Media Meccas.(Business)

Byline: Emily Flynn Vencat and Zvika Krieger

Mideast nations eager to develop entertainment hubs are pouring money into Hollywood.

Dubai, with its over-the-top hotels and malls, is already known as the Vegas of the Middle East, and last week the line in the sand between Arabia and Sin City blurred further. Dubai World -- one of the investment arms of the ruling al-Maktoum family -- paid $1.2 billion for 5 percent of MGM, the world's second largest casino company, and committed $2.7 billion to co-finance a futuristic casino-hotel on the Vegas strip. "MGM is arguably the most well-run entertainment and hospitality firm in the world," Laiboon Yu, Dubai World's chief investment officer, told NEWSWEEK via e-mail last week. "That's what attracted us to invest."

Entertainment is only the latest industry to benefit from a recent outpouring of Middle Eastern money. Gambling and strip clubs may be haram (forbidden) by Islamic law, but Arab investors have spent at least $10 billion on top Vegas and Hollywood brands in the last year. Universal Studios and Dubai property-developer Tatter are building a $2.2 billion, 22 million-square-foot theme park in the city-state; Warner Brothers and Aldar (Abu Dhabi's largest real-estate firm) have cut a $2 billion deal to build another local megastudio and coproduce a series of films and videogames in both English and Arabic. While Arab players are following a trail of foreign money that has often ended in the red (the Japanese lost billions in Hollywood in the 1980s and the Germans did the same in the 1990s), they don't want only cash returns: they're looking for expertise, soft power and (controversially) global cultural legitimacy.

The investments are part of long-term plans to build international entertainment hubs for tourists and the domestic market alike. Already, the Gulf boasts such destinations as The World, a man-made globe of mini-islands, and there are plans for Arab outposts of both the Louvre and the Guggenheim. Teaming up with American media magnates takes the strategy to the next level. American media analyst Harold Vogel says the return is partly measured in acquired technical expertise that build "indigenous entertainment industries."

The Arab market could be huge. Sixty percent of people in the Arab world are under the age of 25 and the appetite for entertainment is exploding. Over the next five years, PriceWaterhouseCoopers predicts, the Arab world's entertainment and media market will grow by almost 60 percent to $10 billion annually -- outpacing growth in markets like Brazil and Russia.

Next month Viacom and Dubai's Arab Media Group (AMG) will launch MTV Arabia to 35 million households. And Showtime Arabia, the largest pay-television network in the Middle East and North Africa, has plans to roll out Arabic-language soap operas and talk shows.