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Business

Keeping up appearances

by Michael Karam March 1, 2005
written by Michael Karam

What were you doing the moment you heard Rafik Hariri was dead? Ramzi Ghosn was selling his wine at a trade fair in Dubai. “Ronald Hochar [co-owner of Chateau Musar] came over to our stand and told me about the explosion,” recalls Ghosn, who with his brother, Sami, in 1996 founded Massaya, the winery that has been credited with being a major force in Lebanon’s wine revival. “One hour later I was sitting, funnily enough, with Laurent Rigaux, who was the F&B manager at the Phoenicia when it reopened, and I received a text message confirming the sad news. I did not say anything. I wanted to keep it minimal, but I knew we were not selling wine anymore. We were saving the image of Lebanon and protecting a brand, and I don’t just mean Massaya, but Lebanese wine in general.”

Ghosn is painfully aware how perceptions can change. “Before last Wednesday, we felt as wine producers, that we had moved away from the images of war. Sure, people would come to us and ask how things were in Lebanon these days, but the dark old images had gone.” It could be argued that the Ghosns have been partly responsible for erasing those images. The brothers made Lebanese wine cool, with their New-World-look bottles and minimalist labels. Dovetailing nicely with the first genuine stirrings of post-war optimism, Lebanese wine was no longer associated with dusty bottles on the shelf of the local store. It was wine that said summer dining and carefree, beautiful people.

It was also of a good enough quality to attract a trio of high-profile French partners: Daniel Brunier, owner of Domaine Le Vieux Télégraphe, one the greatest of all the Châteauneuf du Papes, Hubert de Boüard de Laforest of Château Angélus and Dominique Hébrard, formerly of Château Cheval Blanc. They all invested in the Ghosn’s Oriental dream, putting their gut instinct, sense of romance, call it what you will, into the brothers’ tiny winery, that five years earlier had been a plot of barren land.

Essentially the brothers needed a comparative advantage and they saw it in French know-how. “They were in for 10% (today that investment has reached nearly $1 million) but it was enough to get started,” explains Sami Ghosn. “The use of their name was the key. Without it, no one would have cared. Still, the French initially had to be convinced by what they were lending their name to. They came and they saw the soil, the grapes and the Bekaa, and they believed in it.” Today, in post-Hariri Lebanon, that confidence is more important than ever. In his office, Ramzi is playing a DVD of the six short films made by the Lebanese government to promote tourism. They cover skiing, food, archeology, beach fun, Solidere’s achievements and, of course, wine. Ghosn is the star, portrayed as the archetypal wine producer, resplendent in linen shirt and Panama hat, striding among his vines looking for all the world like the Man from del Monte.

The short clip, which paints Lebanese wine in a generic Mediterranean aspect, will come as a welcome change to those whose mental stock of Middle East images is comprised mainly of despots, bombs and sand dunes. In fact all the films are seductive. Who wouldn’t want to visit Lebanon after watching them? Ghosn hits the remote and the screen goes blank. “Now we need to sell Lebanon doubly hard after last week’s events,” he says. “Wine consumers have three options: price, availability and image. Image and price are crucial. In terms of image, chaos does not work. Only Serge Hochar [of Chateau Musar] was able to capitalize upon the war and the intrigue.”

The relationship between wine and the internal machinations of a country is particularly tight. “When you choose a wine you are choosing the taste of a country. Look at the Chileans and the South Africans. When Pinochet and his generals were in charge no one wanted Chilean wine. Look at South Africa; it wad almost immoral to serve South African wine.” Now that all these countries have freed themselves of repression they are sexy and so are their wines. Lebanese wine is becoming sexy. We have to keep it sexy.”

The events of February 14 aside, things are getting sexier. For the record, Lebanon’s microscopic (by global standards) wine sector saw 11% growth in exports this year, part of an overall curve, representing a 74% increase since 2000. Massaya’s production levels are also on the rise and now stand at a respectable 300,000 bottles annually. The winery has a strong export instinct and has developed a strong presence in France and the UK (the two countries account for a whopping 70% of all Lebanese wine exports) as well as Canada. As of this year, Massaya has also been probing the equally attractive and relatively untapped US market, especially in New York, Florida, Illinois and Texas. The Ghosns are still uncertain what volumes they will be allocating to the US market, but both are confident that they can break out of the clichéd Lebanese on-trade and into the mainstream as they have done in Europe. Clichés are forbidden at Massaya. From the outset, the brothers and their partners did not call the winery a “château,” despite the Lebanese fondness for classy superlatives. Instead they opted for a New World wine approach, color coding the three main reds – white (Classic), Silver (Selection) and Gold (Reserve). The signal they were sending market was that they were breaking away from the old order. The range is a nod to both Lebanese and French influences

Most people forget that Massaya began life as Arak producers with the, by now ubiquitous and oft copied blue bottle adorned with Arabic calligraphy. The decision to make wine was taken in 1996, with the first forty-eight-thousand-bottle harvest made from locally purchased grapes one year later. Ramzi leans back in his chair. “It was just like the arak,” he sighs. “No one took us seriously. They said we were kids playing. Then, within two years we had French partners.”

Suddenly, the wine venture had taken on a different rhythm. Until then it was romance, now it had an international dimension. Has it worked? “Today we are on the wine list of the Paris Ritz, Le Crillon, the Georges V and the Wine Society in the UK. Massaya is running its own show,” says Sami. “Our partners opened doors, but without the quality, we would not have lasted.”

Over the next five years, the brothers want to expand and plant in areas other than the Bekaa. They want to experiment with TERROIR. And now is the time. New grape plantations have changed the lives of many of the Bekaa Valley’s struggling farmers, who were forced to grow illegal hashish and opium or fruit and vegetables that were severely undercut by those from neighbouring countries. The landscape of many towns like Mansoura and Rashaya is changing as the demand for good TERROIR increases.

Ramzi is at pains to stress that for him and Sami, theirs is a national collaboration. “My brother and I were driving through Byblos, in the area where the Lebanese forces militia wanted to build an airstrip that would serve Christian Lebanon. Sami pointed out that it’s ironic that many Lebanese wanted to be separate, when in actual fact we cannot produce without each other. Our suppliers are Muslim; our financiers are Muslim and much of our hardware comes from Muslim manufacturers. We cannot be on our own.”

March 1, 2005 0 comments
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For your information

A nose for a bargain

by Executive Contributor February 14, 2005
written by Executive Contributor

“In February, get your nose done with a special discount,” ran the ad placed by plastic surgeon Dr. Elie Gharios on his website. With a price of only $700 instead of the regular $900, Gharios had expected a 50% business increase. “Unfortunately,” he said, “business was very slow following the death of [Rafik] Hariri.”

Educated in France, Canada and the United States, Gharios runs three plastic and aesthetic surgery clinics in and around Beirut. He does on average 20 nose jobs, or rhinoplasties as it is officially called, a month.  “Some 80% of the Lebanese have a small bump on their noses,” he said. “That is just genetically determined as such, but most people wish a straighter, more European nose.”

These days, having your nose done is no big deal in Lebanon, where women wear their after-surgery plaster with pride. Yet, plastic surgery is not just for women. An estimated 30% of clients are in fact men. The nose job and other corrective surgeries are big business. Ever since the end of the Lebanese civil war, the number of plastic surgeons increased from but a handful to some 70 today.

The sector matured, as it introduced the marketing and financing methods you find in any sector of the economy. Gharios has offered special group packages for bank employees, for example, and is currently negotiating with a travel agency to create a travel package that, apart from surgery, includes a plane ticket and hotel stay. While it is often virtually impossible to get a mortgage loan in Lebanon, many banks today offer a personal loan for plastic surgery, which allows you to pay for your beautification in installments.

Though surgery may be just business, Gharios does not operate on anyone. “Sometimes people come in with a picture from a magazine, saying ‘that’s what I want,’” he explained. “But I don’t work like that. Beauty is about harmony and aesthetic surgery is about re-shaping and re-fining, not about creating something completely new. ”

World Bank initiative

The World Bank and the United Nations Development Program announced February 8, the 18 finalists in the first round of Lebanon’s Development Marketplace competition, in which social entrepreneurs compete for grants to fund their projects. Entitled “Harvesting Youth and Community Ideas for a Better Environment,” the competition – a first in Lebanon – aims to support local creative initiatives to clean up the environment.

“We chose the theme of the environment because it is one of the main areas of concern in Lebanon where you can really do some good,” said Zeina al-Khalil, a World Bank spokeswoman. “Furthermore, it’s one of the three pillars of the World Bank’s 2004-2008 Country Assistance Strategy. Currently, the Bank has no environmental projects in Lebanon – we have projects in community development, infrastructure, education, but no loans targeting the environment.”

