Saudi Arabia focuses on reshaping media landscape

With more than SR3.3bn ($879.8m) in spending earmarked for culture and media by 2020, Saudi Arabia’s government is hoping to attract significant private sector investment in the development of its creative and entertainment industries. To this end, state agencies are working hard to encourage international investment, talent and media sector expertise in the Kingdom, and they aim to help develop local entertainment businesses and expand their influence across borders.

As part of this drive the Ministry of Culture and Information (MoCI) announced in December 2017 that commercial cinemas will be allowed to operate in the Kingdom for the first time in 35 years. With the first cinemas scheduled to open in March 2018, the government anticipates over 300 licensed cinemas to open by 2030, creating more than 30,000 permanent jobs and more than 130,000 temporary ones. Saudi Arabia’s rulers are also taking significant steps to encourage citizens and residents to find and enjoy new forms of public entertainment in the country. In April 2017 the Public Investment Fund announced it would be the main investor in a new 334-sq-km entertainment city to be built near Riyadh, which is to include a Six Flags theme park, a safari experience and sports facilities. The development, which is due to open in 2022, is designed to encourage Saudi families to spend more of their income at home rather than abroad, and in so doing meet some of the objectives outlined in the country’s Vision 2030 development plan (see Tourism chapter).

State Control

In keeping with other sectors of Saudi Arabia’s economy, the government has traditionally played a leading role in the media industry and is in control of news outlets across all platforms. The MoCI, which presides over the sector, was formed in 2003 with the renaming of the Ministry of Information, itself established in 1963. Prior to that, a number of regulatory bodies had been established in the Kingdom to deal with different branches of the media. According to the MoCI, Saudi Arabia’s first newspaper, Umm Al Qura, a weekly that now serves as the country’s official gazette, was formed in 1925. In 1936 the Council for Advertising and Hajj was formed, and in 1949 the foundation of Saudi Broadcasting was announced by royal decree. A director-general for radio was created in 1955, and in 1959 the post of director-general of press and publicity was established. MoCI staff regulate and license all print, broadcast and online media services.

The Saudi Broadcasting Corporation (SBC) is fully funded and overseen by the government, and operates a number of television channels and radio stations. SBC channels include Al Saudiya, a news and entertainment channel in Arabic, the Arabic rolling news channel Al Ekhbariya and Saudi 2, a news and entertainment channel broadcast in English. The state also runs the Saudi Radio station and the Saudi Press Agency. The MoCI held a monopoly on broadcasting in the Kingdom until the advent of Saudi-owned, pan-Arab satellite broadcasters such as Rotana and Middle East Broadcasting Centre (MBC) in 1987 and 1991, respectively. Pan-Arab pay TV operator OSN is owned by Panther Media Group, which is based in Dubai International Finance Centre, but the equity in the business is shared between KIPCO, Kuwait’s national project company, and Mawarid Group, the Saudi conglomerate, with a stake of just under 40%.

Shaping The Future

The long-term outlook proposed in Vision 2030, and the shorter-term objectives outlined for 2020 in the National Transformation Programme (NTP), are set to have direct benefits for the media industry in Saudi Arabia, with more than SR3.3bn ($879.8m) allocated to sector-specific projects. Media companies will also benefit indirectly from government investments in digitisation, the rollout of high-speed broadband, and support for small and medium-sized enterprises (SMEs) across all sectors. The spending allocated to the MoCI in the NTP includes SR859m ($229m) for the privatisation of the Al Ekhbariya news channel; SR700m ($186.6m) for the construction of a 40,000-sq-metre Royal Complex of Arts; a new SR624m ($166.4m) creative hub called Saudi Media City, to be built in the capital over an area of 60,000 sq metres, including a 7000-sq-metre training centre; and the creation of broadcast facilities to serve the holy sites in Makkah and Medina at a cost of SR123m ($32.8m). Almost SR1bn ($266.6m) will be spent by MoCI to enhance Saudi Arabia’s reputation abroad through a public information campaign, as well as through the establishment of media centres in key global cities.

