Desert streams: Netflix and other entertainment giants woo Saudi audiences

For U.S. entertainment companies, the young, affluent Saudi market is an irresistible prize. But the risk of geopolitical plot twists is high.
August 2, 2021, 8:00 AM UTC
Tim McDonagh

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It was the end of a sweltering summer’s day in Riyadh, with the mercury hitting 110˚ F. In a social hall in Saudi Arabia’s capital, producers and executives from the animation studio Myrkott doled out pizza and salads to a buzzing group of actors, illustrators, and staff. Then they switched on a big-screen TV and settled in to stream the latest Netflix release, which had dropped precisely at midnight as June 30 became July 1.

The crew was binge-watching their own new eight-part series, Masameer County, their first production under a five-year deal signed with Netflix in September 2020. Under the deal, Myrkott will create original movies and TV shows for the streaming giant—in Arabic, with plotlines specific to Saudi life. Within hours of the premiere, the Myrkott crew had more to celebrate: The series—a satirical look at a fast-changing society—topped Netflix’s most-popular-programs list for Saudi Arabia, and hit the top 10 in several other countries in the region.

A pizza party in a social hall is a humble affair by the standards of Saudi Arabia, whose status as the planet’s biggest oil power has generated vast wealth. But the premiere was a milestone in the multifaceted financial relationship between the Saudi Kingdom and the U.S.-centered global entertainment industry. 

In that relationship, billions of dollars of investments in both directions interweave the interests of two juggernauts. On one side is Saudi Arabia’s de facto ruler, Crown Prince Mohammed bin Salman, universally known as MBS, whose millennial habits (he turns 36 on Aug. 31) include a passion for video gaming. As part of an urgent effort to diversify the Saudi economy, where 42% of GDP comes from oil exports, MBS has relaxed decades-old strictures governing how Saudis consume and produce movies and popular music. On the other end are American entertainment companies, whose progressive image is at odds with Saudi monarchical rule—but whose thirst for fresh markets and content has rocketed with the rise of streaming media. 

Few companies feel that thirst more than Netflix, the world’s biggest streaming platform, which makes its Fortune Global 500 debut this year. With more than 209 million subscribers in some 190 countries, Netflix has an unmatched reach, giving it enormous power to influence how the world sees Saudi Arabia—while also giving content creators access to the wealthiest audience in the Arabic-speaking world. “The Saudi entertainment economy is a vast, fertile soil of youth with stunning spending power,” says Sam Blatteis, CEO of The MENA Catalysts, a Dubai-based government relations firm advising U.S. tech companies entering the Saudi market. 

Netflix is hardly the only American company to till that soil. In February, Warner Music Group took a minority stake in Riyadh-based Rotana Music, the region’s biggest recording company, with an investment of nearly $200 million, according to the Wall Street Journal. AMC, the cinema owner, is spending around $1 billion to open 100 theaters in the country by 2030. Six Flags, the world’s biggest theme-park operator (based in Grand Prairie, Texas), has partnered with the Saudi government to build a giant entertainment resort called Qiddiya, 28 miles from Riyadh. 

Compared with those capital-intensive investments, Netflix’s Saudi deals are small in dollar terms. (Netflix and its partners declined to disclose their value; overall, Netflix says it will spend $17 billion on content in 2021.) But they expand the company’s foothold in the Arabic-speaking world, a market of 420 million people that stretches from Morocco to Oman—and a crucial playing field for Netflix, whose subscriber and revenue growth now come predominantly from outside the U.S. The shows it is funding have symbolic weight, too, highlighting voices that foreigners rarely associate with the kingdom’s conservative culture. 

Last October, a month after signing Myrkott, Netflix inked a five-year deal with Telfaz11, another Riyadh production company. Telfaz11, like Myrkott, had spent years uploading youth-oriented feature films on its YouTube channel; there were few other places to show them in the kingdom. Now it will develop and produce eight films to be shown on Netflix. The streaming giant has ramped up its Saudi content since 2019, with a range of series and movies, several focusing on tensions over social rules. Last year Netflix released an original Saudi drama series called Whispers, about dark secrets in a family-run business, directed by a well-known Saudi woman filmmaker, Hana Al Omair. In an email, Nuha El Tayeb, Netflix’s director of content acquisition for the Middle East, North Africa, and Turkey, told Fortune she is on a hunt for female filmmakers in particular. “There’s incredible talent in Saudi Arabia,” she said.

