What Do Chain Smoking & Binge Watching Have in Common?
A question on handling the societal and economic impact of content streaming in a post covid era (focus - Saudi Arabia).
Smoking, pleasant as it is to some and unpleasant to others, has taken an integral part of our lives and social behavior and according to several studies has been associated with serious health issues. All of that did not seem to convince many smokers to quit or to slow down on smoking. In the Middle East, the traditional local tobacco industry regressed over the years leaving the theater wide opened to foreign tobacco companies. Local tobacco plantations either ended up powering the supply chain of foreign tobacco industries or that of the local tobacco industry that mostly became an inferiorly perceived business. Not sure what figures say about smoking and productivity, but some may say that people used to have more focus time in office with a cigarette in hand. After governments realized the cost of smoking on their GDP and implemented a list of measures that was primarily aiming at making smoking a less appealing social habit, smoking became more than ever a social behavior and designated smoking areas become a place to socialize, feel accepted and feel the belonging to a group of people that share this same habit. Not sure if this was a global phenomenon but I couldn’t help not noticing that every time I walked by the smoking area at work the same people were sitting there smoking (sometimes with their coffees) chatting and chilling even in the hottest august days of Dubai. This made me wonder about the economic cost of those regulations translating in lower productivity of “smoker employees” who were spending all those hours socializing outdoors and whose number kept growing for a reason or another!
One day joining my colleagues at the smoking area. I told a colleague of mine about the great experience of having a 65” TV at home. She recommended that I watch a series titled “Breaking Bad”. I went home with the full intent to give it a chance. The days after, I was rushing back home immediately after work to my couch where I would spend an overnight binge watching the series. Not realizing that days and nights of binge watching not only turned me into a zombie but also impacted my productivity, quality of work and quality of living. It was around the same time that Netflix announced its international expansion.
Does the Chain Smoking & Binge-Watching Story end here?
Fast forward few years came the Covid Lockdown. International streamers’ stocks skyrocketed, and people demanded entertainment. They demanded it cheap and that is what streamers are great at doing. Streaming business as well as the demand for content creation (direct productions and acquisitions) exploded. Ad revenue declined and linear TV was impacted.
Many countries including France, Germany, Italy, and Australia among others were (even before covid) attempting to manage the impact of the growing demand on international streaming services and its impact on the local media scene. This situation has been putting pressure on the growth in theatrical and other media content revenue streams and on the availability of talents and crew for local productions. Many countries adopted a mix of measures aiming at bringing back some balance to the content creation ecosystem. France, Germany, Italy, and Australia adopted a mix of policy models for the promotion of local content, including a mix of local content quota, required direct and indirect re-investing in the local market/economy and rules of prominence for local content on international platforms content and other measures.
Here is how each of these measures translate.
Investment: a direct investment in production (partner managed, commissioned and/or acquired content). Direct investment guarantees that a portion of the streamer’s revenue is redirected to the local market with the intention to leverage local content production and potentially elevate its quality. This can be with or without the obligation of having a local content quota. Indirect investment on the other hand, channels a portion of the revenue back to an investment fund that is usually controlled by a governmental body. This may help reduce the ciaos in the market and target investments towards a better planned/prioritized content production, better alignment with public policy goals but previous experiences in the MENA region tells us that this mostly doesn’t help much.
Quota: The objective of setting a quota is to make available on the streaming platform/channel a certain percentage of local content. Then if there was no sufficient supply of local content, that may encourage the commissioning of local production to local producers and make local content available to the local audience and potentially internationally as streamers would want to optimize the local content by making it available worldwide. However, if the local content supply is high and available at low cost, streamers may opt to acquire cheap local content just to tick the box of local content requirement, leaving it with less or no marketing to be almost unnoticed and consequently give prominent position to a better quality and wider range foreign content. Governments can try to impose sub quotas for indie producers or for new content but whereas the local production quality in most of the world is less appealing than that of established markets, the local content is likely to be lost down the content library that can include tens of thousands viewing hours of content. Other issues to consider is the potential unjustified increase in local content cost and availability on local channels and streamers. Looking at the above, it is difficult to determine a rule out of applying one way or the other (investment or quota). Will a direct investment with no quota necessarily lead to fewer but high-cost productions, inflation in rates? Better quality productions? The answer will depend on many elements to factor in the addressable local market and must be assessed in isolation of other experiences in other parts of the world and in isolation of other streamers experiences.
Prominence: The simple one here is the local content prominence (discoverability) on streamers’ catalogue. Giving it a better positioning and a generally prominent marketing position. The bit complex one is prominence through engagement on multiple levels of major local players. Mostly those who have a history of delivering higher quality content, are closer to the public policy of the state and that cater to public interest. An example to this is the French model.
June 23, 2021, the decree on audiovisual media services on demand (SMAD) was published and took effect on the 1st of July 2021. The French Ministry of culture considered this decree “… a historic step in the adaptation and modernization of the financing system for French and European creation, in a context of profound change in the audiovisual sector…”
Under the SMAD
Video-on-demand services must devote at least 20% of their turnover in France to financing the production of European or original French cinematographic and audiovisual works, increased to 25% for services offering films less than 12 months old
The distribution between cinematographic and audiovisual works will be determined by the agreement concluded with the CSA, each genre having to represent at least 20% of the total obligation.
