Digital content and media services represent a monetisable opportunity for different players in the Middle East. However, the monetisation strategies of the diverse stakeholders — including operators, vendors, content developers, aggregators, and over-the-top (OTT) players — currently lack clarity and well-defined objectives.
Application developers, for example, are yet to forge healthy relationships with telecom operators despite the market attractiveness and strong local reach of the telcos. Content aggregators, content delivery network providers, and media houses similarly feel threatened by telecom operators that are venturing into the digital media space.
Nevertheless, both operators and digital media providers are in need of innovative services that are in line with changing customer needs and service consumption dynamics. IDC believes that it is imperative for all stakeholders to understand that telecom operators are essentially the enablers or facilitators for digital media, since they own and control the access medium. Currently, operators in the Middle East are re-selling content through delivery platforms such as internet protocol television (IPTV) and through mobile applications.
Both mobile operators in the UAE are witnessing the stagnation of their voice revenues. In the search for alternative sources of revenue, du and etisalat are now transforming their traditional business models, which rely heavily on voice and SMS-based services, to more dynamic portfolios based on digital media and data services. Initially, operators began by providing valued-added service (VAS) offerings such as ringtones, music libraries, and mobile TV. These services are now well developed; however, they only constitute a minor share of overall mobile revenues.
Operators are now exploring new VAS offerings such as games, videos, and music content, which places them in direct competition with OTT service providers. There have been notable investments in content development across the region that have yet to produce returns.
The slower growth or failure of these ventures can be traced to multiple factors, such as the lack of local partnerships, limited locally relevant content, content owner rights for multiscreen offerings, immature business models, the absence of revenue share agreements, and conflicts of interest among various stakeholders. In particular, the UAE has seen increased interest in digital media initiatives from the government, telecom operators, and other stakeholders in the media domain.
The data traffic in the MEA region is expected to grow exponentially over the next five years. IDC believes that a significant portion of this data growth is driven by content development efforts in the region. The content is being offered in a variety of options, including in the form of PayTV, free-to-air, and OTT. The main factor behind these efforts is the growing number of local consumers watching content online. For telecom operators, monetisation of content therefore does not mean simply generating greater average revenue per user (ARPU), but also reducing churn, retaining subscribers, and attracting the youth segment, which is at the forefront of content services consumption.
With the increase in content development and digital media initiatives, IDC expects the year ahead to bring more clarity to the overall digital media and communications sector in the UAE. Questions surrounding what specific services are provided by particular operators will be answered during the course of the year.
IDC analysis suggests that another important aspect of the content industry relates to the selection of the appropriate business model. Some companies have simply employed the pay-per-usage model (also known as flat subscription model), while others have opted for more innovative approaches such as freemium or marketing-loss models. Stakeholders need to understand that each model has its own benefits and drawbacks, and they should evaluate each to select the one most suitable for their respective content.
Despite strong demand in the Middle East, content and application developers have still not been able to address the shortage of Arabic content. As such, telecom operators in the region will enhance their focus on developing relevant content in order to polish their service offerings, a move that will eventually lead to monetisation in the form of targeted mobile advertising. Mobile advertising will not only enable enterprises to increase their presence in the digital media space, but will also help them target specific market segments on the basis of social, behavioural, and location data.
The columnist is group vice president and regional managing director for the Middle East, Africa, and Turkey at global ICT market intelligence and advisory firm International Data Corporation (IDC).