Infrastructure & Investment

Budgets allocated to other ministries in the NTP are likely to prove indirectly beneficial for to creative industries. The Ministry of Economy and Planning, for example, is to spend SR160m ($42.7m) on accelerating digitisation, while just under SR6bn ($1.6bn) of the budget of the Ministry of Communications and IT will be devoted to a broadband stimulation fund that will be used to provide high-speed fibre connections to more Saudi homes.

Entrepreneurs planning to establish media companies will also be able to take advantage of new projects being undertaken by the Ministry of Commerce and Investment, which is to spend SR29m ($7.7m) across all sectors on a freelance and business entrepreneurship programme, SR250m ($66.7m) on SME development and SR1bn ($266.8m) on supporting SMEs. For media production companies, there are opportunities to provide immersive technology solutions at new centres for pilgrims and at museums to be built at cultural heritage sites across the country. Vision 2030 calls for the development of new cultural and entertainment venues designed to reflect the aspirations of citizens and residents of a prosperous country, and it pledges to provide land for new attractions, such as Riyadh’s planned entertainment city, as well as support for writers, authors and directors. These creative practitioners will have opportunities to reflect social changes in their content, as Saudi citizens are encouraged to take part in new hobbies, sports and leisure pursuits. The government hopes to see the proportion of people participating in weekly sporting exercise increase from 13% to 40% by 2030. Greater opportunities for investment are emerging with a government initiative to encourage mass female participation in sports, with women being allowed to enter sports stadiums and a slew of female-only gyms being licensed.

New Ministers

In April 2017 two new government ministers were appointed and tasked with helping to shape the media landscape in Saudi Arabia. Awwad Al Awwad replaced journalist and academic Adel Al Toraifi as the minister of culture and information, while Abdullah Alswaha became the new minister of communications and IT, replacing Mohammed Al Suwaiyel. The two outgoing ministers had both been appointed in January 2015, more than a year before Vision 2030 was approved by the Council of Ministers in May 2016. Al Awwad is not an industry insider as his predecessor was, but his experience as the country’s envoy to Germany and roles including a term as deputy governor of the Saudi Arabian General Investment Authority, suggest the new minister has strong credentials in attracting international investment as well as promoting the Kingdom’s interests abroad. The new minister of communications and IT also has a successful track record in international commerce. Alswaha served for 12 years as the managing director for Cisco Saudi Arabia, and immediately prior to his ministerial appointment was spearheading the drive to digitise the Kingdom.

Strategic Objectives

The NTP has laid out four strategic objectives for the MoCI. The document articulates how each objective conforms to the longer-term aims of Vision 2030 and also sets out key performance indicators (KPIs) within the context of those strategic objectives that must be met by 2020.

The MoCI’s first strategic objective is to develop an environment that stimulates cultural activities in order to meet these three Vision 2030 aims: promoting tolerance, professionalism, discipline, justice and transparency; preserving Saudi, Arab and Islamic cultural heritage and history; and preserving and promoting national identity in order to pass it on to future generations. The KPIs to be met by 2020 under this strategic objective are: increasing the number of annual cultural activities in the Kingdom from 190 to 400; boosting the number of book titles published in the Kingdom from 5900 to 7500 per year; and ensuring that the number of people taking part in cultural activities grows from 750,000 to 1.2m, thereby fulfilling Vision 2030 objectives related to preserving Saudi, Arab and Islamic cultural heritage, and promoting and preserving national identity. The second strategic objective is to increase awareness of government decision-making and achievements, thereby meeting the objective of enhancing interaction between public authorities and citizens. The KPI for this is to improve the ability to disseminate government decision-making and achievements by 55%. The third strategic objective is to enhance the Kingdom’s image locally and internationally, and the KPIs include improving public perceptions of the Kingdom by 58% and fostering 10% growth in positive media content regarding Saudi Arabia. The fourth objective is to develop media industries and strengthen their competitiveness internationally, thereby meeting the aim of supporting and promoting cultural and recreational activities, and national companies. The 2020 KPIs for this target involve increasing the number of creative and media jobs from 10,000 to 16,100; growing the GDP of media companies from SR5.2bn ($1.4bn) to SR6.64bn ($1.8bn); and ensuring the percentage of revenue going from the sector to the national economy grows from 17% to 42%.

