Changing face of Pakistan’s electronic media landscape by Hassan Waqar Raja

Changing face of Pakistan’s electronic media landscape

By Hassan Waqar Raja. Author can be reached at hwraja@gmail.com

Pakistani media landscape, today, is faced with an existential question on how to monetize old and current investments in face of tides of newer local and international content distribution platforms, changing technology and an overall stagnant ARPU environment.

As it stands today, advertisement incomes are no longer a stable and reliable stream of revenue for TV channels. Governments, both national and provincial, had become significant contributors to Ad Revenues for print and electronic media in last 10 years. Changing national political priorities and economic conditions necessitate creation of newer revenue streams. An estimated PKR 8 Billion worth of bills are yet to be cleared by the Government for previous services. In the current political and economic environment Ad revenues are only likely to go further down in the next five years. On the other hand digital Ad revenues are seeing Year on Year growth. Lastly, newer TV licenses are being awarded after an impasse of many years. Revival of some of the old licenses in 2018 and

issuance of newer licenses will lead to further splitting of available revenue pie. Together, these three factors will lead to shrinkage in total available money and everyone’s share in the electronic media.

Broadcasters will have to find newer ways to monetize their current assets through innovation and new investments for enabling a traditional Pay- TV Model in Pakistan. Traditional analogue cable’s limitations and associated cultural behaviors that have evolved over time, combined with limited local content offering have created an overall low ARPU environment. Today, Pakistan’s subscriber ARPU is estimated to be somewhere between PKR 350- PKR 400 (USD 2.55- 2.99 @ USD1= PKR 135). Younger subscribers (up to the age of 35) are more than half of the total population, and they are increasingly relying on OTT for accessing local and foreign content. The right to choose and view content, unlike the western world, is not an outcome of personal freedoms, rather a result of fewer choices on the traditional platforms and a culture of patriarchy that is often misconstrued with religious restrictions.

No part of our population demographic has access to similar forms of social and personal entertainment that is available to their foreign peers in Pakistan’s region (excluding Afghanistan) or beyond. Incomes, cost of living and costs of available entertainment leave TV or personal smart

mobile phones as the primary form of entertainment for most of our population demographic.

Growth of subscription-based OTT models hasn’t really achieved critical mass yet. Local content is already mostly FTA, where broadcasters and content owners are monetizing their property through YouTube, Tune.pk etc. this is not expected to change overnight since it will also require a paradigm shift away from FTA broadcasts, for which the market is not currently fully ready. Foreign content (non- Indian) has a lower acceptance in the country because of the language barrier and in some

cases cultural norms. But individual users are not subject to those norms and are making independent decisions. Lot of western content is being bought and sold after dubbing in the country. Sports, Indian and western content is available on OTT and remains the primary reason for ingress of

foreign content distributors in Pakistan particularly Indian OTT platforms.

Individual subscribers, as per an assessment, on average can pay up to PKR 300 per month (approx. USD 2.2) for subscription-based content. In case of Sports this can be twice or thrice this amount, but only for short durations like different cricketing and local sports events. This is a derivative of various factors that includes overall economic situation of the subscriber and their viewership pattern. But this is a powerful indicator for content pricing and acquisition strategies and design of future

infrastructure. 

Stakeholders like Salman Iqbal of ARY in recent years are seen to be investing largely in creating and supporting different local sports leagues. These leagues for Cricket, Kabaddi, Boxing etc. will lead to both generation of highly in- demand local sports content in both short and long form for linear and VOD platforms. This will also provide value entertainment to an already content savvy population. Pakistan with its single private sports channel needs more sports and a much-needed distraction from political drama on already abundant news channels.

Pakistan has separate regulators for telecom and media; Pakistan Telecommunications Authority (PTA) and Pakistan Electronic Media Regulatory Authority (PEMRA). PEMRA has so far not incorporated OTT media distribution in its media-licensing regime, for reasons not being elaborated or discussed here. Present Government’s recent announcement of their intent to create a single regulator for press and electronic and digital media is a welcome step. This will theoretically take into account on the on- going convergence between the three areas from advertisement and funding point of view, and effectively regulate them. This step will be more effective if functions of PTA are also merged within the same new regulator to make it more resourceful and effective, in terms of both content regulation and infrastructure development, to support growing needs and regulate the changing landscape.

