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Exclusive Interview: OSN CEO on the new golden age of television

Exclusive Interview: OSN CEO on the new golden age of television

From competition with YouTube and censorship in the Middle East, OSN CEO David Butorac talks candidly across a broad range of issues

Not long ago, television was being written off as a dated medium that would not survive the internet age. Is the recent renaissance all down to the birth of event TV and shows that garner extremely loyal fan bases due to the high quality of actors and directors now drawn to the medium – or are there other forces at work?

“It’s a fascinating time in our industry, we are at an amazing point in the television lifecycle. Back before the turn of the century Bill Gates was often quoted as saying that television as we knew it was ‘dead’ because Microsoft TV was going to take over the world. That didn’t quite happen.

“Linear television as we know it is in spectacular health. The quality of content has never been better. You now have Hollywood movie directors and actors doing television for the first time. The biggest hit show of 2016 will be a Martin Scorsese series for HBO called Vinyl, which is simply stunning and is about the music industry in New York in the 1970s – following an idea Scorsese and Mick Jagger had together. It’s a vibrant time for content and that’s driving the continued acceleration of television.

“The medium had to evolve so that the consumer could get access to the content in different ways. It has to be high quality for a TV screen and to be aggregated to digital devices so that the consumer can watch it wherever and whenever they want. Gone are the days that a broadcaster can say ‘this is what time you have to watch the movie’.”

How is OSN’s revenue, have you been affected by the low oil price in the Middle East and conflict in Yemen – and their negative effects on the region’s economy?

“When people don’t feel comfortable about investing money to entertain themselves outside of the home they need to be entertained inside the home, which proves to be a positive for pay TV. When you overlay that pay TV in this region is still in its infancy, then there is a huge opportunity there. We are seeing significant growth in our business. We have to sell premium content and premium technology and we have to give the consumer a reason to subscribe beyond just more volume of channels.”

What percentage of your revenue comes from subscriptions and what percentage is from advertising?

“The model means 95 per cent of our revenue comes from subscribers. We are not in competition with free-to-air, which sells advertising capacity. By and large, OSN gets its money directly from consumers.”

Is the Middle East still a predominantly free-to-air market or is subscription TV gaining real traction now?

“Very much the latter but the two sit side-by-side. Pay TV just offers consumers that chance to access content earlier.”

How is your audience split between Arabic viewers and those native English speakers?

“The vast majority are Arabic speakers, upwards of 90 per cent. One of the great benefits of this region, particularly in the premium market, is that most of our customers are fluently bilingual and so we can aggregate English-language and Arabic content.”

Might the company pursue an initial public offering at some stage soon?

“Both of our shareholders in the past have expressed interest in looking at the equity options for the company. As it stands today, we have no plans for an IPO but it is one of the options the shareholders could pursue in the future. It’s not inconceivable.”

Is there any truth in the recent rumour that KIPCO might sell the company to the Qatar Investment Authority?

“There is absolutely no substance to the rumour. It was published without fact checking. There were no discussions, no interest, no desire and no sale. It was just a rumour on digital media that exploded and had no factual base to it. It was lamentable journalism.”

How are you staying ahead of the competition now that new players like icflix and Starz Play Arabia have entered the market?

“We have to convince the consumer that they should pay for a quality service. We have to deliver the best shows in the world as soon as possible, so Game of Thrones you will get the same minute as transmission in the United States.

“We will continue to be at the front of the curve. Given the complexity of this market, the services you mention will struggle because they don’t have scale. We have already got the premium content locked up. It’s like a car dealer trying to sustain a business on only selling one model of car.

Yes, there are some pretenders coming to the market but we know that pay TV is not easy.”

Etisalat and du are also hosting video-on-demand options now so the market must be getting tighter for you?

“The telcos are not competitors, they are ultimately our friends because they are a distribution means for us. We sell our product wholesale so if you’re in a home and getting a bundle product from du then the television you are getting is an OSN product. I don’t really care whether I get a customer through wholesale or retail.”

What’s your view on the illegal downloading of TV shows and movies – is it not impossible to put the genie back in the bottle now we have such a tech-savvy population so deeply engaged with the ‘grey market’?

“It is not impossible. Let’s not sugarcoat it; piracy is theft of people’s property. We are fighting strongly as an industry to protect intellectual property and we are having significant successes in the courts. Governments in this region, particularly in the United Arab Emirates, are also taking a leadership position on this.

“It’s not just about the major broadcasters losing profits. It’s actually about our ability to invest in the growth of the industry. We have to create world-class soft skills, technical skills and employment – and piracy dampens that. The impact is not just on companies but also on the economy. Together we will fight that fight and we will win so that people recognise the voracity of intellectual property. It is not a victimless crime, there are consequences.”

