Lebanon’s media has tough year but confident of turnaround

Advertising dollars are flowing out, but Beirut

Last year, Lebanon’s media industry went on a proverbial rollercoaster ride far more thrilling and precarious than anything America’s major theme parks could possibly dream up. Next year looks to be equally action-packed, as the sector struggles to make up for $38.7 million in losses sustained during Israel’s month-long war on Lebanon, overcome low advertising revenues and face up to increased competition domestically and regionally.

In business terms, the summer war could not have come at a worse time for the media industry—as indeed for the whole economy—with certain Lebanese TV channels planning rebranding and new print publications launching that would have helped retain Lebanon’s position as a media hub in a region where media growth is amongst the highest in the world. Competition is increasingly cut-throat among the 200-plus channels vying for limited ad spending.

City TV, formerly NBN, had planned to revamp its broadcast schedule and New TV was looking for investors prior to the war. City TV, which sustained $1.25 million in damages, is now gradually implementing changes and is expected to relaunch in January, depending on funding, and New TV, which lost $2.65 million, is still in the same boat as it was in July. Murr TV’s (MTV) planned relaunch was also scuppered by the conflict and is slated to start next year.

Investors fleeing

Production houses saw investors and clients scurrying for the door during the war, and confidence in the lucrative sector—production houses generate more revenue than TV channels—has taken a beating, particularly in regard to foreign investors that had come to Lebanon in droves in recent years to take advantage of the country’s varied geography and educated populace.

Newly-launched magazines such as entertainment guide Time Out Beirut also ceased publication as the country’s reputation as a nightlife and beach hot spot slid off the map. Talks are still underway as to whether TOB will grace newsstands again, the publication having suffered considerable losses after bringing out only four editions. Other publications were also hit and the country’s sole English-language newspaper, The Daily Star, stopped publishing The International Herald Tribune (IHT) and slashed staff salaries by 30%. The IHT is rumored to return in January.

However, although all media outlets sustained financial losses and in certain cases severe damages—Al Manar TV’s studios were leveled by Israeli warplanes—viewing figures soared when the world’s eyes were directed on the July-August conflict. Al Manar’s popularity ranking, for instance, went from 83rd in the Middle East to the tenth slot between July 15-28 according to Israel’s Market Research. Likewise, newspapers have seen increases in readership as people focus on the country’s fractious politics in the months following the ceasefire.

The snag of course is that politics don’t generate advertising revenue. According to ArabAd there was a 40% drop in ad spending during the war; with the economy limping along on half empty, advertising, like consumer spending, is still down despite a tentative peace.

“The best guy to predict the future is a tarot card dealer,” quips Dani Richa, Chief Creative Officer for Impact BBDO. “He’s probably more accurate than me in a country like Lebanon, as the future doesn’t depend on heads of industry, clients or consumers.”

In the absence of prophetic powers, the media is groping in the dark as to what next year will hold.

“The market is operating on a day-by-day basis and advertisers are acting cautiously,” confirms Roger Darouni, Executive Marketing Director for LBC.

But as Richa points out, “Everyone is so committed, over-invested and paid such dear prices that there is no choice but to continue.”

And continue the media and advertising sector must.

Crucially, major production houses have remained committed to Lebanon. Music TV powerhouse Rotana is still operating out of Lebanon and has just opened a Rotana Café in downtown Beirut, although the network moved two channels to Cairo before the war. Saudi Arabia’s MBC, however, said production had actually increased.

“We are staying here in Lebanon. Nothing has changed and we are increasing production with eight shows in Lebanon, two in Dubai and four in Cairo,” says Nadine Tarabay, Commercial PR Manager at MBC Lebanon.

Nevertheless, with foreign investors shying away from Lebanon, knock-on beneficiaries of the TV production business, like equipment rental companies, are feeling the pinch. “Rentals are down, and productions have been postponed. Maybe next year things will pick up,” says Elie Battah, General Manager of Audioland.

Going Orange

Despite a fairly gloomy outlook for the media in general and the instability caused by the political situation, one upcoming media outlet has decided to enter the fray in a rather unusual and daring way.

As can be seen on billboards throughout Beirut and the surrounding areas, Orange TV, or OTV, plans to raise funds through a joint stock company, Al Lubnaniah Lil I’lam, that is open to the public. Starting with a paid-up capital of $2 million, OTV plans to raise $40 million via four million $10 shares to establish a terrestrial and satellite channel, and a holding company that will include a production house that will be a joint venture with France’s Societe Francaise de Production (SFP) if negotiations are finalized.

To Lebanon observers, the colorful name of the channel will immediately be associated with a political party—former General Michel Aoun’s Free Patriot Movement (FPM). And true to form, Aoun came up with the idea of a channel “For the People, By the People” through collective ownership.

So will the channel be yet another addition to Lebanon’s highly politicized media landscape where every channel, radio and newspaper has a political connection of some form or another?

Roy Hachem, the CEO of OTV, says it will not be. “Aoun won’t influence the channel, and it will be independent of the party. I know it’s hard to prove, we need to start transmission and broadcast news,” he says.

What about the color though? “People may ask about the color, as orange, but it’s the only [political] link we have and a color the publicists wanted,” Hachem explains.

Media observers are not as convinced however. “I think the station is portraying a very specific political point, which is clear from the color and symbolic,” says Habib Battah, Managing Editor of Beirut-based Middle East Broadcasters Journal. “I think it will follow a pattern, of a political constituency for a station. There is no reason to believe it will be different, as when you open the first page of their brochure there is a photo of Aoun.”

Hachem assures it will be independent and objective in its delivery of news. “We want something like the BBC. I want to hear people saying—even if not good for the FPM—‘I heard it on OTV.’”

Hachem also points to the different categories of shareholders as a further example of how the channel is not being solely supported by FPM followers.

“Some are looking for a dream, others are serious investors. We have people buying $300,000 to $500,000 of shares,” he says. Supporters, on the other hand, tend to buy between 100 to 300 shares.

As money rolls in through the IPO—$10 million was raised by the end of November—the challenge for the channel will be to attract a broad array of viewers and generate advertising revenue when it launches in 2007. As Hachem points out, OTV already has a head start in terms of guaranteed viewers through shareholders and political supporters, something the advertising industry is equally aware of.

Power to the people

“Letting people own TV creates loyalty before the station even starts—a smart model,” advises Richa. “The challenge is to attract people that don’t agree politically but agree with entertainment.”

But for OTV to grab a 10% slice of the Arab advertising market, as their investment guide says the channel is aiming for, OTV will have to find a careful balance between Lebanon and regionally-orientated content.

“To live in Lebanon as a TV channel, you need half subsidized by a satellite arm, and although OTV might be successful here it’s a lot more trying to compete on a pan-Arab scene with budgets of tens of millions of dollars,” says Richa.

While Lebanese TV stations compete for just $35 million in TV ad spending, other Arab countries advertising revenues are skyrocketing, with Qatar, for example, soaring 60% in the first half of 2006 to $101.5 million for all ad spending. Lebanon only accounts for 5% of the region’s $2 billion ad market.

To remain commercially viable, OTV aims to acquire 30% of Lebanese viewers and, in the long-term, gain 20-25% of the advertising market. To do so, OTV will have to bite into the ad revenue of LBCI and Future TV, which control around 65% of the country’s advertising expenditure.

LBC, however, seems unphased by the prospective competition. “OTV will certainly capture viewership from different TV stations, but LBC’s market leadership won’t be affected,” said Darouni.

He thinks TV ad spending will increase if the political situation stabilizes, a factor all channels, and OTV in particular, will be banking on for 2007.