Open to youth groups, local communities, NGOs and academic institutions, the competition offers start-up funding of up to $20,000 per project. The organizers expect between five to right of the finalists to walk away with funds for their projects. “There is a pool of $130,000 in total, from which each winner can receive up to $20,000,” said Khalil. “The final amount granted will be based on the amount requested, and also on whether the candidate can leverage additional funds elsewhere.”

The 18 finalists were selected out of a pool of 87 participants by a panel of independent assessors, on the basis of their innovation, impact, sustainability, replicability and the institutional capacity of the bidders. They included: the Regional Cooperative Union in South Lebanon, the Lebanese House for Environment, the Association of Chouf Cedars, the Lebanese Association for the Protection of Natural and Archaeological Sites in the Chouf, the Association of the Friends of Tannourine Cedars, the Association of Rural Development in Aarsal, the Lebanese Scouts Association, the Cultural Charity Association-Al-Doha Secondary School, the Catholic School of Christ the Savior, the Torch of Passion and Unity, the Lebanese Geological  Society, the Animal Encounter, the Baldati Association, A Rocha, Friends of Nature, the Association for Volunteer Services, the Public School of Haqleet and the Scouts of Lebanon-St. Joseph Group.

The winners will be announced later in the spring, at the Innovation Day, where the finalists will display their projects at a public location before an independent panel of jurors.

More good new for Gemaizeh

Want to know where to drink and dine in Gemaizeh or what artist is exhibiting where? Check out www.gemayze.com. To promote one of Beirut’s most popular areas, the website offers a short history of Gemaizeh, articles written about the area, as well as an event list and the contacts information of café’s, restaurants, galleries, shops and even pharmacies.

“The aim of the website is twofold: on the one hand, to promote my Convivium Projects and on the other to promote Gemaizeh, the area I love,” said Kareem Bassil, the man behind the virtual initiative and sole owner of project development company Bassil Real Estate Investments.

Although technically launched in 2004, the focus then was mainly on promoting Bassil’s real estate developments. In recent months however, the site has grown into a portal that is actually worth its name. “I want to make the site more and more appealing,” Bassil said. “As people like to read about people, soon we will introduce the day-to-day adventures of an English lady living in the area.”

Of course, the young entrepreneur is well aware that by promoting the area and its events, the site promotes living in the area and thus, Convivium, which, derived from Latin, loosely means “living with.” There are currently five Convivium projects, which combine contemporary architecture with the traditional building style in the area. The buildings are characterized by the use of tiles and arches, and they are not higher than surrounding buildings to preserve Gemaizeh’s traditional character, which according to Bassil, is one of the last areas representing “old Beirut.”

While Convivium I and II have been built and sold, number III will be finished by the end of the year. Convivium IV is an old townhouse waiting for a buyer, and V is currently being built. It consists of two boutique hotels and three apartment blocks.

“Even considering what happened to [Rafik] Hariri, I remain positive for the future, so Convivium VI has already been planned,” reasoned Bassil. “It appears on the edge of Gemaizeh and downtown, and will consist of 70m2 to 90m2 studios.

Horeca 2005 still on course

From April 5 to April 8, the 12th annual Horeca 2005 trade fair will take place at Beirut International Exhibition and Leisure Center (BIEL). Some 300 exhibitors have agreed to participate in what is the Arab world’s largest trade fair for hospitality industries. “So far,” claimed Joumanna Damous of the fair’s organizers Hospitality Services, “we only had a handful of cancellations, which has surprised us in a positive way.”

The Jdeidet based Hospitality Services have been organizing the annual event since 1994. With offices in Jordan and Kuwait it organizes among other fairs the International Hospitality Forum in Jordan and the Horeca fair in Kuwait. It also publishes the bi-monthly trade magazine Hospitality News and the bi-annual Lebanon Hospitality and Foodservice Directory.  Why an annual fair in Beirut?

“Because Lebanon is market leader in the Middle East,” said Damous. “Taking into account the 9/11 effect, the amount of foreign investments in Lebanon has reached some $850 million in 2004, 80% of which went to the hospitality industry. Total demand on travel and tourism on services reached some $4.1 billion in 2004, some 25% of which was generated by foreign tourists.”

Exhibitors at the fair vary from hotels, supermarkets, schools and universities to pubs, clubs, caterers, and restaurants. Some 85% is Lebanese and 15% foreign, which is double the number last year. Products and services include equipment – everything from fridges and coffee machines to pots and pans – decorations, tabletops and cutlery, uniforms, linens, bedding and technology. Last year, more than 18,000 visitors attended the fair, which was held in late April. “If we would record a 10% increase in visitors this year,” Damous said, “that would be perfect.”

Tapping into Adma

The SABIS International School is still on course to open a third school in Lebanon after signing a contract with Intered (the managing arm of the SABIS School network) and the Beirut-based Abniah general contractor company at the end of last year. The construction of the school is expected to total $8 million. The move comes as part of a greater international strategy, which will see the opening of five new schools in Syria, the UAE and the United States.

The new school in Lebanon, to be called ‘SIS Adma’, will be located on the hills of Adma and is scheduled to open its doors for the 2005-2006 academic year. “We chose Adma because we believe that there is a need for a trilingual international school in that part of Lebanon,” said Victor Saad, VP of operations and development. “The idea of a school became a reality once we were able to find what we believe is an outstanding location for it.”

The purpose-built campus will span 75,000m2 and will be composed of 10 buildings, including educational facilities, a performance hall and sports facilities, such as an Olympic-size swimming pool and a soccer field. It will offer kindergarten, primary and secondary classes, with the capacity to accommodate up to 1,800 students.

An educational system which started in Choueifat, Lebanon in 1886 as an all-girls school, SABIS now counts 27 schools across four continents – Africa, Asia, Europe and the United States – totaling approximately 25,000 students. It is all part of the school’s strategy of catering to “mobile” families. “We have 29 different nationalities at Choueifat, including children of United Nations employees and foreign companies – families that move around,” said Saad.

The tuition fees for the SABIS schools vary, even within countries. The Choueifat fees, for example, are higher than those of Khoura. “The fees are based on different criteria, most important of which is providing a top quality education to a wider sector of students,” Saad commented. The tuition fees for Adma have tentatively been set to range from $3,600 for the nursery to $4,000 for the upper secondary classes.

February 14, 2005 0 comments
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For your information

On the scene

by Marianne Stigset February 14, 2005
written by Marianne Stigset

According to Pierre Achkar, the owner of the Monroe Hotel and president of the Lebanese Hotel Owners Syndicate, the bomb that killed former prime minister, Rafik Hariri, cost of the hotel district more than $60 million. But, it was the sight of panic-stricken guests fleeing to the airport (in some case not even waiting to pack) that sent a shiver down the spine.

That said, there were some losses that could not be replaced at Lebanon’s own Ground Zero. The St. George’s club lost five employees in the attack, and had an additional 15 employees wounded, five seriously.

The loss of life aside, it was everyone’s nightmare. “Beyond the external damage, you also have the water pipes, the gas pipes, the fire system, a whole number of things – assessing all of this is a big project which takes time,” commented the manager of the Monroe Hotel, who assessed the total costs incurred by the physical damages to the hotel at over $1 million.

Elsewhere, hotel executives who had worked hard to drum up trade on the back of Lebanon’s tourist revival were not impressed. It had become almost personal. “I just got back from Egypt, where I had worked hard to shore up business guests, and I was happy because all these groups had booked with us,” seethed Nada Ghawi, spokeswoman for the InterContinental Le Vendôme, which had an 80% occupancy rate prior to the incident, commented. “Now they have all cancelled. This whole thing makes me so angry.”

The majority of the hotels are likely to have to bear the brunt of the costs themselves because they have not taken the premium insurance policy that protects businesses against acts of political violence and terrorism.

“To my knowledge, the only hotel that is covered is the Phoenicia, which is protected by InterContinental’s global coverage,” said Fateh Bekdache, general manager at Arope Insurance. “It is very rare for hotels to have [this level of insurance] in Lebanon – the policy is too expensive for them, especially in such a tight market.”

Others pinned their hopes on assistance from the government. “Our hotel needs to be entirely renovated, just like it had to be after the civil war,” said Joseph Hanna, the auditor of the Beverly Residence Hotel. “Our insurance has told us it doesn’t cover such incidents. The government should consider us victims, as we were after the war, and reimburse us, so we can restart our businesses again.”

In the meantime, staff members were being put on annual leave. “Security, housekeeping, and engineering are being kept, but the rest of staff has been put on annual leave,” said the hotel manager of the Monroe Hotel. “Keeping them here would only depress them.”