There is also incredible potential for ethical and public relations pitfalls. Saudi Arabia’s rulers have long drawn fierce criticism among activists and politicians—for their human rights record, their restrictions on women’s autonomy (some of which, like the ban on women driving, have recently been lifted), and the protracted military campaign in Yemen. The outrage grew particularly sharp after the grisly murder in October 2018 of Washington Post columnist Jamal Khashoggi, which the Central Intelligence Agency concluded MBS himself had approved. (Saudi authorities convicted eight Saudis for Khashoggi’s killing; MBS has denied any prior knowledge or involvement.)

The Qiddiya site today.
Courtesy of Qiddiya
Qiddiya in an artist’s rendering. Texas-based Six Flags is partnering with the Saudi government to build a massive entertainment complex at Qiddiya.
Courtesy of Qiddiya

The question for entertainment companies is whether the Saudi market’s promise outweighs the risks to their reputations, in a country where politics can sideswipe business. That’s a balancing act that Western business has been undertaking for decades—often very profitably. Still, it makes corporate leaders press-shy. Netflix declined to make executives available to discuss its Saudi plans. (“This is not controversial at all,” a PR rep insisted, when asked why the company did not want to talk.) Representatives of AMC, Six Flags, and other businesses mentioned in this article either declined to give interviews or did not respond to multiple requests. Saudi officials who oversee investment strategies promised interviews, then went silent.

But the opportunities speak for themselves. About two-thirds of the Saudi population of 34 million are under 35—younger even than MBS. They have more disposable income than their peers in Jordan, Egypt, and other populous Arabic-speaking nations. They live in a country with roughly 95% internet penetration and widespread fast Wi-Fi. And Netflix, available in the kingdom since 2016, looms large in their wired world. “It’s become the lifestyle,” says Amer Abu-Elhaija, 32, an executive at Myrkott. “It’s like, I have a phone, I drink tea and coffee, and I have a Netflix subscription … That’s the new Saudi.” 

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Until recently, the entertainment industry was shut off almost entirely from the kingdom. When I reported from Saudi Arabia in October 2017, there had been no movie theater in operation for nearly 35 years. Movies and secular music were anathema under the conservative principles of Wahhabi Islam, to which the country has long adhered. Young people by the thousands had to hop flights to nearby Dubai or drive to next-door Bahrain to party in discos and see Hollywood releases. During an interview over tea in a hotel lobby at the time, a source pointed up at the ceiling, telling me that even the background music piped through the speakers was a recent breakthrough. 

Change came quickly under the crown prince. When MBS took the reins from his father, King Salman, in 2015, his primary mission was to break the economy’s overwhelming reliance on oil. He drafted McKinsey  consultants to create a grand strategy called Vision 2030, aiming to double GDP and create 6 million jobs by that year. The plan calls for massively boosting private enterprise, building out health care, logistics, and other industries—and creating entirely new tourism and entertainment sectors.

In a kingdom famous for cultural austerity, breakthroughs in entertainment earned some of the biggest headlines. In April 2018, the country’s first new cinema, operated by AMC, opened in Riyadh, showing the Disney Marvel universe epic Black Panther. AMC CEO Adam Aron told guests at the VIP Saudi premiere that the blockbuster was about “the story of a young prince who transforms a great nation. That might sound familiar to a few of you.” Today there are dozens of theaters, often packed. Aron said in 2019 that AMC’s theater in Riyadh did 11 times as much business as its equivalent in the U.S. or the U.K.

Two-thirds of the Saudi population are under 35, and roughly 95% have internet access.