Do you think the virtual reality audience experience will develop rapidly now?

“A lot of money is going into VR developments. Like a lot of technology at the start, it can be a clunky experience. It will continue to evolve. But it’s probably more akin to the gaming world than the broadcast world.”

It is fair to say that your company is the dominant traditional entertainment force in the Middle East and North African region. How many countries are you in now?

“We license content across 24 countries, from Morocco to Iraq. Our predominant markets though are the Gulf states.”

But do you have expansion plans beyond the MENA region?

“The opportunity in the region is still huge. Pay TV penetration is still very low because it really only started in 2009, so that’s where our focus will be in the coming years.”

Do you plan to go into Iran when the country opens for business, if sanctions are lifted next year?

“We have rights for Iran that we are currently not able to leverage because of the restrictions. It’s a market that appeals to us. It’s very sophisticated and very affluent. If and when that market liberalises and the restrictions are reduced then we will be operating there.”

How many subscribers do you have now?

“We have in advance of a million subscribers and in 2014 we increased our revenue by 24 per cent so it’s a rapidly growing business.”

Changing topic, the censorship laws in relation to entertainment in the United Arab Emirates are pretty clear. How does this affect your approach at OSN, is it a real headache for you?

“It’s not a headache at all. Wherever you are in the world, broadcasters have to make their products appropriate for the social norms of the region they are operating in. If you are broadcasting network television in America, you cannot show any nudity whereas you can show levels of violence that in the United Kingdom you can’t show before 9pm at night.

“Every market has its requirements but it is a relatively light-touch. The regulators in this region take a forward-thinking view in relation to editorial censorship. As a pay TV operator, we have parental PINs on the box so there are already controls. Because we have that sophisticated level of control, the regulators take a view that the requirements are less than they would be for free-to-air where everything is being blasted out to everyone. There’s no overt influence on our processes and there’s no imposition on our business.”

How have you changed the business model in your five years at the company?

“Well, it has evolved in that we have increasingly focused on localised content. The biggest change has been bringing our Arabic drama and entertainment quality up to a similar standard to our western content. We’ve brought it up to par. That is something I’m very proud of.”

The tech companies now adopt a ‘mobile first’ approach to product/content development. Will you increasingly work along those lines in the future or will the big-screen TV always be the dominant force for you?

“It’s going to be mix and match. The linear screen will remain our predominant distribution means but we will be driven by consumer demand. We have to cater to all of our consumers and whatever they want to do.”

Social media is now a major source of entertainment peer sharing but I notice you are not tweeting on Twitter. Is there any reason why?

“I follow but I don’t tweet. Social media is important and needs to be used wisely. On a daily basis, I read what the journalists I respect across the world are doing via Twitter. It’s about personalising your media experience.”

You are launching an Arabic version of the successful American satirical show Saturday Night Live next year. Isn’t that a risky move given the cultural sensitivities and taboos in the region?

“Again, we will ensure that the programme conforms to the social norms of this region. We are not about trying to inflame any attitudes. We are very respectful but at the same time there is an opportunity for us to take broadcasting where free-to-air can’t go. The regulators accept there is a different standard for media where you can control access to the signal and the distribution.

“We have great expectations that the programme is going to be hugely successful. Comedy is underserved in this region and this provides a fantastic opening for a good humoured view on life in the region.”

The rights for sporting events like football grow ever more expensive every year. Is this price inflation sustainable or will it soon become uneconomical for broadcasters to purchase such rights?

“You have to differentiate between football and the rest of sport. We actively engage and invest in sport. It is true to say that sports rights are escalating in value where there is an economic return.

“But in this region we have idiosyncratic operations whereby a couple of the sovereign-backed broadcasters are taking a view that they will pay uneconomic rates for football rights with no hope of ever getting a return. That’s not a game that I will play.

“I would love to have the premium football services on our screen but I’m not going to pay uneconomic rates simply so that I can put my badge on the carriage, it’s unsustainable if you are operating a traditional economic model. We have to run our business to make sure that we are able to grow it.”

Technological disruption is nowadays a threat to most traditional industry players. Is that the case with OSN?

“What’s happened is that we all now live a digital life, that means technology. In broadcasting that equates to choice. We are able to offer that to the consumer. The technological advances we see are simply expanding choice and we need to keep abreast of that and keep pace with consumer demand. It’s an opportunity, as there is nothing stopping us being the company that delivers. We are not just a linear broadcaster. We sell content but we use technology as the enabler. We will stay at the forefront and we will continue to invest tens of millions of dollars to do so.”

What do you make of the new generation of YouTubers with millions of followers, who are effectively creating their own TV programmes?

