Within days of losing the Premier League rights, Showtime announced its merger with Orbit
Showtime, Orbit futures secure after merger – analyst
read more here at Arabian Business online top source of news
Pay TV companies Showtime and Orbit “possibly” faced financial ruin had they not merged earlier this month, a media industry figure claimed on Tuesday.
Gabriel Chahine, partner and head of consumer and media at management consultancy Booz & Co, told Arabian Business that neither pay-TV company was generating solid revenues as separate operations.
“We don’t have the economics of the paid-TV networks but it would be very difficult to imagine they are making money, especially with the amount they pay for sports rights,” he said.
“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 added with Showtime and Orbit struggling to make money, a merger was the best outcome for both companies.
“The merger was overdue and it makes perfect economic sense because there will be a lot of synergies around markets, sales, customer service and distribution. It will give them more bargaining power with suppliers and the big movie vehicles to negotiate better prices on the content.”
Pulling in subscribers has been an ongoing battle for the companies, with several networks in the region all vying for customers, according to Chahine.
In the Middle East, pay-TV subscribers and people with free-to-air packages have access to more than 500 channels. But Chahine said only 25 channels secure more than one percent of ratings, while the others “do not even appear on the radar”.
“The consolidation of two networks is overdue,” he said. “From an economic standpoint, three 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’s usually sport (which sets pay-TV aside from free-to-air), but they are now losing on this side, so they face challenges competing with free-to-air.”
On July 3, Abu Dhabi Media Company (ADMC) outbid rival Showtime for rights to screen English Premier League football from August 2010.
Showtime CEO Marc-Antoine d’Halluin told Arabian Business days later that he hoped a deal to carry ADMC sports channels with Premier League matches on the pay-TV platform could be agreed.
It is unknown whether talks between Showtime, which currently owns the rights to air top English football for three seasons ending next May, and ADMC have begun.
Within days of losing the Premier League rights, Showtime announced its merger with Orbit. The combined pay-TV companies will offer 70 exclusive channels featuring sports, movies, Arabic content and international shows.