The government is also making live pop music widely accessible for the first time. In 2019, K-pop megastars BTS packed the 60,000-seat national stadium; Mariah Carey and the Black Eyed Peas also performed in the country. Government authorities have broken ground on Six Flags Qiddiya, a 129-square-mile entertainment and sports complex whose area is double the size of Walt Disney World. Saudi officials say Qiddiya’s infrastructure alone will cost an estimated $8 billion. 

COVID-19 slowed the Saudi entertainment expansion, but it didn’t stop the kingdom from pursuing opportunities abroad. In March and April 2020, even as oil prices plummeted and the kingdom’s economy sharply contracted, the Saudi Central Bank transferred $40 billion to the Public Investment Fund (PIF)—the mammoth Saudi sovereign wealth fund, whose assets top $400 billion and of which MBS is chairman. The transfer had one primary aim: To buy U.S. stocks at rock-bottom pandemic prices. “You don’t want to waste a crisis,” the fund’s governor Yasir Al-Rumayyan told investors at the time

In April 2020 the fund invested $500 million in Live Nation, giving it a 5.7% share in the world’s biggest live entertainment company. And last December the PIF announced that it had invested more than $3 billion in U.S. gaming companies Take-Two Interactive, Activision Blizzard, and Electronic Arts. Suddenly, the PIF had sizable stakes in companies that could feed young Saudis’ appetite for diversion. In the context of the pandemic, “people were saying that is terrible, reckless,” says David Rundell, a former U.S. diplomat in the kingdom and author of Vision or Mirage: Saudi Arabia at the Crossroads, a book about MBS’s reforms. “But right now, MBS looks like he was a genius.” 

Saudi entities also built bigger stakes in TV and film. The PIF bought nearly $500 million worth of Disney shares in May 2020, and in December a Saudi bank with government backing plowed $50 million into AGBO, the production company of Joseph and Anthony Russo, directors of one of the biggest-ever box-office earners, Avengers: Endgame. Those investments represented a new step in a long courtship—one that geopolitics had interrupted.

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In April 2018, MBS and his entourage booked out the Four Seasons Hotel in Beverly Hills for a summit with Hollywood execs, titled “The Future of Saudi Arabia’s Entertainment Industry.” Clearly, that future ran through L.A. The crown prince was feted at the Bel Air mansion of Fox Corp. chairman Rupert Murdoch, and two days later at the home of producer Brian Grazer, where guests included Amazon’s Jeff Bezos, Disney’s then-CEO Robert Iger, and Ari Emanuel, chief of powerhouse agency William Morris Endeavor.

It was a prodigious round of networking, and dealmaking wheels began to turn—until Khashoggi’s killing six months later put a deep chill on negotiations. The journalist, a vocal critic of MBS, was murdered inside the Saudi consulate in Istanbul; all evidence led back to the Saudi government, which blamed “rogue agents” for the homicide. Amid the outrage that followed, Emanuel cut ties with Saudi Arabia, returning a $400 million investment to the PIF. “A lot of conversations were put on hold,” says Ivan Jakovljevic, an adviser for tech and startup companies doing business with Saudi Arabia.

The U.S. and other Western governments imposed sanctions on some Saudi officials linked to the killing. But few condemned MBS, and no meaningful restrictions were put on the scores of multinational businesses with operations in the kingdom. Today, almost three years and countless news cycles later, anger over Khashoggi has begun to fade. “I don’t think the Jamal Khashoggi event will stop investing in the long run,” says Rundell, the former diplomat.

For American companies, this uneasy coexistence of ethics and profits is familiar. For decades, the U.S. has regarded the Saudi monarchy as crucial to its own interests, given the country’s mammoth oil reserves and its alliance against a common foe, Iran. Swallowing objections to the behavior of the monarchy has become part of the calculus. Sam Blatteis, the adviser to tech companies, compares the situation to some non-American corporate leaders’ feelings about the U.S. “Just because I do business in America does not mean I agree with extrajudicial drone strikes and Guantánamo Bay,” says Blatteis, himself a U.S. national. Ultimately, he adds, “companies have a fiduciary responsibility to be able to win in emerging markets.” 