Equally affected were the shops and restaurants surrounding site of the explosion. Within hours of the blast, Rafik Khazen, the owner representative of Awtar restaurant on the ground floor of the Monroe Hotel, was already overseeing the clearing up of his heavily damaged venue. “All the windows are broken, the ceiling is damaged, as is our kitchen,” he said, standing amid the debris. “We’re looking at a minimum of $20,000 to $25,000 in damages here. It makes me feel bad when I see this, because we are a popular restaurant. Now we won’t be opening for weeks.”

Down the road, the employees of the Bassoul Heneine car dealership were also hard at work, with the firm intention of re-opening fast. “We’re working every day from eight to eight, Monday through Sunday to rebuild the shop so we can re-open as soon as possible,” said Henri Nawar, a sales manager. “The store was badly damaged: all the windows were broken, the ceiling, the lighting, the fixtures, the phone lines. The cars were also scratched up and had windows broken.”

February 14, 2005 0 comments
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Lifestyle

Wine Advertorial

by Michael Karam February 13, 2005
written by Michael Karam

Welcome to the first ever Vintage Executive Wine Club. Every month it will be my pleasure to review five wines supplied by Vintage, Lebanon’s leading vintners, from their outlet in Saifi Village. From the comfort of the pages of EXECUTIVE, we will take on a journey of wine, grapes, famous (and not so famous) winemaking families and regions, explain what makes them so special and how you can get the best out of them. 

The wines are selected by the very capable Wadih Riachi, manager of Vintage, whose knowledge of the wines in his shop makes buying and visiting the Vintage shop an education in itself.

This month Wadih has selected three reds, all with a strong Cabernet Sauvignon presence: Michel Lynch 2000 (Bordeaux), Torres Gran Coronas Reserva 2000 (Penèdes, Spain) and one from Lebanon’s very own Domaine Wardy (Lebanon).

Cabernet Sauvignon is probably the most famous red grape on the planet. Typically giving aromas and flavours of blackcurrants, peppers, chocolate and spices, it is planted almost everywhere in the wine growing world, but is most associated with the wines of Bordeaux, in which it is almost universally present and where it has thrived since the 18th century.

The Michel Lynch 2000 is an elegant blend of Cabernet Sauvignon, Merlot and Cabernet Franc (two other hugely important Bordeaux grapes), in the best tradition of the Medoc region of Bordeaux, where the lynch family has been making wine since the 17th century. The wine is firm in the mouth with supple tannins and gives notes of berries and sweet spices. I found it needed at least an hour or two to “open up,” so decanting is advised if one wants to appreciate the understated elegance of this wine.

The Torres family of Penèdes in North-East Spain is one of the powerhouses of the modern wine sector and the Gran Coronas is one of their most consistent performers, made as it is with 85% cabernet and backed up with 15% local Tempranillo, Spain’s most famous grape, giving it a dryer, measured feel in the mouth, while losing none of the Cabernet’s traditional characteristics.

In Lebanon, the Cabernet Sauvignon has replaced the Cinsault as the backbone of the modern Lebanese wine industry. Domaine Wardy’s monovarietal is a fine example of how the grape has taken in the Bekaa With its intense fruits, the wine is big in the mouth and keen to express the formidable terroir from when it came. Salim Wardy has done a fine job with this and his two other ‘mono’ blends and above all represent excellent value.   

For the whites, Wadih has gone for Chardonnays, one from the historic Burgundy vineyards of Joseph Drouhin in Beune and the other from the mighty Frescobaldi holdings in Tuscany in central Italy. The Chardonnay may have become a cliché among today’s white wine drinkers, but this should not detract from its popularity, versatility, consistency and quality. It is a grape that ranks among the most important and widely planted on Earth and, in France, makes some of the finest Burgundies and Champagnes.

Beune, in the Côte d’Or region of Burgundy, is home to Joseph Drouhin, whose ancestors have been producing wines for centuries. The Macon-Villages 2002, comes from an AC (appellation contrôlée) of the same name and is known for its Chardonnay. It is a medium bodied white, fruity with hints of flowers and like most of the whites from the region is drinking well now.

Frescobaldi is one of the most powerful vineyard-owning families in Tuscany, of which Pomino, situated at 650 meters, is a DOGC (denominazione din original controllata e garantita) the highest category of Italian wines. It is no wonder then that the Fescobaldi’s Pomino Bianco 2002, a blend of Chardonnay and Pinot Blanc is one of its best whites. I concur with Wadih: it is indeed long and elegant and bristling with Tuscan spirit. On the nose it is awash with flowers, peaches and pears. It is a wine to savor and is also drinking very well now. 

Till next month, enjoy!

Michael Karam’s Wines of Lebanon will be published this spring by Saqi Books of London. He is a contributor to the Award winning Wine Report and Jancis Robinson’s Oxford Wine Companion.

February 13, 2005 0 comments
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Money Matters

by Executive Contributor February 13, 2005
written by Executive Contributor

Economy and Finance

Riyadh Bank Posts 26% Growth in 2004 Profits

Riyadh Bank, the second largest Saudi bank, released its 2004 figures featuring a growth of 26% in net income to $533.3 million compared to $424.5 million in 2003. The bank attributed this rise in profits primarily to its increase in capital reaching $1.3 billion through distributing one free share for every four shares owned and $4.8 of annual profits per share. It is to note that Riyadh bank, 29%-owned by the government, has witnessed since 1997 a fast growth in profits due to the strategies and plans undertaken by the bank to develop its services and adapt to all the economic developments on both national and international scales.

NBK Records Net Profits of $515m in 2004

The National Bank of Kuwait (NBK), the country’s largest bank and the top-rated Arab bank, posted net profits of $515 million during 2004, compared to $412 million in 2003. NBK’s CEO explained that the growth in profits was achieved amid a strategy of diversification in the sources of income and prudent risk management besides taking advantage of growth opportunities presented by an improving operating environment. The bank’s total assets reached $19 billion at end 2004, while shareholders’ equity amounted to $2 billion. In turn, NBK’s return on equity (RoE) and return on assets (RoA) stood at 29.9% and 2.73% respectively, among the highest worldwide.

Country Profile: UAE

International rating agency, Moody’s Investors Service, upgraded the United Arab Emirates’ sovereign long-term foreign currency debt ratings to A1. The agency also raised the sovereign’s short-term foreign currency ceiling one grade to Prime-1 and currency issuer rating to A1 from A2. The outlook on these revised ratings was given as stable. The agency cited that the main reason behind this upgrade was UAE’s stellar economic performance in recent years in addition to the continued domestic political stability. Moody’s mentioned in its positive commentary that nominal GDP growth has averaged 11% since 1999 and consumer price inflation has remained very low. To a large extent, economic expansion has been driven by the oil sector, which generates about one third of GDP. However, the non-oil sector has also registered strong growth. The agency concluded that both the fiscal and current account positions remain in significant surplus.

February 13, 2005 0 comments
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Special Report

Q&A: Eli Khoury

by Executive Contributor February 13, 2005
written by Executive Contributor

The CEO of Saatchi & Saatchi Levant discusses the political and economic factors impeding the growth of the advertising industry in Lebanon.

Economic recession, political instability and the advertising industry do not make for happy bedfellows. A $100 million industry during the war, the advertising business has steadily shrunk in subsequent years, despite all indicators pointing to the potential for growth. As the best and the brightest among Lebanon’s young advertising professionals turn their eyes toward the Gulf, Eli Khoury maintains that Beirut still boasts more assets than its competitor to the East. Executive finds out what the long-standing head of Saatchi & Saatchi Levant views as his industry’s main challenges and some of the remedies he recommends for the ailing patient.

What do you see as the key challenges facing the advertising industry both at the local and at the regional level?

The future of the industry both regionally and locally is linked to politics. In Lebanon, the current political situation is having a major impact on the industry’s development. It already has had an impact, and it will have even more of an impact should the situation deteriorate. If the situation changes, it ought to have a positive effect. And the same goes for the Middle East – the clash of civilizations, the war in Iraq, the Israeli-Palestinian conflict, terrorism… all of this has direct implications on the business. So how the industry will fare in 2005 and beyond really depends on how the political situation evolves.

In what way has politics in Lebanon affected the business?

Firstly, let’s look at the state of the media in this country. A healthy media is a media that works for its buck. The others will survive regardless, because they are politically funded. Of course we all know who is subsidizing this. Because this industry thrives on competition and freedom of speech, a media, which is in the pockets of the politicians, is not beneficial to it. Nor is the audio-visual law, which was passed. The whole purpose of introducing that law was to prevent regional media from moving to Beirut. And of course there was the whole MTV incident. So these are the issues on the media side. On the advertisers and audience side, i.e. our clients and our clients’ clients, there is the problem of poor purchasing power, which makes advertisers stingier and exclusively sales oriented. To give you an idea, the size of the industry during the war was around $100 million.

And now?