Reputation Management

The second and third NTP objectives concern strategic communications and reputation management. The public relations sphere in Saudi Arabia has been shaped by an economy dominated by government-owned entities and state-run media. If the changes envisaged in government strategies are realised and state-run enterprises, including some media outlets, play a larger role in a more diversified economy, then businesses will have to develop new approaches to dealing with customers and citizens. “In the realms of public relations and content production, there is room in Saudi Arabia for those willing to invest in, and understand, the market,” Rabih El Amine, CEO of Alef International Publishing, told OBG. “The country needs international expertise, but also businesses that can utilise Saudi talent and adapt to the country’s culture. A key requirement is the ability to develop credible content, such as annual reports, as more and more companies adopt international reporting standards.”

Production Ecosystem

A key part of the drive to increase employment and grow creative industries is the development of Saudi Media City, expected to be launched in the first quarter of 2018. The project is being steered by the General Commission for Audiovisual Media (GCAM), which was created in 2012, and is chaired by the minister of culture and information. GCAM’s aim is to create a production ecosystem that will draw technology, talent, education and capital together rather than approach the development as a real estate project. “Our aim is to create a framework that will empower content creation, global interaction and local collaboration, and in so doing we hope to entice foreign investment and expertise to Saudi Arabia,” Fahad Almoammar, director-general of investment development at GCAM, told OBG. The MoCI has also been preparing the government’s Arabic rolling news channel, Al Ekhbariyah, for privatisation. It will offer services in Arabic, English and Farsi. “Our aim is to be the most trusted news source for Saudi Arabia, but our output will also include sport, culture and business,” Jasser Al Jasser, general manager of Al Ekhbariya, told OBG.

Media Market

In addition to government reforms, Saudi Arabia’s media market is being rapidly transformed by many of the technological and commercial changes being experienced by media producers around the world, with traditional forms seeing declining advertising revenues and circulation. “We strongly believe in digital, but the market is different than print, where you have a handful of competitors,” Wael Al Fayez, general manager of Al Khaleejiah Advertising and Public Relations, told OBG. “In the digital sphere we are competing with the likes of Google, Facebook, Twitter and Snapchat. However, we do see opportunities. We have strong brands, we are capitalising on them by building digital platforms and products, and there is a gap in the market for high-quality Arabic content.”

Financial Performance

Al Khaleejiah is one of the subsidiaries of Saudi Research and Marketing Group (SRMG), which together with Tihama Advertising and Public Relations Company constitutes the media sector on the Saudi Stock Exchange. Both companies have posted annual net losses over the past four years, totalling over SR280m ($74.6m) at SRMG and SR180m ($48m) at Tihama. SRMG has diversified its operations in recent years. Its publishing division has interests in advertising and distribution, while a second arm – NUMU – targets education and specialist publishing. SRMG’s third area of expertise is in printing and packaging. The group’s news and general magazine firm, Saudi Research and Publishing Company (SRPC), publishes 15 titles including dailies, weeklies, monthlies and quarterlies, with some serving a pan-Arab audience and others a national or local one.

According to Al Khaleejiah, in 2016 SRPC had a 23.6% market share of dailies, a 43.5% share of the weekly market and 22.3% of the monthly market. SRPC’s most popular daily titles were Okaz, Al Riyadh and Asharq Al Awsat, which had market shares of 18.3%, 17.4% and 10.5%, respectively. The company’s English-language dailies, Arab News and the Saudi Gazette, had market shares of 4.5% and 0.4%, respectively. The women’s lifestyle magazines Sayidaty and Zahrat Al Khaleej accounted for 43.5% and 18.8% of the weekly market, respectively, while the women’s monthly Hia, with a 16.1% share, was just ahead of Ahlan Wa Sahlan, the Saudi Arabian Airlines in-flight magazine, which accounted for 12.7% of the monthly market. However, the same data from Al Khaleejiah shows a decade of steadily declining revenues from the print sector, a trend that was mirrored by shrinking revenues from the titles published by SRPC.

To combat falling print numbers, SRMG has been diversifying its ventures. SRMG and Bloomberg inked a long-term partnership in September 2017, which will see the creation of Bloomberg Al Arabiya. This news service will have a television and radio network, as well as a digital platform. Additionally, SRMG acquired a controlling stake in Argaam Investment and Trading Company – which owns online publications Argaam. com and Akhbaar24.com – in October 2017.

