Britain’s financial sector mulls future after leaving EU

The financial community is convinced that Britain, whose financial rules are aligned with those of the EU, has no interest in moving too far away from them. (Reuters)
Updated 03 November 2019

Britain’s financial sector mulls future after leaving EU

  • Experts want review of business approach to adapt to changing realities

LONDON:  With a crucial election, Brexit and potential trade deals looming, the future of the beating heart of Britain’s financial sector will be shaped in the coming months.

The specter of a “Singapore-on-Thames” — a highly deregulated British financial sector like the city-state — is the dream of some pro-Brexit financiers, who have criticized European rules that they believe are holding them back.

But regulators do not appear to be in a mood to tear up the rulebook just yet.

“It has been 10 years since the financial crisis and the subsequent reforms we put in place, and now is the right time to review our approach to regulation,” Nausicaa Delfas, from the UK Financial Services Authority, said this week.

“Brexit provides added impetus to look at things again.”

At a London conference on the issue, Barnabas Reynolds, who specializes in UK and EU regulation at law firm Shearman & Sterling, said the regulators should look at everything.

Like many in the City — the financial hub in central London — he did not see “what’s wrong” with the idea of a Singapore-on-Thames.

European financial rules, although designed under Britain’s influence, have restricted the sector’s ability to compete with Wall Street, he added.

Bank of England Gov. Mark Carney thinks differently.

He says there will be “no bonfire of financial regulation” and instead promises a “dynamic” approach to “optimize our efforts without compromising on the level of resilience.”

Most of the financial community is convinced that Britain, whose financial rules are currently aligned with those of the EU, has no interest in moving too far away from them at the risk of being denied access to the vital common market.

“We have been on a trajectory of improving the regulation rather than weakening it,” Iris Chiu, a law professor at University College London, told AFP.

But some sensitive areas will be in the spotlight as soon as Brexit is completed, such as limits on bank bonuses or possible supervision of the booming fintech industry.

“Fintech is one area where the UK is seen as an international market leader” and it will want to defend its position, said Sarah Hall, from “The UK in a Changing Europe” think-tank.

This could mean applying a lighter touch to startups in the sector with regards to transaction traceability, customer data or the origin of funds.

The Solvency II Insurance Directive is also one of the areas where Britain may want to diverge from the EU, particularly on the amount of mandatory capital reserves, she added.

Anti-corruption groups such as Transparency International, whose recent report denounced the billions of dollars of illicit money that passes through Britain and its offshore territories, are still concerned.

They fear backtracking after the efforts of recent years to lift banking secrecy in territories such as the Isle of Man and Jersey, even if others such as the British Virgin Islands are still largely escaping scrutiny.

Paul Fox of Finance Watch also points out that the devil often lies in the detail, and that any adjustments “can give rise to regulatory arbitrage” by investors who take advantage of any glitches in the new rules, at the risk of destabilizing the financial system.

Britain’s Brexit deadline has been pushed back again, this time to Jan. 31 after lawmakers called for more time to scrutinize Prime Minister Boris Johnson’s deal with Brussels.

He is hoping to win a parliamentary majority in early elections called for Dec. 12, which in theory could make getting the deal through Parliament easier.

The political deadlock has led to delays in the ratification and implementation of some financial transparency laws, including on trusts — investment vehicles that are often family owned.

Wealth management is one of the “areas of interest for Labour” if they came to power after next month’s general election, said Sarah Hall.

The Labour party, led by the veteran socialist Jeremy Corbyn, has proposed a radical plan to re-nationalize key industries, and tackle what he sees as a “corrupt system” of wealth and privilege.

Business leaders have already warned it could cost the country dear.

Hall said the ultra-rich have already begun to divest their assets from London and place them outside the country out of fear of a Labour government, which would likely implement further capital controls and raise taxes.


INTERVIEW: CEO Maaz Sheikh sees business soar as Saudi viewers turn to streaming services

Updated 29 min 56 sec ago

INTERVIEW: CEO Maaz Sheikh sees business soar as Saudi viewers turn to streaming services

  • All eyes on Starzplay as lockdown reaps rewards

Maaz Sheikh has had a good lockdown.

The founder and CEO of Starzplay, the Middle East’s leading entertainment streaming channel, saw his business soar as curfews, social distancing and travel restrictions left people with little to do apart from slump in front of a TV and binge watch for hours on end.

“I think when the whole situation was unfolding, we were trying to think which way is up and which was down, both on a personal level and also as a company — what it means for our subscribers. It was nerve-wracking in the beginning,” Maaz Sheikh told Arab News.

In the region, it was Starzplay subscribers chose to watch, rather than Netflix or other streaming services, in English and in Arabic.

“What we benefited from, of course, was all the people staying home, but one of the things that worked in our favor was that we are an organization based and headquartered here, and we were able to adapt and localize our services much faster than anyone else,” he said.

“In Saudi Arabia, you can sign up for Starzplay via STC, Mobily or any of the other services. You can sign up with your mobile phone number. Netflix came to this region with a very US-centric mindset, thinking that everyone had a credit card and that having a credit card is a norm in the world. In fact, the reality is different, especially in Saudi. Not everyone has a credit card,” he added.

“So, through one bill where you pay your landline and your broadband, you can also have access to Starzplay on the same bill. You can just download onto your smart TV,” he added.

Starzplay has been in business for five years, and while it is probably not as well known as Netflix, it has been making big inroads into the region, especially Saudi Arabia.