For the year 2004, I doubt the total revenue of the industry was worth much more than $60 to $65 million. And this despite the fact that post-war economic predictions estimated the advertising industry’s potential at up to $300 million. So the impact the political situation has had on the economy has directly affected our industry – advertising is after all frequently considered a luxury, which is the first to go during cut-backs. And the manner in which the politicians have minimized all competition within the media in the country, has had an impact on us. As a result, both the media and the advertising industries are suffering.

Is Dubai then becoming a more attractive location for the advertising industry in the region?

Dubai is trying to take our place, but if you look at its human resources, it’s purely based on expatriates, so this endeavor is economically unfeasible.

Why would an expatriate haven not result in an area bustling with creativity that could compete with Beirut?

Creativity has soul, it comes from within a society. You cannot import different talents and put them in a basket and tell them to be creative. Furthermore, from a financial perspective, there are significant differences between Beirut and Dubai. Having spoken to TV stations that operate in both cities, I have discovered that the difference in operating costs between the two is tremendous. There is a difference between having to import ten talents from abroad and pay them hefty, and having to import your entire staff, down to the person who makes coffee. In Beirut, the basic HR infrastructure is already there, and then you can get fancy when it comes to above-the-line positions. In Dubai, you need to hire your entire staff from abroad and provide them with a house, a car, etc. For an operation such as my own, the difference in operating costs would be at least 180-200%.

Could you not justify the higher expenditures required to set up shop in Dubai with the greater market size the Gulf has to offer?

Dubai is the center for a lot of the business in the Gulf, which allows it to be somewhat of a regional player. But if you look at the advertising industry in Dubai today, it is merely composed of sales ads. I don’t know what the size of this business is, but I doubt it is enough to sustain an entire industry. There is no creativity involved, so the revenue generated will be minimal. The industry there gets by because it is also servicing Saudi Arabia and surrounding Gulf countries, which Beirut does as well. There isn’t much Dubai can offer that Beirut cannot. The difference lies in the fact that in Dubai, they don’t have the political problems that we have here, and there are more economic incentives offered. In Lebanon, that local market is tired.

What is the share of local clients vs. international clients in Saatchi’s Lebanon portfolio?

It terms of volume, local business represents barely 30% of my portfolio. And seeing how money is scarce here, you usually can’t get fancy with many of these projects. The clients are more interested in pushing the product rather than building the brand, at the cost of creativity. There are no big expectations – people just want to address their urgent needs. What worries me with this trend is the impact it has on the new, young ambitious talents that are entering the industry. At Saatchi we try to push for creativity as much as possible, even at our own expense sometimes, regardless of what the client is willing to pay, partly to give these people the opportunity to use their talent to the fullest.  

Is the brain drain among the young Lebanese advertising professionals significant?

Yes it is. They are leaving Lebanon for Dubai, where the pay is better, and there are less hassles. It may not be fulfilling professionally, as the requirements there are low, but the pay makes up for that. Yet I don’t mind this so much, as long as we keep the manufacturing brains. I can export HR, as long as I produce here. The challenge I face in my company is that in order to keep the brains here in Beirut, I need to pay them the same salaries as I would in Dubai. Otherwise I end up with a team of graduates, and one senior manager. This incidentally, is what you will find in a lot of advertising agencies in Beirut. Middle and senior management has been wiped out. In Saatchi, we prefer having more chiefs than Indians. But this requires paying high salaries.

Has branding awareness among Lebanese companies improved?

Let’s face it – they don’t have time for such a luxury. They need to focus on the bottom line, on breaking even. The economic times are not propitious to educate people about branding. Some companies have the money to delve into it, but you also need to create a momentum. If the market is about this, everybody wants to be a part of it. We can’t blame the Lebanese companies – they are probably more ready for this and more apt at it than most in the region, but there are other concerns that need to take priority for now.

There is a tendency here to view advertising as an expense rather than an investment. Is this a concern for you?

To consider the cost of advertising as either a CAPEX (capital expenditure) or an OPEX (operational expenditure) depends on what you are advertising and the nature of the advertising job. Any brand investment is a CAPEX. Any sales investment is an OPEX. Most people don’t want to invest right now – they want to keep advertising within operating expenses, and minimal operating expenses at that. Above the line, mass media, brand awareness campaign is a CAPEX that people can’t give priority to at present.

So it is a question of economic necessity rather than a question of understanding on the part of the advertisers?

It is in part a question of understanding, but it is important to note that you will only see a difference once the accounting principles here change. Of course I will benefit from advertisers understanding that what I do for them is an investment. But the real change will come the day advertisers can, in accounting terms, present their balance sheets to the authorities and say that advertising is part of their capital expenditures. This is the trend in the West, especially in the United States. So clients here need to understand advertising as an investment, but the government and other organizations involved, such as the trade lobby groups, need to create a new accounting principle for the country. Therefore, addressing this issue has a conceptual facet to it, as well as an economic and a legislative one.

The advertising industry is characterized by global consolidation. Recently 5the regional tv industry was impacted by the rapprochement of Choueiry Group and Ara Group How do you view the impact of this development on the industry?

In absolute terms one should be against it, but when examining the situation one cannot help but think that it will be beneficial to the industry for now. It will help stabilize it, and establish some rules of competition. Having this market be dominated by a semi-monopoly provides for a good balance until it picks up.

Do you expect business for the advertising industry to be picking up?

Only if and when the political system changes in this country will the advertising industry grow. Otherwise, you are facing further deterioration. The primary engine of economic growth according to George Soros is mood, it is trust. And I really believe in this. If you feel confident in the future, then you will operate well.

You talk a lot about the need for political and economic change, but the advertising industry in Lebanon has been marred by internal conflicts and feuds. Is it fair to place the entire blame for the current situation of the industry on the political system?

Yes it is. The problems you have in this sector are identical to those you have in any other sector – look at the banking industry, the publishing industry…. It’s a plague that has hit all of our houses. Why? Because there is less money to go around, and therefore competition gets nasty. It’s question of survival. The wrongdoings that have marred the advertising industry are a result of a shrinking market. Granted, the ruthlessness may be accentuated when it comes to the advertising industry here in Lebanon, because we are more visible. But at the end of the day this problem has less to do with the industry than with the country.

Are the Lebanese chapter of the International Advertising Association (IAA) and the local industry syndicate making any difference for the industry?

They are nice social clubs. If you are looking to meet new people, or even a husband or a wife, they would be good places to go to. But they have neither made an impact for the industry here, nor have they shown any willingness to do so.

What has come of the project to establish a body to monitor and establish accurate data on the advertising industry in Lebanon?

We would love to get some accurate figures on the industry, but we don’t seem to be any nearer to getting these than we have been in the past. This is one of the reasons why I labeled local syndicate and the IAA as social clubs. We have a lot of dreams: we dream of an advertising ethics code, we dream of data that provides us with the information we require on the market, we dream of having published figures. Will it happen? Frankly, I don’t know. I won’t be getting involved in this until I see a change in the political system.

February 13, 2005 0 comments
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Special Report

Q&A: Eli Khoury

by Executive Editors February 12, 2005
written by Executive Editors

Economic recession, political instability and the advertising industry do not make for happy bedfellows. A $100 million industry during the war, the advertising business has steadily shrunk in subsequent years, despite all indicators pointing to the potential for growth. As the best and the brightest among Lebanon’s young advertising professionals turn their eyes toward the Gulf, Eli Khoury maintains that Beirut still boasts more assets than its competitor to the East. Executive finds out what the long-standing head of Saatchi & Saatchi Levant views as his industry’s main challenges and some of the remedies he recommends for the ailing patient.

What do you see as the key challenges facing the advertising industry both at the local and at the regional level?

The future of the industry both regionally and locally is linked to politics. In Lebanon, the current political situation is having a major impact on the industry’s development. It already has had an impact, and it will have even more of an impact should the situation deteriorate. If the situation changes, it ought to have a positive effect. And the same goes for the Middle East – the clash of civilizations, the war in Iraq, the Israeli-Palestinian conflict, terrorism… all of this has direct implications on the business. So how the industry will fare in 2005 and beyond really depends on how the political situation evolves.

In what way has politics in Lebanon affected the business?

Firstly, let’s look at the state of the media in this country. A healthy media is a media that works for its buck. The others will survive regardless, because they are politically funded. Of course we all know who is subsidizing this. Because this industry thrives on competition and freedom of speech, a media, which is in the pockets of the politicians, is not beneficial to it. Nor is the audio-visual law, which was passed. The whole purpose of introducing that law was to prevent regional media from moving to Beirut. And of course there was the whole MTV incident. So these are the issues on the media side. On the advertisers and audience side, i.e. our clients and our clients’ clients, there is the problem of poor purchasing power, which makes advertisers stingier and exclusively sales oriented. To give you an idea, the size of the industry during the war was around $100 million.

And now?

