Where next for the Middle East media sector?

In a sense the launch of the Dubai Media City in 2000 started the media explosion in the region. It allowed 100% foreign ownership and gave would-be media tycoons a chance to start a business. It also pushed the established media groups into launching new ventures to keep up.

This phenomenon has been repeated on a smaller scale in other Gulf countries with new magazines, newspapers and especially satellite television stations launching in droves; even radio has boomed and the Internet has come from nowhere to challenge other media as the prime source of regional news.

Reality check

However, with all booms there has to come a point when reality clicks in, and owners start to look for a real return on their investment. In many cases they will find that advertising revenues, and the potential for future revenues just do not justify being in business. For it is relatively easy to set up a media company, but not nearly so easy to make a profit.

Unless you have another objective, of course, and media businesses do often have owners who run them for prestige reasons rather than profit; although even the deepest pockets can get tired if losses get too big.

It would therefore be reasonable to conclude that after a roaring five years of growth, the media sector in the Middle East is ripe for consolidation and rationalization. Quite how this will happen is anyone's guess.

Auditing revolution

It could be that big groups squeeze out their junior rivals by an investment in media audits, which demonstrate to advertisers that smaller titles fail to give value-for-money. Or it could be that larger groups buy up the smaller upstarts.

One thing that would accelerate the rationalization and consolidation of the media business is a sharp downturn in advertising from a business slowdown. That does not seem in immediate prospect, and it is more likely that mergers, acquisitions and closures will emerge simply because the sector has over expanded.

This is how the classic business cycle of capitalism works with the creation of new enterprises followed by a period of consolidation and rationalization. But the downside is that this means less media jobs and an end to the boom in new positions.

Indeed, this would be a far more sobering period for those involved in the business. They will have to justify their employment to a far greater extent than in the past. The upside is that a far more professional and profitable media sector is likely to result, probably more in line with what consumers and advertisers would like to see.