“It’s fantastic, a very healthy thing. YouTube is a fantastic opportunity for consumers to be creative. The cost of creativity has changed. Nowadays you can do on your laptop what we did with hundreds of thousands of dollars of technology 20 years ago. There is no barrier to entry in terms of cost so it allows creativity to explode.

“But ultimately, consumers also want to watch high-quality content. The amount of money invested in an episode of Game of Thrones is equivalent to what used to be invested in a feature film. That has to get a return and YouTube doesn’t deliver a return. We all love the YouTube funnies but the broader broadcasting experience is still going to happen on a television set. The two are not in any way competitive.”

On the same theme, there’s a scene in the recent Birdman movie with Michael Keaton where he criticises his daughter’s generation for only having one ambition – “to go viral”. Do you have any sympathy with that view of the youth of today, is it a healthy thing in society for young people to be so addicted to technology and short-form content often lacking in substance?

“You used to be famous for doing something, now you are famous for being someone and digital media has enabled that. The hottest talent is a certain family from the United States who have a reality TV show and all we have been doing is watching them live their rather strange and extreme lives. They are famous simply for being someone.

“You could be pessimistic about that but then I temper it with the fact that the amount of quality broadcast content that is being created has never ever been equalled. The amount of time spent watching television is increasing. House of Cards dispelled the myth that people are only interested in short-form. It created a 13-part series and released it all on one day so that people could binge watch. So the idea that everyone has a short attention span now is untrue because, when you have quality content, people will watch it for hours and hours.”

Does OSN have any sort of official public service broadcasting remit or strategy within its business model?

“We don’t but we do believe we have a public service obligation so we have actively engaged in public health awareness campaigns and won awards for it. We do take our corporate responsibilities seriously. We have to give back to the community and that’s what we seek to do.”

How would you describe your management style?

“I try to be engaging and open. The days of the guys in the white collars sitting up on the top floor hurling down tablets of stone to the people on the floor below are long gone and so they should be. We try to run a more egalitarian operation where everyone’s opinions are valid. Of course, management is not a democracy. It is a benevolent dictatorship. But I hope I put the emphasis on the word benevolent and not dictator.”

Which business leaders would you say have inspired you and why?

“I had the pleasure of working for News Corporation for 16 years and Rupert Murdoch was a visionary. He changed the way broadcasting happens globally. The week before last I had the pleasure of lunching with Michael Bloomberg. He has achieved a lot in life and, through politics and philanthropy, he is putting back into society. That’s inspiring.”

You started out as a cameraman nearly 30 years ago. Would your individual journey to the very top of such a multinational company, where you worked your way up, be possible today when the industry is so professionalised and those in executive management are expected to have postgraduate qualifications and much more besides?

“I would hope so. My entire career, I have gone out of my way not to have a job description. A JD buttonholes you, without it you can do anything. I’ve come up off the shop floor and seen from the inside a lot of the issues. The days of people coming up through the ranks are not gone at all. It’s a great route to take. Yes, there is a professional route to executive management but there is no right or wrong way. It depends upon the individual. Here, we aim to be an organisation that allows people to shine.”

As a cameraman, you filmed events around the Berlin Wall coming down and the first Gulf War. Do you ever miss the cut and thrust of those heady days?

“I’ve been privileged to have a varied career. Being in a boardroom is around about the same as being in a war zone. I get my thrills in other ways – for example, presenting to the board now as opposed to being under fire in another environment with a camera.”

You attended Harvard as a mature student. Did the university live up to your expectations – does it deserve its esteemed reputation?

“Yes, it’s the hardest I’ve ever worked in my life. It was an amazing experience. When you go to an elite business university, the real benefit is getting access to the people who are teaching. They are people who have been at the forefront of business decisions, the best in the world. The course I did was all based on case studies of real companies with real problems that you had to identify. I learnt that most businesses, whatever the industry, have similar issues to deal with.”

How many employees are there at OSN and how many of them do you know personally?

“We are just shy of 2,000 and growing. I couldn’t tell you how many I know personally but I try not to lock myself in my office. It’s the age-old thing they teach you at business school of management by walking about and I try to do that.”

What are your favourite shows and films, and why?

“I like well-written dramas with great characters so shows like House of Cards, Gotham, True Detective and Game of Thrones. I just watched Spielberg’s new Cold War movie over the weekend Bridge of Spies. It’s beautifully written with strong characters.”

To conclude, aside from watching such programmes, how else do you relax outside of work – what are your favourite hobbies; I heard that you like sailing a great deal?

“I am more floating than sailing but I have the luxury of having a nice boat that I can go and escape on. I love outdoor pursuits, I’m a scuba diver and I love hurtling down snow-covered mountains with pieces of fibreglass attached to my feet. I’ve even got a piece of steel in my leg from skiing where it went wrong once.”

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