Business leaders’ eagerness to win was manifest in January in the heavy attendance at the Future Investment Initiative, or FII—the annual Saudi conference nicknamed “Davos in the Desert” by Western media. The 2021 installment brought together numerous top U.S. corporate brass, including Disney’s now-chairman Iger, Blackstone CEO Steve Schwarzman, and Goldman Sachs CEO David Solomon. Some dialed into the two-day event; others flew to Riyadh to meet government officials. An online panel on entertainment featured AMC’s Aron, YouTube chief business officer Robert Kyncl, and Bob Simonds, CEO of STX Entertainment, the Hollywood movie production and distribution company. Afterward, Simonds told the Times of London he had informed several movie stars about his participation in the Saudi conference. “They had no issues with that,” he said. 

Some entertainment creators and consumers are less sanguine. In July 2020, MBS announced that Saudi Arabia would sponsor the European championship of League of Legends, the massively popular e-sports game owned by Riot Games, a Tencent subsidiary based in Los Angeles. But Riot scrapped the deal less than 24 hours later, after players expressed outrage on social media. 

Such objections have been more the exception than the rule, however. Moviemakers, who seldom publicize where they’re filming, have begun shooting on Saudi territory for the first time. The Russo brothers filmed scenes of their drama Cherry, which came out earlier this year, near the Saudi ancient desert city of AlUla. The upcoming spy thriller Kandahar, partly financed by Saudi media conglomerate MBC, is scheduled to shoot later in 2021 in Saudi Arabia, which will stand in for Afghanistan. 

And this December, Saudi officials will inaugurate the Red Sea Film Festival in Jeddah, headed by producer Mohammed Al Turki, 35, who built his career in Hollywood. “We’re working on a wonderful tax incentive program to get all of these filmmakers to shoot in the kingdom,” Al Turki said in July at the Cannes Film Festival, where the Saudi government sponsored a pavilion showcasing its film industry. “There are more movies planned.”

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Despite the growing coziness, some film and TV creators worry about working in a climate where Saudi political sensibilities could restrict the stories they tell. Two recent developments—both involving Khashoggi’s death—have stoked those anxieties. 

First, in 2019, Netflix pulled an episode of Patriot Act, a news-style comedy series starring Hasan Minhaj, after the Saudis complained about a clip in which Minhaj condemned Khashoggi’s murder. The episode was dropped only in Saudi Arabia, and Netflix said that local law required it to do so. Not missing a beat, Minhaj began his next episode by telling his audience, “This is Patriot Act—or as it’s known in Saudi Arabia, Error 404—Not Found.”

Then, in January 2020, the documentary The Dissident, about Khashoggi’s killing, was screened at the Sundance Film Festival. Director Bryan Fogel’s previous release, Icarus, about Russia’s Olympic doping scandal, had won an Oscar, and the new film was well-reviewed. But it failed to land wide distribution, eventually becoming available only on demand. Fogel has argued that bigger distributors shunned The Dissident for fear of offending potential Saudi partners. “We didn’t have an offer for $1 let alone $1 million,” he told the Associated Press. “As these companies become bigger and bigger, we’re seeing the choices they make, including content, become less and less risky.”

Shows from around the globe populate Netflix’s Saudi Arabian most-popular-shows page.
Courtesy of Netflix
The satirical Saudi series Masameer County recently held the most popular top spot on Netflix.
Courtesy of Myrkott Animation Studios

That said, there’s at least one group of film and TV makers that are taking some risks: the Saudis whose content is airing on Netflix.

Masameer County, Myrkott’s animation series, is rendered in an almost primitive, black-outlined cartoon aesthetic, which is so innocuous-looking that episodes include a disclaimer explaining that the series is not for children. The series offers bitter—and often hilarious—insights into life under an authoritarian system, pillorying the powerful. In the opening episode, an enormously wealthy Saudi is abducted after sneaking out of his palace to buy an ice cream. His kidnappers subject him to the ranting of a crazed leader who tells his pliant audience that “the oppressive powers of the West and their minions—we will make sure they meet their demise.” The scene appears to be an unsubtle dig at the nationalist screed that dominated state-run Saudi media for years—before Netflix and Amazon Prime became widely available.