For the year 2004, I doubt the total revenue of the industry was worth much more than $60 to $65 million. And this despite the fact that post-war economic predictions estimated the advertising industry’s potential at up to $300 million. So the impact the political situation has had on the economy has directly affected our industry – advertising is after all frequently considered a luxury, which is the first to go during cut-backs. And the manner in which the politicians have minimized all competition within the media in the country, has had an impact on us. As a result, both the media and the advertising industries are suffering.

Is Dubai then becoming a more attractive location for the advertising industry in the region?

Dubai is trying to take our place, but if you look at its human resources, it’s purely based on expatriates, so this endeavor is economically unfeasible.

Why would an expatriate haven not result in an area bustling with creativity that could compete with Beirut?

Creativity has soul, it comes from within a society. You cannot import different talents and put them in a basket and tell them to be creative. Furthermore, from a financial perspective, there are significant differences between Beirut and Dubai. Having spoken to TV stations that operate in both cities, I have discovered that the difference in operating costs between the two is tremendous. There is a difference between having to import ten talents from abroad and pay them hefty, and having to import your entire staff, down to the person who makes coffee. In Beirut, the basic HR infrastructure is already there, and then you can get fancy when it comes to above-the-line positions. In Dubai, you need to hire your entire staff from abroad and provide them with a house, a car, etc. For an operation such as my own, the difference in operating costs would be at least 180-200%.

Could you not justify the higher expenditures required to set up shop in Dubai with the greater market size the Gulf has to offer?

Dubai is the center for a lot of the business in the Gulf, which allows it to be somewhat of a regional player. But if you look at the advertising industry in Dubai today, it is merely composed of sales ads. I don’t know what the size of this business is, but I doubt it is enough to sustain an entire industry. There is no creativity involved, so the revenue generated will be minimal. The industry there gets by because it is also servicing Saudi Arabia and surrounding Gulf countries, which Beirut does as well. There isn’t much Dubai can offer that Beirut cannot. The difference lies in the fact that in Dubai, they don’t have the political problems that we have here, and there are more economic incentives offered. In Lebanon, that local market is tired.

What is the share of local clients vs. international clients in Saatchi’s Lebanon portfolio?

It terms of volume, local business represents barely 30% of my portfolio. And seeing how money is scarce here, you usually can’t get fancy with many of these projects. The clients are more interested in pushing the product rather than building the brand, at the cost of creativity. There are no big expectations – people just want to address their urgent needs. What worries me with this trend is the impact it has on the new, young ambitious talents that are entering the industry. At Saatchi we try to push for creativity as much as possible, even at our own expense sometimes, regardless of what the client is willing to pay, partly to give these people the opportunity to use their talent to the fullest.  

Is the brain drain among the young Lebanese advertising professionals significant?

Yes it is. They are leaving Lebanon for Dubai, where the pay is better, and there are less hassles. It may not be fulfilling professionally, as the requirements there are low, but the pay makes up for that. Yet I don’t mind this so much, as long as we keep the manufacturing brains. I can export HR, as long as I produce here. The challenge I face in my company is that in order to keep the brains here in Beirut, I need to pay them the same salaries as I would in Dubai. Otherwise I end up with a team of graduates, and one senior manager. This incidentally, is what you will find in a lot of advertising agencies in Beirut. Middle and senior management has been wiped out. In Saatchi, we prefer having more chiefs than Indians. But this requires paying high salaries.

Has branding awareness among Lebanese companies improved?

Let’s face it – they don’t have time for such a luxury. They need to focus on the bottom line, on breaking even. The economic times are not propitious to educate people about branding. Some companies have the money to delve into it, but you also need to create a momentum. If the market is about this, everybody wants to be a part of it. We can’t blame the Lebanese companies – they are probably more ready for this and more apt at it than most in the region, but there are other concerns that need to take priority for now.

There is a tendency here to view advertising as an expense rather than an investment. Is this a concern for you?

To consider the cost of advertising as either a CAPEX (capital expenditure) or an OPEX (operational expenditure) depends on what you are advertising and the nature of the advertising job. Any brand investment is a CAPEX. Any sales investment is an OPEX. Most people don’t want to invest right now – they want to keep advertising within operating expenses, and minimal operating expenses at that. Above the line, mass media, brand awareness campaign is a CAPEX that people can’t give priority to at present.

So it is a question of economic necessity rather than a question of understanding on the part of the advertisers?

It is in part a question of understanding, but it is important to note that you will only see a difference once the accounting principles here change. Of course I will benefit from advertisers understanding that what I do for them is an investment. But the real change will come the day advertisers can, in accounting terms, present their balance sheets to the authorities and say that advertising is part of their capital expenditures. This is the trend in the West, especially in the United States. So clients here need to understand advertising as an investment, but the government and other organizations involved, such as the trade lobby groups, need to create a new accounting principle for the country. Therefore, addressing this issue has a conceptual facet to it, as well as an economic and a legislative one.

The advertising industry is characterized by global consolidation. Recently 5the regional tv industry was impacted by the rapprochement of Choueiry Group and Ara Group How do you view the impact of this development on the industry?

In absolute terms one should be against it, but when examining the situation one cannot help but think that it will be beneficial to the industry for now. It will help stabilize it, and establish some rules of competition. Having this market be dominated by a semi-monopoly provides for a good balance until it picks up.

Do you expect business for the advertising industry to be picking up?

Only if and when the political system changes in this country will the advertising industry grow. Otherwise, you are facing further deterioration. The primary engine of economic growth according to George Soros is mood, it is trust. And I really believe in this. If you feel confident in the future, then you will operate well.

You talk a lot about the need for political and economic change, but the advertising industry in Lebanon has been marred by internal conflicts and feuds. Is it fair to place the entire blame for the current situation of the industry on the political system?

Yes it is. The problems you have in this sector are identical to those you have in any other sector – look at the banking industry, the publishing industry…. It’s a plague that has hit all of our houses. Why? Because there is less money to go around, and therefore competition gets nasty. It’s question of survival. The wrongdoings that have marred the advertising industry are a result of a shrinking market. Granted, the ruthlessness may be accentuated when it comes to the advertising industry here in Lebanon, because we are more visible. But at the end of the day this problem has less to do with the industry than with the country.

Are the Lebanese chapter of the International Advertising Association (IAA) and the local industry syndicate making any difference for the industry?

They are nice social clubs. If you are looking to meet new people, or even a husband or a wife, they would be good places to go to. But they have neither made an impact for the industry here, nor have they shown any willingness to do so.

What has come of the project to establish a body to monitor and establish accurate data on the advertising industry in Lebanon?

We would love to get some accurate figures on the industry, but we don’t seem to be any nearer to getting these than we have been in the past. This is one of the reasons why I labeled local syndicate and the IAA as social clubs. We have a lot of dreams: we dream of an advertising ethics code, we dream of data that provides us with the information we require on the market, we dream of having published figures. Will it happen? Frankly, I don’t know. I won’t be getting involved in this until I see a change in the political system.

February 12, 2005 0 comments
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Special Report

Reality TV hits the jackpot

by Marianne Stigset February 12, 2005
written by Marianne Stigset

Love it or hate it, reality TV is here to stay. Arab media has jumped on the bandwagon that has revolutionized the global television industry, and is sweeping the advertising, telecom and consumer industries along in its wake. Despite misgivings about the suitability of applying Western concepts, such as Star Academy, to a region characterized by deep conservative and religious tendencies, the shows have succeeded in attracting record audience ratings from the word go. As it enters its third year on Arab TV screens, the industry is charging full steam ahead, developing new concepts, increasing production budgets and cashing in on multiple revenue streams. But will the new phenomenon of reality TV survive the pressure of constantly reinventing itself to maintain audience interest, whilst keeping conservative critics at bay?

A star is born

A long-standing feature on Western television screens, reality TV in the modern sense of the concept was first introduced in the United States in 1973 with the PBS series An American Family. Twenty years on, the genre gained mainstream popularity through MTV’s Real World, generating a slew of variations on the theme: reality game shows, reality dating shows, reality celebrity shows etc. Reality TV rapidly found a niche, catering to people’s attraction to voyeurism, the cult of celebrity, the desire for a new form of entertainment and the ever-growing opportunities for interactivity with audiences offered by modern communication technology.

By spring of 2004, 12 of the top 20 shows among 18 to 49 year olds that aired on American broadcast networks were unscripted, according to the LA Times. With viewing figures for shows such as The Apprentice, averaging close to 20 million, advertisers were no longer in two minds about associating themselves with the controversial programs. The shows are returning season after season and franchises are being created, giving reality TV both acceptance and predictability – two mouthwatering characteristics for advertisers. For CBS’ Survivor, 30 second advertising slots now go for over $400,000, putting it in the mega-league of top grossing programs.