The Kingdom accounts for 40 percent of total revenue, while almost half of all consumption in the Middle East and North Africa region comes from Saudi viewers.

And what have they been watching during the long weeks of lockdown? 

Lots of “Vikings,” “The Office” and Turkish-made romantic soap “Jusoor Wal Jamila.” 

Saudis on average watched more than 18 hours of Starzplay in May, compared with less than 12 a year before.


BIO

BORN: Islamabad 1970.

EDUCATION

  • Schooling in Dubai, UAE.
  • Oklahoma State University, US.
  • University of Kansas, MBA.

CAREER

  • Various executive roles in media and communications, US.
  • Chief sales and operations officer, OSN, Dubai.
  • CEO and founder, Starzplay.

“The beauty is that everyone has a mobile phone. We were there in the market with the right product, the right content, but also the right distribution so the masses can actually sign up for our service. It really benefited us.

“It was not just that we were a streaming service. The whole category benefited from the lockdown, but we were the only one in the market that had this kind of distribution and payment arrangements. We were the only one available to the masses,” Sheikh said.

It is not just the distribution platform that is different from Netflix. Starzplay takes a distinct stance on content, too, as Sheikh explained.

“Our industry is evolving in a simple and predictable way. What is happening is that the more Netflix has gone into its own originals, the more studios see them as a competitor. So studios have been pulling their content away from Netflix.

“Until now, with what comes out of Hollywood and the UK, 95 percent of English-language content was produced by seven or eight studios. In the UK it’s the likes of the BBC and ITV, while in the US it’s Warner, Disney, Sony, Showtime, CBS, all the major studios,” he said.

“So, the way the industry is evolving is that if you want Netflix originals, you go to Netflix, if you want anything else you go to Starzplay,” he said.

Sheikh reeled off an impressive list of top shows on his platform. “Big Bang Theory,” “Billions,” “Grey’s Anatomy” and “Britannia” are among them, while younger viewers soak up “The Flash,” “Supergirl” and other DC titles made by Warner Studios.

Starzplay has also made its first foray into original content, tailored for a Middle East audience, with the series “Baghdad Central.”

“Data is the new oil, they say, and ‘Baghdad Central’ was the result of our experience over five years of consumption history, with billions and billions of minutes consumed. So based on what people were consuming in our key markets and with those insights, we produced our first original,” Sheikh said.

“Baghdad Central” was launched in March with a big name Hollywood actor — Corey Stoll from the award-winning series “House of Cards” — as well as top British and Arab actors.

“We wanted to bring a show to the region that combined the best of the three. It was shot in Morocco in partnership with UK and US producers,” he explained.

That kind of content has pulled in the viewers during lockdown. The figures show Starzplay hit a peak of 6.5 million daily minutes of consumption in Saudi Arabia in the middle of April, compared with about 2 million before the pandemic lockdowns.

Existing viewers are also watching more. The average Saudi spent 28 minutes daily in front of a Starzplay show before the lockdown. That more than doubled to one hour as movement outside the home was restricted.

“To put that into perspective, it took us five years to go from zero to 2 million minutes a day, and it took us six weeks to go from 2 million to 6.5 million. We did more consumption growth in six weeks than we did in the first five years,” Sheikh said.

He is reluctant to forecast how many of these consumers will stay with Starzplay as the lockdowns are eased around the world and the region. 

“I’m expecting some churn, so it’s tough to predict what the base will look like later in the year. We saw tremendous growth, but as the lockdown eases I think we’ll see some churn on those subscribers,” he said.

But even as the lockdown are eased significantly in the region, consumers are not going back to pre-pandemic levels. There is likely to be a permanent shift in demand for Starzplay in the “new normal” environment.

“Unlike Netflix, one of the challenges we had in the region is that the brand awareness and content awareness of our service was comparatively low. One of the things that has happened is that because of increasing demand and awareness, people got to find out about Starzplay. People experienced that and connected the content to our brand.

“That is going to be an enduring and lasting benefit for our company. You cannot unlearn it. I’m expecting some churn in high sign-ups and reduced consumption volumes, but the lasting benefit we’re hoping for is the brand awareness and content awareness that was created,” he said.

That kind of growth is likely to accelerate Starzplay’s evolution from a privately funded startup to a listed public company. It has raised $125 million over its five years, from some pretty impressive investors, including US media giant Lionsgate, the big financial firm State Street Global Advisers, and Nordic investment firm SEQ, which backed Starzplay from the beginning.

With profitability just around the corner, Sheikh does not see the need for further funding, especially as investment sources have dried up during the uncertainty of the pandemic period.

“During COVID times, when consumption and new subscribers were going through the roof, the flip side was that we realized that capital markets were going to be out for 2020. Lucky for us, we are well capitalized, and we are not in a situation where we need to use funds. This is not a good time to be out there raising money,” he said.

“The goal is to serve our customers and also create shareholder value. There are multiple ways of doing that. One is that you generate cash and shareholders benefit from cash dividends. That’s the traditional model. The more high-growth model that is more applicable to companies like us is shareholders push for more growth and expansion to increase the enterprise value of the company,” he said.

Sheikh has set his medium-term sights on a public listing. “In the long run the goal is to continue to grow the business, and in the next three to five years to get into a position where we can list the company on the London Stock Exchange.

“We haven’t absolutely decided that, as it’s so far out. I’d say what we’re looking to do is list ourselves, and if not in London, then other markets, local or London. That’s the ambition, to look to IPO on London or other markets. We’re not there yet. We’re still two to three years away from a decision, but that’s our ambition,” he said.