ABTA: Brazil Pay-TV Sector Stabilizing

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SÃO PAULO: The 24th edition of ABTA Expo & Conference opened yesterday with reassuring messages from government representatives and expressions of cautious optimism by channel and platform executives about the health of Brazil’s pay-TV business.

Oscar Simões, the president of ABTA, the Brazilian pay-TV association, said that the Brazilian market is going through “a moment of stabilization.”

“The contraction of the subscriber base bottomed out in November, with a drop of 0.9 percent,” he said. “Then [the rate of decline slowed down] in January and February with 0.5 percent, in March and April with 0.3 percent, and now we see a rate of about 0.2 percent. This trend clearly signals stabilization of the subscriber base losses and after that, with the improvement of the economic environment, the base should start growing again.”

Simões said that pay-TV executives are more optimistic than skeptical and cautiously “waiting for opportunities.” According to him, one of the variables that prevented a steeper drop in subscribers (only 2 percent compared to 3.8 percent of the GDP) is because people turn to home entertainment in times of crisis. “Instead of going out for dinner and movie theaters, people entertain friends watching movies together at home.” In addition to that, Simões says that people appreciate more and more “the diversity and the quality of the product.”

Earlier this week, CVA Solutions published a study of 5,000 triple-play subscribers (broadband internet, pay TV and landlines) around Brazil. According to the study, “75.9 percent said that they would change pay-TV package brands if it were simpler, especially if cheaper, and 11.5 percent said that they have already canceled pay TV in favor of free TV and Netflix.”

Simões said that he “didn’t understand the study’s parameters and that no official data shows such numbers.” He added that the cord-cutting moves seen in the United States have not been happening in Brazil and he asked CVA for more information about the study.

Bernardo Winik, retail officer at telco giant Oi, also questioned the study. Oi was the only group that saw an increase in customers in the most recent report from telco regulator Anatel: a rise of 5,600, or 0.5 percent, in April. Currently, the group has 1.2 million subscribers and its performance, according to the company, is due to their Oi Total package, responsible for 70 percent of Oi TV sales.

“Operations-wise, life continues—all indicators are better than last year’s and the years before that. My budget hasn’t changed,” he said in an implied reference to the fact that the operator was forced to seek bankruptcy protection from creditors on 65 billion reais ($19 billion) in debt after restructuring talks broke down ahead of the imminent maturation of a 231 million euro-denominated bond last week.

“That is a negotiation process between banks and creditors,” Winik continued. “We, on the retail side, are focusing on our clients and all of our investments this year [still] stand.” Winik announced prepaid options for pay-TV customers and new combos with 15Mb broadband and the option to pay for extra speed.

At the formal opening panel, government reps tried to give some reassurance that the regulations are consistent and the environment is safe for investment. João Rezende, president at Anatel, said that “the agency always worked to encourage the sector’s progress and that the sector is vital to the country.” Manoel Rangel, executive director at Ancine, had a similar message.

Telecommunications Secretary André Borges, who worked previously as an attorney for América Móvil and Oi, mentioned the legal asymmetry created by the fact that OTTs are not taxed as SeACs (or Conditional Access Service, in the Brazilian acronym for pay-TV channels).

Marcelo Carelo, Minister of Culture, pointed to the fact that pay-TV’s national programming helps people’s sense of belonging to a nation as wide as Brazil. He recalled that when he lived in Mexico City, as a diplomat from Itamaraty, watching Brazilian programming “comforted his soul,” after a day speaking Spanish. “We have to find ways to foster the industry without losing sight of the needs of the consumer.”

During a separate press conference to announce new technologies like 4K and DOCSIS 3.1, the president of the América Móvil group in Brazil, José Antônio Felix, said that if the government was really concerned about fostering the industry, it wouldn’t tax it so heavily, it would create symmetry in competition, and it would preserve contracts and legal security. About 60 percent of our expenses are taxes. That goes against digital inclusion, telecommunications strengthening and a good environment for investments in infrastructure and technology. This is a capital-intensive sector. What other sector invested more than 30 billion reais (US$9.25 billion) in the last three years in Brazil?”