From Real World to Miss Lebanon 2003

By spring of 2003, reality TV hit the Middle East. Future TV bought the license for Pop Idol from the British company Fremantle Media, turning it into Super Star, LBC launched its own concept: a reality TV beauty pageant, in the form of Miss Lebanon 2003. Both shows were instant hits, drawing viewers by the millions. For the finale of the first Super Star, 4.8 million viewers throughout the Arab world voted for their favorite contestant.

“In a rare moment in the history of the Arab media, a sense of influence and involvement has been given to the people, where their votes determine the outcome of the show,” Abed Al Rahman Pharaon, an analyst with Arab Advisors Media, commented in a report on the program. “Consequently the popularity of this show has been amplified, and viewer numbers has augmented tremendously.”

The success bred followers: franchises for Star Academy and Survivor were soon bought up by LBCI, the former going on to surpass the popularity of the network’s pioneering reality program.

“People in the Arab world love singing and dancing, which has made Star Academy the most popular show by far,” explained Ronny Jazzar, manager of AVM, which handles advertising for LBCI in Lebanon, and the producer of Miss Lebanon 2003.

The finale of Star Academy in February 2004 was watched by 48.8% of the Lebanese television audience.

“It’s been successful in part because of its social revolution aspect: boys and girls living under the same roof is very new by Arab standards – it gives it an image of coolness and tolerance,” said Naji Baz, manager of Star System, which handles the post-show careers of the Star Academy contestants and the sales of accessories related to the show. “Furthermore, for a show like Star Academy, every country has its own national champion, so you get the ‘international soccer effect,’ with everyone watching to cheer for their country’s representative.”

The revolutionary aspect of the shows has been significantly dampened so as to suit the social codes of 22 Arab countries. In Star Academy, men and women are lodged in separate areas, with segregated bedrooms and bathrooms. Alcohol, cigarettes and public displays of affection are out of bounds, and proper attire is de rigueur. It’s still a far cry from the steamy jacuzzi scenes and late-night bedroom escapades familiar to Western television audiences.

Arab producers are also coming up with their own concepts, which are being sold back to the West. The upcoming CEO on the Infinity channel, which pitches 10 budding entrepreneurs against each other in a bid to win $250,000 to fund their own business venture, has already sold its franchise to Indian producers, and is in negotiations with producers in Australia and the United States, according to executive producer Ziad Batal from Media Group.

As Batal sees it, reality shows have now become a fixed feature on the Arab scene. “Everybody is getting on the bandwagon, because these shows have proven themselves,” he said. “They are not a fad anymore, they have become the norm.”

High production costs

Part of the initial appeal of reality TV for Western television networks was the low production costs entailed. Recruiting a group of odinary people to live together under camera surveillance, as in Big Brother, was a low budget operation. Yet with growing competition and increasing airtime share, the production costs of the shows have rapidly risen.

“Production costs of reality shows might have been cheaper than scripted shows initially, since you don’t need to pay actors for example, but they are rapidly becoming expensive,” said Batal. “The CEO show is costing approximately $100,000 per episode – we’re incurring a lot of costs through all the activities we are getting the participants to partake in, but we are not skimping on costs – we’ll pay what we need to in order to produce quality TV.”

In the case of CEO, the producers of the show, Media Group, and the network, are splitting the costs. For LBC and Future TV, production is generally made in-house, and the costs are carried by the networks. Star Academy and Survivor cost between 10 to 15 times more than LBC’s other programs. Super Star is incurring a similar dent in Future TV’s budget.

“Between the franchise license, the royalties, the huge production costs involved in casting all over the Arab world, flying all the contestants in and hosting them for five months … we are looking at over $2 million in total production costs for the 19 episodes of Super Star,” said Claude Sabbagha, marketing manager for FMS, Future TV’s advertising agent.

Yet surpassing the increasing production costs are the growing revenues. Advertising alone covers production costs in their entirety. “We are really making a lot in advertising revenues – they exceed the production costs of $2 million by far, we are talking revenues in the multimillion dollar range here,” said Sabbagha, who was not alone in his reluctance to divulge total revenues.

An advertising magnet

Success on a regional scale, continuing hype and a capacity to target the demographic category of choice for many brands has advertisers signing up in droves. “Star Academy has been a success because it is reaching the younger generation,” said Jazzar. “It’s the first time Arab TV successfully targets the 15 to 25 age bracket, which is not reached easily.”

“All the major brands are willing to pay for spot advertising on these shows,” said a media manager from an international advertising agency in Beirut. “They follow the shows’ ratings and see that they do well.” Rising alongside audience ratings are the prices of the advertising slots for the shows. Although not in the same league as US rates, 30 second ad slots for Arab reality TV run from $7,000 to up to $20,000.

“Advertisers are now willing to pay five to 10 times more than what they did initially,” said Batal.

Yet the real big spenders come in the form of sponsors, be they exclusive or co-sponsors. Exclusive sponsorships with the top international shows come in the form of regional package deals and remain the preserve of major international brands.

Lipton was the exclusive sponsor for Super Star during the first two seasons of the show, a contract Ford has now taken over. Star Academy was initially sponsored by Nescafe, and now has Pepsi as its sole sponsor.

“Sponsoring gets really expensive, and as it entails regional deals, they are only really worthwhile for major brands that are sold internationally,” said Karim Mansour, account manager for Grey Worlwide, which represents Pampa, one of Miss Lebanon 2003’s main sponsors. “For a product such as Pampa, entering a multi-million dollar deal to sponsor a show such as Star Academy is not worth doing, seeing how our product can’t be found in Saudi Arabia, Yemen and some other Arab countries. For a product like Pepsi, which has the biggest market share of carbonated drinks in the region, it definitely is.”

Both the television networks and the brands remain tightlipped about the size of the sponsorship deals, yet industry insiders evaluate the Lipton deal at $1 million for the first season and $5 million for the second season of Super Star. The Pepsi deal has been estimated at $4 million. Other products choose to become co-sponsors, at a lesser price, but still benefiting from significant exposure.

“You get a lot of mileage out of sponsoring these programs, a lot of exposure” Mansour explained. “The logo of your product is featured at the end of every promotional spot for the show, you get regular ad spots during the program, with certain deals you are also offered airtime on other shows and as a main sponsor, your product will be placed in the show, so on Miss Lebanon, the girls were seen drinking Pampa.”

Product placement – a long standing feature in Western advertising strategies – is gaining ground through the shows. Media Group is now opening a separate department to handle such deals for its shows.

Additional revenue streams

A large part of the appeal of reality TV shows is the interactivity with the audience. Encouraged to text in comments and vote for contestants by phone or over the internet, viewers become an inherent part of such shows and are given a sense of empowerment.

The Arab Advisors Group reported that during the first season of Super Star, “the two finalists were from Syria and Jordan and the GSM operators in both countries turned it into a sort of national duty to vote for the compatriot. According to the (Future) TV station, 80% of the votes came from Jordan, Syria, and Lebanon,” the countries from which the semi finalists came from. Companies such as Intercom Media and Cellcast are brought in as mediators for the networks to negotiate deals and shares with mobile phone providers throughout the region.

Although representing a smaller share of the total revenue – according to Sabbagh, 75% of the revenues for Super Star come from advertising, and 25% from phone calls – telecommunication could reveal itself to have significant future revenue potential

“Phone calls and text messages represent a huge revenue potential,” said Batal. “Both Star Academy and Super Star have generated millions in SMS revenues.”

Following the season finale of the first season of Super Star, the Arab Advisors Group wrote that “the true super star may indeed be the mobile operators that grossed, along with Future TV and the VAS service provider, over $4 million in voting revenues alone.”

Another revenue generating industry on the sidelines of the shows is the sale of accessories. The success enjoyed by the shows have turned them into internationally renowned brands, thereby making it worthwhile for the networks to produce accessories related to the program or team up with other consumer products. “We’ll be launching a huge merchandizing campaign, teaming up with renowned brands such as Mont Blanc to make CEO pens, CEO diaries, products targeting the niche we have found with this program, which is the corporate world,” said Batal.

The risks ahead

Although tremendously successful from both an audience and a revenue perspective, the reality TV industry in the Middle East is not without its risks. The shows are kept in check by the conservative forces in the region, which can go as far as ensuring that a show is cancelled. MBC’s Arab version of the popular Big Brother show, casting 12 participants sharing an apartment on Bahrain’s Amway Islands, caused such a public outcry that the show was pulled off the air less than two weeks after its premiere.

For some advertisers, such controversy has served as a disincentive to attach their product to the shows. In enumerating the reasons why Nescafe chose not to renew its sponsorship deal with Star Academy, Fida Yared, media planner at Media Insight, which handles the Nescafe account, said: “Regionally, the program did not go down so well in certain areas. People reacted to the idea of boys and girls living together in the same house, which is one reason why Nescafe chose not to continue sponsoring Star Academy.”

