TBS FEATURE INTERVIEW

Alexander Zilo
President and CEO, Orbit
Rome, July 1998

TBS: There’s been a lot of talk that Orbit is moving out of Rome. Is this true?

Alexander Zilo: We are not moving out of Rome, we are focusing on decentralizing portions of our business, what we’re calling the Arabization of Orbit. Over the last five years we’ve encountered many obstacles; those obstacles have now been overcome, and we’re much more comfortable with integrating our business back into the region. The business will not be centrally located in one place, it will be divided into sections. Primarily the infrastructure we’re establishing is built around the production plants that we have for Arabic products.

TBS: A lot of which you would do outside Rome anyway.

Zilo: We have very little production in Rome. We don’t have the studio capabilites, it’s difficult to get access to talent, etc. So we were since our inception producing all our programming for our second channel, al-Thaniya, from the region--Kuwait, Cairo, and Lebanon. So now having experienced the higher, incremental costs of having to go through third parties, where you don’t have your own infrastructure, we’re now focusing on that infrastructure to bring our costs down in order to be able to produce more. Anyone who is committed to [this], like Sheikh Saleh has done on his side in Avezzano and elsewhere, you have to have the infrastructure to keep your costs down and have vertical integration and control of your programming. The fundamental issue that we find everywhere is that studios are very rare, and the people that you commission to do the work then have to deal with another, third party, and everybody takes a piece along the way.

TBS: Will you still commission outside work?

Zilo: We will commission outside work, we will cause the outside people to use our facilities, so we have control of those markups.

TBS: Is this reorganization or this decentralization already underway?

Zilo: It’s been underway for six months.

TBS: Where will the production centers be located? We’ve heard mentions of Cairo and Jebel Ali in Dubai.

Zilo: By this time next year we will have substantial resources in Cyprus, Dubai, Jebel Ali, Kuwait, Cairo, Lebanon, and here in Rome. The bases I’ve just cited are existing today, they’re just smaller. This should allow us to integrate ourselves better into the culture and the language, and also bring down the costs. People, I believe, overreacted to this concept of decentralization and turned it into a catch-all of, we’re leaving Rome. Now, anything’s possible—two years from now, three years from now, we may, who knows. In the same way that any broadcaster’s strategy may change and their focus may change. Business is vibrant, business has to adjust to the conditions of the day. So we’re not precluding it, but that’s not in the cards now.

TBS: Earlier this year trade publications were reporting that Orbit expected to show a profit within a year’s time. Is decentralization and the cost of new startups and expanded production facilities going to delay that move into becoming a profit center?

Zilo: No. The timeline to break even for us is December. Nothing is going to distract us from that. A lot of the elements of decentralization actually are contributing to reducing costs—one body alone moving out of Rome saves you 42 percent of the salary. Anything that has to do with infrastructure is a capital cost, that’s long-term, as a separate element. So that’s expansion, as opposed to the operating business of today.

TBS: Aren’t you concerned at all that you might be politically vulnerable? After all, you’re carrying news programming from the American networks, you’re carrying discussion shows, which can be controversial; that’s part of their excitement. Was that a consideration? Did it make you hesitate at all?

Zilo: Not at all. We’re sensitive to it; you have to be able to protect your business from political and commercial fallout. And those two elements go hand in hand. And that is why we are splintering our operations, to put it in various locations, so as to have the redundancy. For instance, at the moment [the public affairs talk and call-in show] Ala-l-Hawa’ broadcasts live every day from Cairo, and sometimes the topics are innocuous and sometimes they are not. And sometimes we have very colorful individuals. If we were slapped on the wrist for any reason, it’s very easy within a couple of hours for us to move [host] Emad al-Deeb from one location to the other. And in fact we do move him; he travels a lot, from Beirut to Palestine to Amman to London. So we’re prepared to put out this show from anywhere with a few hours notice. We don’t see that as succumbing to political risk by going into the region because we’ve mapped out the critical core areas that need to be protected.

TBS: Where do you think the market of encrypted satellite networks is going? Right now in the region we’re basically looking at Orbit, ART, Showtime. Do you expect more players in that area?

Zilo: Well, I definitely believe there’s a market for pay television in the Middle East; otherwise we wouldn’t be doing what we’re doing, and I certainly wouldn’t be doing what I’m doing. Having said that, I don’t believe that there is room for multiple platforms, in the same way that I don’t believe there’s room for a multiplicity of free-to-air satellite platforms. In both instances you have a limited pot of advertising money for the free-to-air services, and on the pay/encrypted side you have a limited purchasing ability from the region. As such, we can all struggle along with a piece of the pie, but it would be difficult for everyone. So I think in the long term, if I were to predict it now, two to three years from now, the landscape of pay television will be very different. I don’t think there will be new entries; you may see a few of them, but it’s one thing to have the ego and the pride of launching a platform, it’s another thing to turn it into a business. Nobody likes to admit to defeat, nobody likes to admit to commercial difficulties, so they’ll struggle along, but to say there’s room for multiple commercially successful ventures? I don’t believe so. I don’t think there’s room for more than two.

TBS: Will Orbit be on Nilesat?

Zilo: Orbit won’t be on Nilesat. We have excellent relations with ERTU, Egypt 1 and 2 are on our service on an exclusive basis, and there was no obligation for us to take transponders on Nilesat. In fact, none of the transponders are available now.

TBS: BBC Arabic TV news was both a problem and a package that brought considerable prestige to Orbit. Since the demise of BBC Arabic television news we have al-Jazeera, we have the Arab News Network out of London, as new ventures in the Arabic satellite news market. Do you ever consider undertaking a new Orbit Arabic news channel once more, but perhaps with a more culturally sensitive partner?

Zilo: It is in our plans, at a point in time, to incorporate a new Arabic news service into Orbit. It’s all about timing. News is a very expensive proposition; my priority right now is to produce Arabic entertainment programming, which will not run the risk of being politically offensive. The moment is not right for us to deal with the launch of a news channel, but we do have inclinations and plans to do so in due course; whether it’s next year or the year after I can’t say. Will it be with a partner? The likelihood is that it will not. We know from our own experience that editorial integrity is sacrosanct with control, and as such whenever you have a partner you have a consultative process. News happens too quickly to go through that consultation process, and therefore our decision, our inclination is that we not go with a partner. TBS