No. 5, Fall/Winter2000

Special Issue:
The Arab World

Thematic Channels' Salvation

Private sector involvement and pay-TV subscription revenues may put an end to the Nilesat Thematic Channels' dilemma and prove to be its salvation, reports TBS Cairo Correspondent Heba Kandil

Two years ago, Nilesat was launched carrying a vast array of Egyptian and Arabic channels, promising to change the Arab media scene and reassert Egypt's role as the region's media leader. Among that array were the thematic channels, owned by the government's "public corporation" the Egyptian Radio and Television Union (ERTU), each specializing in a particular theme such as health, education, or women's issues. Since then, Nilesat, like so many other bodies of the Egyptian TV industry, has been keeping up with current trends by adding new features—several specialized channels were introduced—and revamping old ones.

The latest refining process extends to the management framework and technical nature of the thematic channels, which has been the ongoing cause of its headache.

From the start, a dilemma was inherent in the nature of the thematic channels when Nilesat opted to digitally encode but not encrypt the channels' signal. As a result, viewers have to install digital decoders as they would with other pay-TV channels such as ART and Showtime. Unlike ART and Showtime, however, there are no subscription fees. In the eyes of television industry experts, this in-between stance spells a disaster in terms of revenues and a "rock and a hard place" situation. On one hand there is the "rock": an encoded signal draws a limited audience--more so than free-to-air Egyptian satellite TV, and far more so than ERTU's terrestrial channels, with millions upon millions of viewers and vast advertising revenue to match. An encoded signal drastically reduces the opportunity for advertisement revenues. On the other hand there is the "hard place": an unencrypted signal draws no subscriptions, which obliterates pay-TV revenues. But Nilesat officials, it seems, were never worried about such drawbacks, and had a certain plan in mind.

Hassan Hamed, chair of the Nilesat Thematic Channels and vice president of ERTU, explains that the idea of transmitting in such a way was sort of a test run. "[We] had to wait until a certain number of viewers owned digital decoders then decide which action to take: subscription or advertising." According to Hamed, last year's figures indicated a total of 500,000 decoders sold in the Arab world. He expects this figure to have doubled by now.

Industry experts, however, doubt that figure, pointing out that decoders sold through the ART/Showtime group amount to only 40,000 sets in Egypt, and they doubt that so many more would have bought Nilesat decoders without ART and/or Showtime smart cards just to look at Nilesat's encoded but free-to-air programming. Furthermore, experts argue that neither of the two figures—the optimistic but grossly exaggerated 500,000 number or the meager but more realistic 40,000 plus—are close to competing with the tens of millions of Egyptian viewers watching local Egyptian terrestrial channels. In the advertising revenue race, they state, the thematic channels have no chance.

Proving their argument correct, the Nilesat Thematic Channels are going for the pay-TV option. Hamed says feasibility studies have been underway, analyzing the possibility of private sector involvement. This new venture will incorporate a selection of some of the existing thematic channels and is to be offered to viewers as part of a subscription bouquet. The nature and degree of such private sector involvement is not yet determined, Hamed said. However, he disclosed that the private sector would have the majority of shares. Full details outlining this co-ownership between Nilesat Thematic Channels and private businessmen are expected to be officially announced within two to three months.

This move towards privatization is no news to many. Already in the field the pressure to open up to the market is persuading many state-owned companies to turn private or partially private. Rumors abound about other channels and stations moving with the tide. TBS