Boycotts of the show have also affected the telecommunication side of the industry, most recently in January 2005, when Saudi Arabia’s main mobile phone operator, state owned Saudi Telecommunications Company, announced it was blocking its 9.5 million customers from texting their votes during the second season of Star Academy, on the grounds that the show did not “match the values of the Saudi culture.”

Remaining innovative whilst respecting local culture and religious values will be the challenge ahead for the reality TV industry. Although off on a good start, the networks have no time to rest on their laurels. “By their third season, the novelty of these shows wears off – generally, you are not going to get the same viewers watching season after season,” warned Batal.

Yared concurred. “The main reason why we decided not to renew our sponsorship of Star Academy was because we didn’t expect it to be as big of a hit again,” she said.

In the US, the reality show graveyard is steadily filling up as viewer ratings fail to match expectations, prompting CNN to predict that the heydays of the genre are coming to an end. A multi-million dollar industry that has taken the Arab world by storm, reality TV still needs to prove it has what it takes to be a ‘survivor’.

February 12, 2005 0 comments
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Special Report

Media commentary

by Thomas Schellen February 12, 2005
written by Thomas Schellen

Once, responsibility was not the big thing in serious media, and serious media were those British newspapers that took you two minutes to fold into a readable format while taking the train to work. Today, successful advertising agencies are serious media, responsibility is what all serious media aspire to, and Middle Eastern journalism is ethically challenged.

Are regional media going where the consumer wants or where special interests herd them. It is not an overt theme. Special interests are by and large an open secret: everybody knows it goes on but nobody really  tries to do anything about.

Take the recent libel case reported in the London Guardian in which Sheika Mouza, wife of the Qatari emir, Sheikh Hamad Bin Khalifa Al-Thani, filed a libel suit against the largest daily in post-Saddam Iraq, Azzaman, published by Saad Al-Bazzaz. During the trial in British court, papers were presented to show that Al-Bazzaz had received £2.5 million by bank wire from Saudi Arabia, presumably to finance the paper, which was established in London and then moved to Iraq after the fall of Saddam Hussein. Media reports in Qatar suggested that certain Saudi officials, angered by the Sheika’s initiatives in furthering women’s education, used the funds to press for the printing of the slanderous material. While conceding that Azzaman, when still based in London, had indeed libeled Sheika Mouza, the lawyers for Al-Bazzaz denied that the paper and its owner had been involved in a propaganda plot instigated in Riyadh.

Consider it an example of the not-so-uncommon special-interest media activities in the Middle East. Anyone in this region who would be honestly surprised by the thought that one party could covertly finance a media published in Europe or elsewhere by a willing propagandist and use this tool to undermine the name of another party would have to be oblivious to the region’s habits of intrigue and disinformation. These patterns have been etched into the history of Arab journalism for about 50 years.

When Egyptian journalist and activist Saad Ibrahim told a Beirut media conference last year that the credibility of Arab journalism had waned and vanished in the same degree to which the region’s media of that epoch had been willing to distort the realities when proclaiming constant victories in the fight against the state of Israel – he harvested anything but unilateral consent from Lebanese journalists in the audience. Ibrahim linked the failing honesty of Arab media to the pressures from governments to the lies of the past. Did he overstep a taboo line?

In discussing the region’s special-interest journalism, one has to accept that loyalty to persons carries an image of normalcy and honor in Middle Eastern culture. This perception of the virtue of loyalty may weigh in favor of partisanship when individual journalists and entire media organizations tend to discount the concepts of impartiality and relentless pursuit of facts. Thus, journalists and media owners in particular have to ask very carefully what is to be gained and what is to be lost by prioritizing loyalty – which is perhaps the same challenge American media faced frequently during the war on Iraq.

But this constellation of priorities can never allow for media to knowingly condone outright lies or even concoct them and it cannot be an answer to the problem of special interests – particularly the kind of special interests that are motivated by sheer greed, cowardice, or foolish disdain for essential human dignity. If some media sell out for such despicable reasons, it is the duty of all other media to stand up to their malice. The only other option is to cease being media. To achieve this, media in the region have still a long distance to cover.

Another claw at the throat of Lebanese media is the absence of transparency in addressing special interest problems within the profession. A leading example is the accreditation of journalists through the Order of the Press. It is a well-known and thoroughly unhealthy situation that qualified Lebanese journalists have for years been unable to gain entry into the syndicate of journalists at the press order. But there has never been an OFFICIAL explanation. 

Under the table, the conspiracy theory is that a single large secto-political interest group rigged the game by registering a bunch of new print publications. Admitting new journalists freely to the professional organization, so goes the theory, would give this group the opportunity to have excessive numbers of its followers to be accredited and subsequently gain dominion over the syndicate.   

The allegation is not so implausible that it could be dismissed lightly. Stranger things have happened in Lebanon. However, the people who should be able to clarify the situation – media people the lot of them – would not do so. When asked about the causes of the accreditation blockage, media leaders from the two branches of the press order and from major newspapers repeatedly seemed curiously non-committal. Some paid lip service to the need for change of the situation, others just played out the lamest of excuses. None seemed very interested to press the matter and go on record with statements that would open the issue to journalistic investigation.

Balance of precarious powers on the small Lebanese stage is the paradigm of coexistence. It would be naïve to expect the established media to seek direct confrontation with irrational forces powerful enough and perfectly willing to control their existence. This is the kind of thing that revolutionary media do in novels and movies but if it happens at all in real life, it is a slow and arduous going . Consequently, the direction of politically effective Lebanese media for some time to come must be expected to be dependent on special interests rather than reader interest. In this scenario, the problem of economic interests looks like a temporal nuisance.  

Here now is one question to ask: how does this lack of media accountability, transparency and integrity affect media consumers? The obvious answer is, it drives intelligent readers and viewers away. This is the moment to shift to a larger horizon, by taking into consideration the situation of the mass media at large and risking another look to the online world and its meaning for the media.

Check the blog – the current whole new phenomenon of online communication. Short for web-log, a blog is essentially a personal internet homepage oriented towards ongoing dialogue about topical or personal content. A blog is low-cost, can be continuously updated with material, and alerts the network to new postings. Blogs attracted about 32 million readers in the US in 2004, according to studies published in December (at the same time, 58% of the US population doesn’t know what a blog is).

In 2004, blogging rose to fame in the US when bloggers uncovered journalistic inaccuracies by mainstream media. Blogging is now being associated with “grassroots” or “participatory” journalism, phrases stipulating that the blog is to the modern individual what Gutenberg’s press was to Martin Luther, the door granting entry to publishing.

Blogs will be the absolute thing for perhaps a few years and in the longer perspective, the idea of participatory journalism has yet to answer many questions. But the amazing involvement of bloggers in political and civic responsibility is a contra-indicator to the idea that shrinking newspaper readership (which is a universal experience of print media) can be blamed on the general dwindling of civil virtues.

If people don’t read newspapers or magazines, it’s because they are not interesting enough. Stakeholder trust is the working capital of any media. It makes a qualitative but perhaps not so much a quantitative difference whether media organizations deny their main stakeholder basis – their audience – because they are stuck on outdated models or are slaves to the desires of special interests.

The future of the media is stakeholder responsibility. All parties have to take their roles and influence more seriously and think of the consequences of what they do. Newspapers, media and advertising industry have one big, shared responsibility in this: listening to the audience. It may be too idealistic to be for real, but at least in the way of a better vision it could happen that greater demand for quality journalism, formulated eloquently by the very real sophisticated media audiences of Lebanon, whether using blogs, letters to the editor, or any other means of proactivity in communication, would add significant momentum to the demise of special interest tyranny from the media domain here.

Participatory journalism in this society may open new horizons for journalism and become part of an antidote to also the economic troubles of media organizations here, and elsewhere. The good associate news on the business side is that online advertising – which has once again a positive outlook – and the emergence of corporate blogs in marketing are opening new pathways for media revenues.

NB: For the record, this writer was alerted to the news story on the Azzaman investigation by a blog, maintained by a Lebanese born academic in California under the name angryarab.    

February 12, 2005 0 comments
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Special Report

Media overview

by Thomas Schellen February 11, 2005
written by Thomas Schellen

The Lebanese journalistic media and advertising industry today are sharing a single berth in a slow boat to an uncertain future. It has been a rough ride, and even taking into consideration the most optimistic estimates, it is not expected to turn into a pleasure cruise for at least another 18 months.

