Arab youth is driving an evolution of the Middle East media market, which is poised to be one of the world’s fastest growing, with rapid digitization, growth in population size and consumer spending far above the global average. The Middle East and North Africa (MENA) media sector is expected to grow annually by 7 per cent from 2014 to 2019, with the value of the end consumer media market rising to $21.5 billion in 2019 from $15.5 billion this year.
This evolution of media in the Middle East is being driven by cultural changes in consumer behavior, resulting in new and significant opportunities in the sector.
First, those who grew up with the internet, the Arab Digital Generation, are changing the way that people both consume and create media. They are increasingly rejecting global content that has been repackaged; instead, they want content that speaks to their lives, experiences, and perspectives. When they have not been able to find it, they make it themselves.
Second, the growth of the media industry will be fuelled by premium Arabic content. Although Arabic speakers account for 5 percent of internet users worldwide, less than 1 percent of websites are in Arabic. Even more than Arabic content, media consumers want local content. The issues related to lack of local talent and funding are being addressed, removing this barrier to meeting demand for Arabic and local content.
Third, mobile technology is ubiquitous. The mobile market is one of the fastest-growing segments in the Middle East. Smartphone penetration in Saudi Arabia and the UAE has surpassed 75 percent of the population, with more than 55 percent of users accessing the internet every day on a smartphone. Already, consumers are more likely to play games and access social networks on a mobile device than a laptop or desktop. This has long-term implications for consumption habits. It should be a top priority for media players to have mobile centricity as an integral part of their strategy.
Fourth, paid models for premium content will flourish. Analysts have found that leisure activities in key Middle East markets (Algeria, Bahrain, Egypt, Jordan, Kuwait, Morocco, Qatar, Saudi Arabia, Tunisia, and the UAE) represent only 2.4 percent of consumer expenditure, compared with 9 percent in the U.S. Consumer spending on media in the Middle East is expected to grow at a significantly higher rate than that in most developed markets, driven by the proliferation of digital content, demand for on-the-go content, and more focus on premium local content. Again, the Arab Digital Generation is at the forefront of this trend, being the first adopter of subscription-based “over-the-top” sites (which use the internet to stream content directly to devices), the primary user of e-commerce and the main consumer of paid games.
Gaming in the region is growing faster than the global average, exceeding even other fast-growing emerging markets such as Russia, China, and South Korea, and is expected to nearly triple in size in the coming years—from $1.6 billion in 2014 to $4.4 billion in 2022. Mobile will become the dominant platform for gaming, and consumers will increasingly expect international players Arabize their content for the region.
The audio-visual content market in MENA will, most notably, experience a transition to paid media. Pay TV is forecast to grow at 10.3 percent per year, compared to ad-based TV’s 7.8 percent. Satellite TV continues to dominate the sector, accounting for more than 95 percent of TV distribution.
E-commerce will be a critical source of digital growth. The MENA e-commerce market was worth $2.3 billion in 2014 and is expected to grow 13 percent annually to 2019. Saudi Arabia and the UAE are the dominant markets, and will continue to make up almost 40 percent of the total market to 2020. Mobile capabilities are increasingly important—mobile commerce is expected to reach 20 percent of e-commerce revenue in 2015, up from 7 percent in 2011.
Global players will need to re-evaluate and reaffirm their presence in the region or risk missing the opportunities. To capitalize on the evolution of the MENA media market, international media companies need to combine the creative energy of Arab youth with their institutional structures to support the transformation of the industry and realize the commercial outcomes. As international media firms and investors consider growth and expansion strategies, the Middle East warrants renewed attention.
About the authors: Noura Al Kaabi is the Chief Executive of Abu Dhabi’s Media Zone Authority, twofour54. Jayant Bhargava is a partner with Strategy&, formerly Booz & Company, based in Dubai.