Netflix’s other Myrkott offering, Masameer: The Movie—released in Saudi theaters in 2020—also lampoons stereotypes about the country. The protagonist, a whiz-kid engineer building a robot for a Saudi bigwig, is a slender young woman named Dana; the bigwig is a crusty sexist who complains that the robot has none of the bulging muscles he wanted. Atop the cartoon world’s hierarchy is a corpulent dolt who sports a superhero cape. “Can you cook?” he asks Dana, hoping to assign her a useful job. “No,” she answers, dismissing his question as idiotic. 

It’s a family-friendly film, not geared for protest. But no young Saudi needs to be told who the characters represent. It captures a society in which a male-heavy power structure that rests on fealty to the royals struggles to keep pace with a generation that craves gender parity and less rigid norms. 

“We are more than just oil and radicalism,” says Alaa Yousef Fadan, the 42-year-old cofounder and CEO of Telfaz11, the Saudi production company. When Netflix first approached Fadan in 2019, he showed them six short films that were “in the drawer,” he says. Netflix snapped them up, packaging them as a series called Six Windows in the Desert. The films offer edgy fictional portrayals focusing on fraught issues, including the conservative dictates around dating and sex. Together they present a rare peek into the lives of regular Saudis. “It is not just that we are misunderstood,” Fadan says. “It is that the world just did not see us at all.” 

Telfaz11’s films, like other Saudi movies and TV shows, construct a vibrant alternative to the kingdom’s global image. The question is whether such entertainment will always be “alternative” or whether it will more closely represent reality as Saudis who desire a more open society come of age and attain greater influence. And that question gives Netflix, and the entertainment industry generally, leading roles in what could be a long-running drama.

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Operations Inside An Amazon Facility On Prime Day
Rachel Jessen—Bloomberg/Getty Images

Desert dealmaking

The economic disruption of the COVID-19 pandemic has prompted a surge in Saudi investment in U.S. companies, and vice versa. Driving the trend is the kingdom’s effort to diversify both its stock portfolio and its oil-dependent economy.  

Blue chips on the dips

The Saudi Public Investment Fund (PIF), chaired by Crown Prince Mohammed bin Salman, holds roughly $400 billion. In the spring of 2020, the PIF poured cash into U.S. stocks that were beaten down by the pandemic, more than quadrupling the size of its U.S. portfolio, to $9.8 billion. Among the big names in which the PIF invested $500 million or more, according to SEC filings: Boeing, Citigroup, Disney, and Marriott. It subsequently sold those stakes, presumably at big gains, and bought stakes in video game makers like Activision Blizzard and Take-Two Interactive; its U.S. portfolio is now worth about $15 billion.

By land and by sea

The PIF sold most of a large stake in Tesla just before the pandemic started, missing out on a huge run in the automaker’s stock price. But its $2.9 billion investment in Tesla’s California rival, Lucid Motors, could yield a $20 billion profit from Lucid’s listing through a SPAC. The sovereign fund now controls about 60% of Lucid, which has just begun to produce cars; the government has hopes for a Lucid factory in the kingdom. The PIF’s single biggest U.S. investment in dollar terms: a roughly 4% stake in Uber that was worth $3.5 billion at the end of July.

In March 2020, Miami-based Carnival mothballed its 100-plus cruise liners and watched its revenues sink to zero. The PIF snapped up 43.5 million shares, becoming Carnival’s second-biggest shareholder.

Big tech comes calling

 As in the rest of the world, the pandemic sped up the demand for online services in Saudi Arabia, and U.S. tech giants took note. In December 2020, Alphabet announced a deal with state-owned oil giant Saudi Aramco to establish a Google Cloud joint venture for enterprise customers. And in March, Amazon said it would hire 1,500 people in Saudi Arabia, as part of a major expansion of its e-commerce business there. Both deals reportedly consummated negotiations that had been put on hold after the 2018 murder of Saudi dissident journalist Jamal Khashoggi, whose employer, the Washington Post, is owned by Amazon founder Jeff Bezos.

This article appears in the August/September 2021 issue of Fortune with the headline, “Entertaining the ‘new Saudi.'”