With a few positive exceptions – this magazine having the pleasant experience of being among them – the country’s print and even audiovisual media outlets have seen advertising revenue dwindle and hover at unsustainable levels. For at least three years now, adspend on the national level was depressed, and, by best estimates, did not exceed $70 million. The largest share went to television advertising and then to print, outdoor media and finally radio. It is no secret that this revenue should only able to feed one or perhaps two TV stations, less than a handful of dailies and a smallish bouquet of other print media. Yet, a glance at the list of active print media kept at the publishers’ syndicate at the Lebanese Order of the Press shows that there are over 200 periodicals registered and running under non-political licenses. Those with a coveted political license number 30 to 35.

Even more bizarre, is that fact that these figures seem quite modest when compared to the total number of non-political and political licenses on record (including non-operational licenses) at the syndicate, which total 1,400 and 110, respectively. But it is still a considerable amount when measured against the size of the Lebanese market. And it decidedly humongous when viewed against the print media’s share of 25% to 30% of the adspend pie, knowing that advertising revenue is the economic lifeblood of not only broadcasters and magazines but also daily print publications. 

The one daily newspaper with a different recent experience could be Al Balad, which claimed after its first year on the market that its readership reach had grown to nearly 40% of all newspaper readers and over 16% of all Lebanese above 15 years of age. The newspaper said at the end of January that its circulation is about 35,000, a figure about a third below the 50,000 free three-month trial subscriptions it placed on the market in its launch phase but definitely impressive by Beirut standards.

One may want to remember in this context, though, that the ad industry’s professional media buyers here have long grown wary of print-run claims by any media. Liberal inflation of circulation figures is one of the industry’s more notorious habits, even if they are held in check by independent audit firms and liability issues. Professional audit firms in the sector – whose business it is to monitor media – are fighting for a change of these practices in the Middle East, most recently at a publishing conference held last month in Dubai. They never tire to tell publishers that fake circulation muscles only lead to the deflation of rate card values and harm their business in the long run as badly as steroids harm an athlete. 

For the journalism side of many Lebanese publications, the economic reality of the past five years has been shattering. Publishers could rarely afford to invest into newsroom training or staff increases. Numerous magazines were forced to operate with skeletal editorial staff; and at struggling dailies, one finds veteran journalists who were denied salary raises for six or more years in a row.

Although professionalism is not entirely lacking from the trade, the results were discouraging. “Professional journalists do not get support from their employers. Novices lack proper basic training,” assessed Magda Abu-Fadil, director of the Institute for Professional Journalists at the Lebanese American University.

From the employer perspective, these were scary years in which survival took precedence over improvements of quality. From the employee perspective, it was a scary job market in which publishers could dictate conditions. Overall, only the most enthusiastic or longsuffering media owners, editors and journalists seemed able to keep their eyes on the ambitions of delivering authentic journalism. 

What has not helped the situation is the constant onslaught of partisan mentalities at media outlets, invading from both business and political angles. The malaise seems almost hereditary in the political press where more courageous journalists sometimes admitted that over many years they saw no escape from prostituting themselves to those in power. But under their economic pressures, newspaper and periodical publishers – who were justifiably worried over their advertising sales – would increasingly succumb to stroking their ad clients with unwarranted editorial niceties or they might swing to another version of anti-journalism by refusing to cover newsworthy events at companies if ad space was not secured before hand. Media outlets lending themselves excessively to such practices did not only drive their own professional reputation into the lowest basement, they would also give the entire realm of journalism an image of disrepute with advertisers.

The saving grace for Lebanese journalism in the past used to be that media exhibited a relatively high level of integrity. They might have bowed less or more deeply to political and business interests – but they did not prostrate themselves so relentlessly as media in other Arab countries. Journalism practitioners and theoreticists here maintain that Lebanon still enjoys a relative large margin of press freedom. In the words of Abu-Fadil, media here are “not entirely free but reasonably free.”

The diversity of views and open debate of issues in the political publications and audiovisual media indeed continues to thrive around the campfires of Lebanon’s intelligentsia, despite the limited number of political licenses and the odd incidence of intimidation, temporary clampdown of publications and arrest of publishers. Although the intrusions were grave, they were not unbearable for the media, maintained one journalist from a family embedded in the national newspaper culture, who added that the most notorious case, the forced closure of television station Murr TV, followed the letter of the media law, indicating more a negligence in drafting of the law rather blatant and willful abuse of it.   

However, the diversity of Lebanese media should not be seen as a sector struggling towards Volatire’s ideal. Rather it reflects the multi-faceted rivalries of the country’s multi-communal society, noted Ramez Maluf, director of the Beirut Institute for Media Arts, a journalism institution also located at the Lebanese American University. In this perception, media might exist in a frame of diversity but are partisan at the core, which hints that many in the field would find nothing objectionable in seeing their opponents’ freedom of expression curtailed.

This state of journalism in Lebanon also transpires in the preoccupation of the local media with the petty affairs of politics, and this lowers the ability of Lebanese media to garner respect for their coverage of Middle Eastern affairs, Maluf said. As media based in the Gulf region are becoming more active and numerous, they are more successful than Beirut-based journalism in attracting audiences on the Arab peninsula because of their greater coverage of Arab affairs and Arab interests. This is especially visible in the satellite television market, where the news broadcasts by Lebanese channels such as LBC/Hayat and Future are less of a reference than those of Al Jazeera and Al Arabiya, two Gulf-based 24-hour news channels.

Consequently, the fact that job opportunities for graduates of the LAU journalism programs saw an upswing in the last two years was not driven by local demand. For the most recent class of journalism graduates, Maluf claimed most positions could be found “rather easily if they were willing to relocate.”

The remaining area of Lebanese media dominance is entertainment, usually fairly removed from all things journalism. Thus, a batch of young aspiring media career starters here recently considered themselves lucky to have the chance to work on the production of programs like Star Academy, where their responsibility consisted largely of switching cameras on and off whenever the participants in the show would discuss dangerous topics, e.g. politics or religion.  

The reality TV surge of the recent past in Lebanon may fit the national tastes but it still can be expected to taper off and settle in a less prominent space in the entertainment industry. On journalistic terms, Lebanese media thus might find growth in the coming years in their own domestic market and backyard of local coverage, provided that the nation’s political and economic life gains a surer footing following the decisive election processes this summer. This notwithstanding, however, the Lebanese media experience of being the regional benchmark seems on the way out, except for those productions and social publications where the country’s comparative liberalism gives it an edge over other Middle Eastern locations.

Does that mean that the Gulf, specifically media locations in Dubai and Qatar, can be expected to step in to the role of centers in serious journalism? The UAE would certainly like to. When staging last month what was billed as the inaugural Middle East Publishing Conference, officials of the Dubai Technology and Media Free Zone and the Dubai Consultancy, Research and Media Centre enthused full power about their business location when addressing the, by organizer estimates, 300 participants at the event that had been co-sponsored by two international associations for newspaper and magazine publishers.

Announcing in by now habitual fashion another mega-project – this time a $70 million Publishing Pavilion at the emerging $270 million International Media Production Zone in Dubai – the UAE executives dangled utopian numbers in front of publishers by boasting a target potential of 300 million people for print and publishing ventures in the region and throw in another 2 billion potential customers between Tehran and Dhaka.

Dubai may have been “bigging-it-up” at the conference but it was left to a Lebanese, As-Safir’s Talal Salman, to offer words of caution of a profound Arab media crisis, which he attributed to the “emptiness of the political role in the Arab world.”

The absence of real figures was the greatest weakness at the conference, commented Lebanese journalist and publishing entrepreneur Khaled Kassar, one of very few to attend the $1,000 per participant event from Beirut. “I went to the conference expecting to get data and studies about the region, but that was lacking,” he said.

The most meaningful numbers on the Gulf media evolution presented at the event came when Ahmad ibn Byat, director general of the Dubai Technology and Media Free Zone, told participants that publishing activities in the UAE grew by 42% over the past two years, with anticipation of future growth at 15 to 30%. Byat also said that Dubai has been at the forefront of creating the infrastructure and conditions for the expansion of the publishing industry and that publishing has reached a stage of maturity in the Middle East.

This is exactly what sober observers of the media environment from all sides – advertising, publishing, and journalism – in this town doubt. “I have yet to see real press freedom practiced there,” said Abu-Fadil about the Gulf region. The very creation of a free zone is a sign of an anomaly that betrays problems with press freedom, said Eli Khoury, CEO/CCO of Saatchi & Saatchi Levant in an interview with Executive. And Lebanese journalists who had migrated from Beirut to Dubai told of increasing competitive pressures and climbing living expenses in the emirate, but not of increasing press freedom. All that, as true as it rings, does not indicate that the Lebanese media can take it easy.

February 11, 2005 0 comments
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Since its first edition emerged on the newsstands in 1999, Executive Magazine has been dedicated to providing its readers with the most up-to-date local and regional business news. Executive is a monthly business magazine that offers readers in-depth analyses on the Lebanese world of commerce, covering all the major sectors – from banking, finance, and insurance to technology, tourism, hospitality, media, and retail.

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