Today the country has approx. 152 million mobile phones (nearly 73% penetration), with 59 million 3G/4G users and 62 million Broadband users. This translates into nearly 30% penetration of 3G/ 4G and broadband access for each, respectively. Though the penetration levels are some of the highest in Asia but Internet speeds leave a lot to be desired for most. It is expected that by Q4 2019, 3G/ 4G will be universally available across Pakistan. But overall, current IT infrastructure cannot keep pace with the growing demand for online content viewership for masses in the short term. In the long term, country requires significant investments in the telecommunication infrastructure as well for enablement of the media industry. Global trends of convergence point out the relevance and

complimentary nature of telecommunications infrastructure for modern day media distribution.

Media distribution platforms require similar immediate upgrades. And in most cases merger with telecommunication infrastructure will be a more sensible way forward. Today, such investments are being hampered by a combination of low ARPUs and lack of Internet infrastructure across the

country. 

This Chicken and Egg impasse can be broken by introduction of newer licensing frameworks in Pakistan to provide confidence to future investors.

Direct To Home licensing is close to being a reality in Pakistan. The license price and initial investment is astronomical, and combined with the low ARPU environment, video piracy, a legacy FTA market, high taxes, limited content offering and existence of illegal distribution platforms, this is a tough business case at best. However, the potential for growth in view of the poor cable infrastructure and subscriber demand for a decent quality of service (QOS) and desire to access content, DTH is both driver of future innovation and market growth. Similarly, regulator should now also consider and allow for consolidation of licenses in the form of frameworks like Head- End In The Sky (HITS). Government and regulator must allow and encourage creation of

consortiums for operating and managing such large projects and expensive licenses and newer ideas, rather than individual owners. There is lack of technical knowledge available within the country to undertake such complex projects and more importantly, corporate infrastructure, associated risks and, lastly management and ownership structures have not matured enough for single patronage for such projects. This also will address the issue of political affinities for all sides in a politically sensitive

industry.

Foreign vendors, particularly Chinese, understand the importance of political affinities for projects in Pakistan. Weak technical knowhow, absence of mature corporate structures and comparatively stringent financing structures and higher interest rates, are enablers for the Vendor driven technology agenda in Pakistan. Such foreign financing for complex projects at exciting interest rates also carry the burden of vendor chosen technology. Structural immaturity of our corporate structures has already

been briefly presented; Total Cost of Ownership (TCO) in cases with attractive financing need to be determined in such cases for both technology and contractual dependencies and liabilities.

Media industry’s linchpin today is the distribution landscape design and management. It is also the Achilles Heel for the future of this industry. Notwithstanding the good work of some who are far and few, current distribution eco- system is restricting both the commercial case for the large investors and also the overall subscriber experience.

To be ready for the future and for their survival, broadcasters must transition from the Ad Revenue model to a Subscription driven revenue stream, and as it is today, being the larger Fish in the small pond their survival is more important for keeping the balance of an already disturbed

eco- system. For its part PEMRA has already incorporated some changes. Supreme Court of Pakistan has been the driver for some of the recent initiatives on TV Audience Measurement (TAM). However honest and numerous such steps are, the secret lies in improving the subscriber

experience for driving up the ARPU. Government must encourage and allow foreign investment for upgrading the media distribution infrastructure in the country. Tax amnesties and concessions is one step. Secondly, regulatory framework should be reorganized, creating one regime for both content and infrastructure management instead of separate PEMRA or PMRA and PTA. Thirdly,

special mechanisms for legal recourse, such as media tribunals with powers of the High Courts, are required to decisively move on matters.

PEMRA is already a unique example of a regulator whose licensee’s regularly take it to courts instead of simple corporate compliance. Prompt dispensation of disputes will further strengthen the regulatory framework and overall regulation of the industry.

Pakistan must sow the seeds for evolution of the Pay- TV industry urgently, for making media industry commercially independent and selfreliant. We are already years behind our region in this area, which is already an established instrument of national projection and propaganda. Self- regulation and responsibility will be a by- product when commercial stakes will be regulated under a singular and effective regulatory regime. Today’s industry has distribution downstream as its Achilles Heel. Consolidation of licenses and equity are the most suitable means and

direction for its longevity.