Revenue

The print market as a whole peaked in 2006 with revenues of $506.8m, before falling by 59.4% to $205.9m by 2016. The annual decline from 2015 to 2016 was 38.4%. SRPC’s titles peaked in 2008 with revenues of $150.2m, before declining by 64.6% to $53.2m by 2016. The annual fall in revenues from 2015 to 2016 was 33.7%. The declining fortunes of the print sector are also reflected in forecasts for advertising revenues of media outlets covering Saudi Arabia and the pan-Arab region. Al Khaleejiah predicts revenues for the print sector in the region will contract from $358m in 2016 to $253m in 2020, with newspaper revenues expected to fall from $311m to $220m and the magazine advertising market expected to shrink from $47m to $33m. Globally, Al Khaleejiah forecasts digital advertising revenues to grow by 30% from $137bn in 2016 to $178bn in 2020. Whereas, the growth forecast for digital in Saudi Arabia and pan-Arab media is 11% over those four years, from $246m to $266m.

Satellite Stars

The dominant players in the country’s media advertising landscape are private firms Rotana Group and MBC, which operate the Arab world’s most popular free-to-air satellite channels and brands. According to the “2016 Media Industries in the Middle East” report by Northwestern University in Qatar and Doha Film Institute, free-to-air channels accounted for 71% of the $3.37bn spent on TV advertising in the MENA region in 2015, with pan-Arab stations accounting for 90% of the total. However, the report also points out that the MENA region has a relatively low TV advertising spend per capita of $17, compared to $80 in Europe and $195 in the US. It suggests this may be because advertisers are more interested in targeting individual countries rather than the whole region.

MBC, which was founded by Waleed Al Ibrahim, began broadcasting in London in 1991 and moved its headquarters to Dubai in 2002. In 2017 it had 18 channels covering news, sport, drama and entertainment, as well as two FM radio stations and several online platforms. Prince Alwaleed bin Talal owns 80% of Rotana, with 21st Century Fox holding a 19% stake. The company, which has its headquarters in Riyadh, has 12 TV stations but operates as a diversified media company with interests in film production, media services, radio and music.

The “2016 Media Industries in the Middle East” report notes that across the MENA region, pay-to-view TV subscriptions generated $750m in revenues in 2015. While the services offered by companies such as OSN may represent a smaller proportion of TV revenues than in some regions of the world, the report noted that MENA subscription TV revenues doubled between 2010 and 2015, and it sees more scope for growth with international video-on-demand streaming services such as Netflix and STARZ Play targeting the region.

Start-Ups & Innovators

There is growing evidence of a groundswell of media production and self-employment among younger Saudi citizens, many of them female. Evidence cited on the Google Arabia Blog in March 2017 showed that 25% of all YouTube uploads in the Arab world in 2016 were from Saudi Arabia, with 15% of the audience residing outside the country and the Kingdom having 20 channels with over 1m subscribers. During 2016 there was 75% annual growth in the watch time of content generated by Saudi women. In November 2016 video intelligence firm Tubular Lab published a list of the 10 most influential female YouTubers in Saudi Arabia, many of whom enjoy hundreds of thousands of views for each video they upload. Traditions around gender segregation are evolving, with greater interaction between the sexes at public events and the repeal of the ban on women driving, which will come into force in June 2018.

According to statistics website Socialblade, Rotana TV has the most influential YouTube presence in Saudi Arabia, with more than 4m subscribers, while the channel run by Mohamed Moshaya, a computer programmer who blogs about the life of his family in Jeddah, is ranked third, with 2m subscribers. Many businesses in Saudi Arabia are paying social media influencers like Moshaya significant sums to endorse their brands. “There are so many people now in Saudi Arabia who are making money at home on YouTube, because they have such an amazing number of followers,” Cyma Azyz, a leading anchor on Saudi Television, told OBG.

Outlook

Vision 2030 challenges the country’s younger generation to reach their potential and become the “architects of the future”, and it invites businesses at home and abroad to play an active role in the transformation of the country. Furthermore, Google’s data shows young Saudi creative entrepreneurs are certainly capable of rising to this challenge, and through their online content they look set to pocket an increasing share of the country’s advertising revenues.