A significant part of the contribution (three quarters in cinema, two thirds in audiovisual) will be directed towards independent production, defined according to demanding criteria that guarantee the maintenance and development of a dynamic French productive fabric, the constitution of an intangible heritage located in France and the circulation of works. Diversity clauses are provided to prevent the contribution from being concentrated on large-budget works or on certain genres rather than others (e.g., animation) …”
The French Ministry of Culture presented that the SMAD:
“will significantly increase funding for European and French audiovisual and film production. It is the first step in an ambitious reform of the funding regime for audiovisual and film creation. It will be complemented by a reform of the funding obligations applicable to television services and a modernization of the media chronology”.
(Publication of the decree on audiovisual media services on demand (SMAD) - Source: French Ministry Of Culture Website - www.culture.gouv.fr ).
Back to the Middle East, most of the Middle Eastern countries have a media ecosystem that lacks at least one main component to taking the industry to the next phase. The scene gets even more complicated when you think digital content production and distribution. There are obstacles and challenges in resolving issues related to access to technology, a reliable network, movement of money, cultural and language barriers, privacy, piracy in addition to security and compliance requirements. When one wants to choose a most favorable medium for streaming business, the pool of choices really narrows down to a couple or a bit more. Countries that have access to technology, capital, a good network and a generally stable economy and political space, mostly have modest access to creative assets and to experienced production crew. GCC countries fall within this category. Saudi Arabia being the one with the biggest potentials.
The transformation taking place in Saudi Arabia generally and in the Saudi media landscape positions Saudi Arabia well to grab the moment and launch a constructive talk with international media players – mainly streamers.
All pieces seem to be falling in place for Saudi Arabia to become the next media (“Asian Tiger”): a) MBC and other Saudi Arabian media companies to start moving to Saudi Arabia (Source: Reuters), this will be the corner stone and building block of the next-generation Saudi media sector, b) A renewed look by the country’s leaders to the Saudi accepted cultural and societal norms, c) A foreign investor’s friendlier ecosystem and a renewed focus on the improvement of processing papers before official authorities. Transforming to digital processing, d) Entertainment sector support, e) Media production related incentives – rebate and other measures, f) Announcement of several initiatives, such as Shareek initiative and finally a set of regulatory and legal changes supporting all the above. But how will Saudi be addressing the societal and economic impact of content streaming growing demand? The binge watching habit, the relatively cheap entertainment cost that VOD presents and the streamers aggressive and AI algorithm-powered marketing is likely to continue increasing the demand on content.
October 20, 2021, the Saudi Communications & Information Technology Commission (known as CITC) released a public consultation on the “Digital Content Platform Regulations Document”. This is part of an initiative by the Digital Content Council aiming at creating engagement with the private sector, empowering entrepreneurship and attracting investors into the digital content sector whilst maintaining the desired protection for the users of the digital content platform. The regulation once issued will bring a major transformation to the manner through which digital platforms (mainly international) currently engage with the local Saudi market. Spot light is also on the General Commission For Audiovisual Media to see whether further regulations will be issued addressing international streamers and audio-visual content production in Saudi Arabia.
The above indicates that a dialogue between the Saudi digital and media regulating entities and international streaming companies is likely to have kicked off, whether directly or indirectly.
A consolidated approach between the Saudi regulatory bodies, Saudi media private and public sector can not only give a powerful position to the Saudi negotiator but would also position Saudi Arabia well to examine the possibility of adopting a localized version of the French model.
This model might be the suitable one to be adopted by Saudi Arabia, provided that such an adoption includes (among others) the French model’s level of clarity in relation to investment/contributions, determines how this additional contribution by the streamers can complement such policy objectives, secures local players fair and reasonable access to IP, addresses the issue of windowing exclusivity and defines a set of clear and well defined criteria for the implementation of such objectives with the ability to iterate from time to time these measure in line with the local public policy goals.
International streamers can with their enhanced local presence in the Saudi market turn to be a great aid to the local economy and to the transformation that the Kingdom is leading. For an instance. Shareek is one of the initiatives where the private media sector and the public sector can work together towards such a transformation! International streamers can through their local presence become an important partner contributing to the success of the initiative.
So far there seems to be a low appetite by international media companies to invest in this important sector in Saudi Arabia but maybe the relocating of Saudi media companies and other entities with regional headquarters outside Saudi into the Kingdom will give a push towards this transformation in the Saudi media sector.
With all the success factors that Saudi has, it is rather odd and somehow not clear what is remaining this shy engagement of international media players in the Saudi media sector.
Maybe we will see a material change in the current direction translating in few to many of the international streamers relocating their regional headquarters to the Kingdom. They might as well work together with major regional players like mbc Group into attaining the transformation and the vision set by the Saudi leadership. This could be achieved through a quantitative increase and a qualitative improvement in the local content production under a new localized version of the French model that would help Saudi attain its public policy goals, without causing any cultural or economic disruption in the Saudi general cultural and media ecosystem.
The risk remains that an unsuccessful dialogue between the Saudi regulatory and the international media companies, will prolong the existing imbalance that is disadvantaging the local industry
The currently privileged position of the international streamers may continue to disadvantage the local media industry amidst an exponential growth in demand for content resulting not only in foreign currency revenues leakage, like that of the tobacco and other industries, but also creating an opinion influence over the Saudi youth (much of the Saudi population). Such influence may not necessarily align with the Saudi public policy objectives.
When does the Chain Smoking & Binge-Watching Story End?
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THE END