Mustafa Gözalan is an executive board member of the Dogan Yayin Holding (DYH) and its affiliate Dogan TV Holding. He began his career in the mid-1980s with the auditing division of Arthur Andersen in Turkey and then in Los Angeles and Chicago. He returned to Turkey in 1990 and played a major role in founding the company's local consulting division, eventually becoming partner in charge of telecom and media industry in emerging economies.

Gözalan joined the DYH in 2000 as Vice President of Business Development. In 2005 he joined the TV group’s management team to direct an extensive merger and transformation of the broadcasting assets of the group. In these positions, Gözalan has been instrumental in forging innovative directions for pay-TV in Turkey.

He recently discussed the group’s strategies and plans for the future.

World Vision: Can you share some general background about your company?

Mustafa Gözalan: Dogan Yayin Holding (DYH), Turkey's leading diversified media-entertainment conglomerate, is listed on Istanbul Stock Exchange. Our operations include newspapers, magazine and book publishing and distribution, printing, television and radio broadcasting and new media. DYH is uniquely positioned in different media segments in Turkey. We currently have an estimated 42 percent share of the advertising market across all media. We operate eight national newspapers, 24 magazines and six printing facilities in Turkey, as well as one in Germany. Our flagship newspaper group, Hurriyet, has recently completed the acquisition of TME, an emerging marketing company which expands the group’s operations to Eastern Europe. We are also involved in media distribution, broadcasting (Dogan TV) and retail online sales including music and book stores.

Our broadcasting assets are consolidated under Dogan TV Holding. Axel Springer AG, the German media giant, owns 25 percent of the shares of Dogan TV Holding. This is the leading broadcasting company in Turkey, with an estimated 24 percent audience share and a 36 percent estimated ad market share.

Can you give some more detail about Dogan Media’s activities in the TV and pay-TV markets?

Gözalan: Dogan TV Holding’s operations include three free-to-air (FTA) national TV stations: These are Kanal D, the country’s leading entertainment channel; Star TV which we recently acquired, and CNN Turk which is a joint venture with Time Warner. We also operate 26 thematic channels, EuroD and EuroStar which broadcast in Europe, four radio stations, production studios, movie distribution and a TV shopping business which we own jointly with TF1 of France.

What about your involvement in digital satellite TV?

Gözalan: D-Smart, Turkey’s second digital satellite platform has been on air since February 2007 but the real commercial launch took place at the end of May. The platform offers all Dogan TV channels, as well as all local, national and international channels broadcasting from Turksat, the state-owned satellite operator.

D-Smart is one of the first examples in the broadcasting industry of merging the best functionalities of FTA DTH and pay-TV. It’s a unique approach that provides incredible operational cost savings. while enabling customers to freely add channels into their EPG.

D-Smart also enables subscribers to add free-to-air channels from other satellites including Hot Bird, other Eutelsat satellites, Sirius and Nilesat.

What makes D-Smart unique is that there are no monthly subscriber charges. The business model is based on advertising revenues with the set-top box belonging to the customer. Content sales are on an a la carte basis and revenues from interactive services play a strategic role in the overall business.

For this project, Dogan TV partnered with the six largest local distributors. Together they control more than 80 percent of the retail free-to-air STB market. All import, production, distribution and sales activies are operated by these partners and D-Smart-enabled STBs are sold by a network of 5,000 agents all around Turkey.

D-Smart is powered by NDS MediaHighway™ middleware and VideoGuard® conditional access on Humax hardware. We feel this offers our customers a tailor-made EPG which is designed according to the needs of both pay-TV and retail FTA markets.

How are fees collected if D-Smart has no monthly fee?

Gözalan: D-Smart enables consumers to access basic FTA and FTV (free-to-view) content without a monthly subscription. By the end of the summer we are also planning to deploy our pay-as-you-go services for premium content including blockbuster movies, special interest channels, premium movie channels and sporting events.

The collection mechanism will be a token-based system that will include both credit cards and scratch cards. Customers will be able to add to their accounts using these mechanisms and they will also be able to activate their credits via a call center, SMS or secure return path (PSTN or ADSL). We recently completed our end-to-end tests within a “friends and family” group of customers and will soon be ready to start commercial operation.

What makes this type of business model well suited for the pay-TV market in Turkey?

Gözalan: TV is the major source of entertainment in Turkey. People watch an average of four hours a day.

According to our focus group studies and market research, we found that Turkish viewers only want to pay for the content they watch. They do not want to commit to platform services where the TV packages are offered on a subscription basis. In real life everyone would prefer to get what we pay for, not to pay for whatever we get.

How many set-top boxes are deployed in Turkey annually?

Gözalan: The move to digital broadcasting is favoring DTH in the absence of DTT or IPTV platforms in Turkey. According to ACNielsen research, 7 million households in Turkey have a digital satellite TV receiver. This represents more than 40 percent of all households. Also, around 1.5 million digital satellite STB units are deployed in Turkey annually. This indicates the continuing momentum of DTH penetration.

Can you make any high level predictions about the future popularity of pay-as-you-go pay TV?

Gözalan: Turkish consumers are accustomed to prepaid business models. Prepaid scratch cards are already very popular in the mobile phone industry in Turkey, accounting for almost 85 percent of the subscription revenues. Based on this success we are now ready to launch our system with scratch cards.

How is NDS supporting this new project?

Gözalan: NDS is fully committed at all levels of our organization. In addition to the support from their headquarters in the UK, engineers from offices in India, Korea and Israel are working with us both on site in Turkey and in their individual offices to ensure the ultimate success of D-Smart.

What other NDS solutions does your company currently use and what solutions are you considering for the future?

Gözalan: We recently kicked off the projects for HD DVR with NDS solutions. We would also like to see a range of D-Smart PC products with NDS solutions in our portfolio.

We are not interested in working with different vendors. NDS is well suited for our end-to-end technology solutions over different platforms.

Why did you originally decide to work with NDS?

Gözalan: NDS is the world’s leading provider of technology solutions for digital pay-TV. As a customer, this means that NDS provides the best one-stop-shopping opportunity because they provide us with NDS MediaHighway middleware and VideoGuard conditional access. We also believe that because VideoGuard is so secure it maximizes the benefits for both operators and content providers.

How influential do you expect D-Smart to be for the future of pay-TV in Turkey?

Gözalan: Generally the growth of pay-TV in Turkey has been slow. There are only 1 million households currently using pay-TV services. This represents about 5 percent of the total market. It appears that the real growth is coming from free-to-air DTH penetration. This seems to indicate that pure pay-TV services in Turkey are not an overwhelming success. At least not yet.

The fact is, with the exception of the UK where BSkyB is very successful, in most markets, the move to digital TV is faster when it is free – either DTH or DTT. That is why you see media companies and telcos trying different models. Some of these business models will not be succesful but I am sure a few of them will capture the potential of the emerging digital home.

The fact that more than 40 percent of Turkish households already receive digital satellite TV encourages us to try our own hybrid model. I expect D-Smart to be a platform where different DTH receivers run with unique software. This will enable broadcasters to sell new digital services and optimize advertising revenues while new niches are created and unique content is consumed on a pay-as-you-view basis. This is what makes D-Smart a completely new and innovative project.

For more information:

Dogan Yayin Holding