Exclusive Interview with Maaal: MBC Group CEO Discusses Dividend Policy During Share Trading Debut in Saudi Market

Sam Barnett, CEO of MBC Group, shared insights as the company’s shares debuted on the main Saudi stock market on Monday, with 10% available for public subscription. In an exclusive interview with Maaal, Barnett disclosed the group’s profit distribution policy, emphasizing that no profits have been distributed over the past three and a half years. The company strategically invested funds to expand its activities and develop new platforms, such as Shahid.

1. Is the company planning to distribute any profits shortly?

The Company has a dividend policy, and every shareholder is entitled to dividends if MBC GROUP declares one. However, the Company has not paid dividends over the last three and a half years. We are focused on growing this company, and all monies we make are reinvested back in, allowing us to continue producing high-quality content and growing our Shahid platform.

1. Can you tell us how MBC GROUP perceives the competition in the sector? Additionally, could you elaborate on the opportunities available?

Regarding broadcasting, the leading players comprise regionally based media groups primarily focused on general entertainment. We have been the pan-Arab broadcasting leader for the last 30 years, reaching over 150 million viewers per week. We have a 40% market share in KSA, 48% in Egypt, and 27% and 19% in Iraq and Morocco, respectively. With subscription-based platforms, the early entrants, including Shahid, are the top 3 players and represent nearly 60% of the market. We have a leading % market share of 23% – our premium content and extensive offering are why we are the leader and the region’s favourite premium subscription platform. Regarding watching free services with ads (AVOD), apart from YouTube and Meta, we are the leading player in the market.

Our market shares are 40% in the Kingdom, 48% in Egypt, and 27% and 19% in Iraq and Morocco, respectively.

In terms of opportunities and outlook, let me explain it in two parts: the first is advertising, and the second is streaming.

With advertising, TV advertising began to rebound in 2022 and is expected to further grow at a CAGR of 5.5% between 2023 – 2027. AVOD spending is expected to increase. In 2022, AVOD spending in MENA was approx. $186 million is expected to grow to an estimated $467 million in 2027. Notably, the appeal for Arabic content globally and the total addressable market outside MENA is significant – there are around 300 million Arabic speakers worldwide, of which 40 million are outside MENA.

With streaming, OTT subscribers are set to double in the MENA region from 12.5 million in 2022 to 25.3 million by 2025 and increase further to 35.3 million by 2027. OTT subscription-based video-on-demand (SVOD) revenue in the MENA region is expected to grow at a CAGR of 6.9% for the five years between 2022 and 2027, from $1.6 billion in 2022 to c. $2.3 billion in 2027. Penetration rates are increasing, with current rates in MENA at only 4% in 2022, compared to mature markets such as the US, with penetration rates of 81% in the same year.

1. What are the main risks that the Group anticipates affecting its operations in the future?

It is important to note that every company faces risk – current or future. We are no different. Our risks are listed in the Prospectus, which you can find on our website or the CMA’s website.

1. Why did the Group offer only 10% of its shares for subscription, and will it provide additional shares in the near future?

In some cases, regulations may allow for a lower percentage of shares to be offered in an IPO based on a company’s specific circumstances – i.e., size, industry, strategic objectives, etc. This was our shareholders’ decision, and the CMA approved it. What differentiates this from other recent Saudi Exchange IPOs is that it was a 100% primary raise.in other words, we are issuing and selling new ordinary shares to individuals and institutional investors and investing the money raised to strengthen the business and support our growth strategy. Our existing shareholders are not exiting and will remain strategic business owners, working alongside our new shareholders to help take MBC to new heights.

1. What are the Group’s most critical competitive advantages?

Similarly to question 3, reading the Prospectus to understand them is best. Here are a few: our exclusive, original and localized content; our extensive content library; and our unique ability to market and cross-promote Shahid VIP packages across our channels. While discussing advantages, let me share comparable thoughts on why our IPO has been successfully oversubscribed and what has drawn investors to the company.

Firstly, the media industry is expanding, and we are poised to capitalise on the momentum. With our strategic levers, including subscription, advertising and complementary growth markets, we aim to drive continued investment and progress.

Secondly, our subscription model provides a reliable and scalable revenue stream with the potential for significant growth as our customer base expands.

Thirdly, paid subscribers in the MENA region are expected to sustain double-digit solid growth and double by 2025G and reach 25 million. Through Shahid, we are well-positioned to capitalise on the significant growth expected in the regional streaming market.

Fourthly, with a captive audience of engaged viewers, our platform offers valuable advertising opportunities for brands looking to reach their target market. Advertising spending on streaming platforms (OTT) is poised to continue its rapid growth as online viewership continues to increase alongside time spent on streaming platforms, providing significant upside potential to grow ad market share in the advertising-based video-on-demand category.

Lastly, we are expanding and developing into versatile business segments such as gaming, music and events, which will broaden its reach with opportunities for cross-promotion.

Bringing all this together, we make a compelling investment proposition.

1. What are the Group’s plans for the future?

As the media industry grows, MBC is well-positioned to capitalize on this trend and drive ongoing growth and investment via multiple levers such as subscription, advertising, and complimentary markets. MBC’s subscription model provides a reliable and scalable revenue stream with the potential for significant growth as our customer base expands. Regional paid streaming subscribers are expected to sustain double-digit solid growth and double by 2025 to reach 25 million. Through Shahid, MBC is well-positioned to capitalise on the significant growth expected in the regional streaming market. With a captive audience of engaged viewers, the MBC platform offers valuable advertising opportunities for brands looking to reach their target market. Advertising spending on Shahid is poised to continue its rapid growth as online viewership continues to increase alongside time spent on the streaming platform, providing significant upside potential to grow ad market share in AVOD. In 2022, AVOD spending in MENA was approx. $186 million is expected to grow to an estimated $467 million in 2027. The Company is expanding and developing into versatile business segments such as gaming, music and events, which will broaden its reach with opportunities for cross-promotion.

1. How does the group view the advertising market in the region, and what are the expectations for the future?

[Refer to Q2]

1. How will the continuous shift towards advertising through digital media affect the Group’s advertising revenues?

Firstly, it’s essential to acknowledge that the market exposure, audience reach, and scalability of our digital streaming platform, Shahid, are truly unique offerings for investors.

Secondly, each side of our streaming “coin” (Shahid and Shahid VIP packages) is significant to the business: our free service with ads captures the advertising revenues that are shifting to digital. In contrast, our subscription service attracts paying users and diversifies our revenue streams by increasing the proportion of the group’s non-ad revenue.

Until recently, we had been very focused on building the Shahid audience, and this came through in both the content we produce and our monetization. We are now re-focusing on growing the total advertising revenue using our broadcasting and AVOD inventory to offer advertisers the best proposition.