africa.

All-in-all, this growth will be led by the younger demographic. As stated by the report; “As teenagers and young adults enter the workforce and become paying consumers (or customers advertisers will pay for), they add a significant boost to media spends.” Naturally then, as the report points out, the youngest markets will tend to be the fastest growing ones, and over 25% of the markets in countries such as Egypt and Morocco are composed of those in the 10-25 year age bracket, while Saudi Arabia, Oman, Qatar, and Kuwait are made up of at least one fifth of this generation.Demographic impact on media growthTogether, the respective growth rates of around 6% and 26% projected for linear television and online video as driven by this younger generation marks MENA as the biggest growth market in the world bar India and Indonesia. As such, the authors of the report contend that content providers will need to further zone in on this younger demographic if they’re to capitalise on the region’s growth potential.

The report states; “To capture a piece of this growth, content creators would be well served to focus on relevant genres for this youth audience, which may include sports, premium action or coming-of-age films. Marketing will also need to focus more on social media, where significant time is spent, and digital interactivity will become key to drive sticky consumption.”

Indeed, 57% of MENA viewers surveyed in 2015 said that they watch live video content more if it has a social media tie-in, placing the region only behind Asia. And while the report foresees the emergence of several new customer segments, it concludes, “the game changer and most disruptive innovations will come from interactivity with customers.”

“Through smartphones, content platforms can create immersive ‘play along’ experiences with reality TV, ‘vote and be counted’ involvement, ‘guess what happens next’ challenges and much more around episodic content and events, particularly sports. We believe this new segmentation will drive a more focused approach to the creation of quality content, and as the inevitable shift takes place to data-driven decision making, the customer will truly benefit,” the report said.