Interview: David Butorac, OSN

David Butorac

Pay TV operator OSN has continued to see strong growth recently and is now looking to expand its offering further via digital distribution. CEO David Butorac talks to Digital TV Europe’s Stuart Thomson about the company’s plans.

If pay TV remains – relatively speaking – a minority interest in the Middle East, it has at least been relatively immune to the worst effects of conflict, which has seen advertising revenues drop significantly among commercial free-to-air channels, and not only close to the fighting.

Pay TV operator OSN, for example, has continued to grow its base over the last couple of years. “The free-to-air and pay markets are different. They are driven by advertising and we are driven by subscriptions, and the region’s conflicts have not dented our sales growth in any way,” says OSN CEO David Butorac.

The plethora of free-to-air channels available via satellite across a region that shares a common language does, on the other hand, continue to have an impact on the pay TV opportunity. When it comes to differentiating its offering, OSN does not emphasise the number of channels as a key selling point, unlike western pay TV service providers.

“We don’t sell on volume,” says Butorac. “We have 146 channels compared to the 600 on free-to-air. The key differentiator for us is quality content, with a premium window where you always see that content first on pay TV.”

The availability of HD services has been a key part of this and all OSN’s premium entertainment channels are now in HD. The broadcaster has also sold on its superior user experience, with content available on multiple screens, with on-demand service OSN Play launching to OSN subscribers in 2012.

More recently, OSN has innovated by launching a place-shifting service. This is available to its subscribers but also as a standalone service targeted at a younger demographic used to viewing content on mobile devices. Go by OSN is available for about US$10 (€8) per month to non-subscribers, and is primarily seen as a way to reduce churn among the existing user base.

“We think digital services generally will target a younger demographic that doesn’t sit in front of the TV but can still have access to content,” says Butorac. He points to the high penetration of smartphones in the region as an indicator of the likely popularity of a Go by OSN-type of service, although he admits that available broadband speeds leave something to be desired. Nevertheless, he says, the technology platform, which permits progressive downloads to enable a smooth viewing experience, can deliver a compelling service.

OSN is in fact now looking to broadband delivery of services as a key growth opportunity in its own right. Butorac points out that it is not necessarily very efficient to deliver content by satellite that is targeted to relatively small expatriate groups in the region, or to territories where the subscriber footprint is relatively small. OSN’s acquisition of Pehla TV’s suite of channels for the region has enabled it to capture the sizeable Filipino market with a satellite-delivered service, but he points to the presence in the region of other groups who might be more efficiently served with channels delivered over broadband.

In addition to migrant workers in the Gulf, Butorac says OSN might also look to alternative means of delivery to provide a service specifically for North Africa. “We own rights for the entire MENA region, but if you look at North Africa, that is a market that, because of piracy and a different level of GDP per capita, is not efficient to reach by satellite,” he says.

“We could launch a streaming service across North Africa that could be based on Go by OSN to aggregate subscription services.”  Using IP distribution and adding French-language content for the local audience could give OSN a route into this potentially large market.

Single platform

For the region’s core pay TV markets in the Gulf, satellite remains the most efficient way to reach subscribers.

Consolidation of the pay TV offering, so that all the most popular content is available via a single device in the home, is seen as a key goal, but one that has in the past proved elusive. Yet OSN has made considerable progress, for example striking a deal with former platform rival ADD to add the ART channels exclusively to OSN’s platform. More recently, it has made more progress by signing a deal to redistribute Abu Dhabi Media’s channels on its platform.

“Abu Dhabi Media decided its core focus was in the content business. We will remain competitive on content but in platforms they realised it is better to access everything via one box,” says Butorac. The deal provides a strong Arabic-language entertainment offering for OSN that reinforces its appeal to a wide audience. For Abu Dhabi Media, the deal provides access to OSN’s platform and sales and customer management services.

One of OSN’s other main competitors in the region is Al Jazeera, with the BeIN Sports offerings providing exclusive coverage of English Premier League football, among other things. Unlike Abu Dhabi Media, Al Jazeera has decided to build its own platform business, meaning that subscribers have to choose or take both services separately.

Butorac is adamant that OSN will not compete for premium sports rights at uneconomic prices. “We do have significant sports content with golf, cricket, and rugby. But I’m not prepared to pay silly money for football,” he says.

While all services are available via a single platform to customers of UAE fixed-line players Du and Etisalat, this remains not the case on satellite. However Butorac is hopeful that BeIN Sports will eventually see that it makes sense to distribute its channels more widely.

In the meantime the broadcaster will focus on building its own entertainment offering and developing its Arabic-language services in particular. Key to this drive is the OSN Ya Hala channel, which achieved a strong following in Saudi Arabia and the UAE in particular. OSN has followed up with the launch of two further Arabic-language entertainment services. Butorac says 90% of new customers to the platform are Arabic-speaking. OSN has focused on acquiring local content rather than commissioning its own, but it has secured what Butorac describes as “early and exclusive windows” for popular series. It has been successful in acquiring rights to highly popular Turkish drama series for OSN Ya Hala, such as Hareem al Sultan.  It also supplements this with popular premium western shows such as those from HBO.

Of course, those early and exclusive windows for premium content bring their own challenges – notably piracy. This is one of the problems that traditionally have held back pay TV penetration across the region. OSN famously invested in a complete set-top box swap-out to eradicate the problem and force people who had previously received its services for free either to pay or to lose the service. The investment appears to have paid off, with OSN recording strong year-on-year growth since that time.

OSN has also joined MBC and others in moving against illegal distribution of content by free channels on satellite. For Butorac, one thorn in his side is that of South Asian platforms with legitimate rights in their own countries that illegally distribute their services on the grey market in the Gulf. He points to a “significant and well-orchestrated distribution” operation of at least one South Asian platform that breaches rights OSN has secured for the region. “That is something we are constantly fighting against,” he says.

The pirating of content and illegal distribution of services is of course a sign that such services are in demand, and OSN is likely to continue to make progress by tapping into that desire for a wide range of high-quality content, delivered with a high-quality user experience.