Equity, Kuwait, Tech

OSN: The Thorn in KIPCO’s Side

Kuwait’s KIPCO Group, which calls itself “The Region’s Most Successful Project Management Company”, is not seeing much success in the Pay TV space.

At the end of Q1 2018, the subsidiary OSN was still a significant drag on the publicly listed group controlled by Kuwait’s ruling-family. We first wrote about OSN in 2017, here.

Priding themselves on shareholder transparency, we think it’s a little disingenuous to drop subscriber numbers from investor presentations when they don’t paint a rosy picture. The last number we got was for Q1 2016, however an observant reader of this website pointed out that in KIPCO’s MTN prospectus from February this year, their Q3 2017 subscribers are given away.

As evidenced above, it appears OSN has managed to get back some subscriber growth. In the 18 months since they stopped disclosing, OSN managed to go from losses, to adding 22,386 subscribers, amounting to just over 2% growth, or less than 1.5% per 12 month period. Positive but hardly a turnaround.

Revenue continues to fall.

Although the pace of losses appears to be slowing.

The business however is still losing more than $55mn per quarter.

Expenses have continued to grow.

What makes matters worse is that people are still turning up to the OTT (Over The Top media services) party. Fox’s regional chief has just announced they’re seeking to launch their own OTT product. This means the region now has OSN (Wavo), Netflix, Starzplay, ICFlix and now Fox contending for market share. Things are going to get ugly. With KIPCO being a public company, we’re able to take up ringside seats to see at least one contestant battle it out.

Whilst we’re on the subject of entertainment, Vevo’s Middle East platform for music video streaming has announced it will shut down most of its own operated platforms to effectively become a series of YouTube channels. The venture, valued at $300mn at the time, involved YouTube, Universal Music, Sony and state-backed Abu Dhabi Media Company. It goes to show, even armed with deep pockets, global tech giants (Google in this case) ultimately own the internet plumbing which provides them the lowest cost distribution.

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