IFT Consulting Execs Examine LatAm Media Market

CANCUN: During a MIPCancun session titled Market Outlook: Economic and Regulatory Perspectives on Latin America’s Media Market, José Cepeda and Dan Punt, managing directors of IFT Consulting, talked to World Screen’s Anna Carugati about the forces and influences impacting the Latin American TV landscape.

Carugati began the session by citing that many pay-TV, mobile or OTT providers are requiring that subscribers pay a fee. Because there aren’t that many credit cards in the region, the prepaid model is very popular, at least with the telephone services. “How are services collecting monthly subscriptions in this environment?” Carugati asked. Cepeda said that at the moment, “10 percent of people can pay for SVOD services while at the same time relying on pay TV, and that will continue to increase. In the coming years, banks and payment systems utilizing credit cards will work to accelerate their availability, and we will also see more activity with the addition of ‘mobile banking,’ which will be a game changer in terms of payment methods via credit cards.”

Meanwhile, Punt added that in Latin America there are opportunities to enter the prepaid-services market and develop a business model that fits the consumer tendency toward prepaid cards. “That’s a business model that can be built in Latin America, which can be different,” the executive said.

The conversation then focused on the internet connections required by OTT services and how access to broadband in the region is not very high. “The broadband penetration in Latin America is at 37 percent and that will grow rapidly with mobile devices,” Cepeda said. “As more people use their devices—iPads, iPhones and Android—they will start to make them their primary internet devices. This will especially increase as 4G begins entering the countries of the region.”

However, Punt stated that 4G is an advanced mobile infrastructure and that other initiatives will first be required, such as HD availability for phones. The executive noted that “current technology consumes a lot of space. 4G is still very slow and has to finish its ‘cross-over’ in the region.”

Carugati asked the panelists about the state of tax policies and what that means for the development of 4G technologies. In this regard, Cepeda said that countries like Brazil and Colombia have very high taxation for mobile services, “nearly 30 percent in tax rates for mobile devices and services. That will decrease the potential for growth.” However, the executive pointed out that governments are doing their best to change these rules and regulations.

The conversation then focused on some mobile-service strategies that can be developed in the region. Cepeda said that one of the strategies is digital offerings, being that phones are the primary means of accessing the internet. This allows “the development of digital models that are having success in other markets, such as VOD and SVOD services backed by advertising, which is very successful in Latin America, as in the case of YouTube. In fact, the world’s number two YouTube star is from Mexico, so we see that this is a very successful model.”

The executives then discussed cable and satellite providers offering skinny packages to compete with OTT’s lower prices. Punt said that skinny packages in the U.S. were born as an innovation in the price of pay TV, which was more expensive. However, in Latin America, this cheaper price rate had already been introduced into the market several years before. “When you look at Brazil, Globosat offers pay-TV packages that are skinny packages at a price level of $30, $20 or $10, something that Brazil has been innovating,” the executive said. “The next phase would be for other pay-TV providers in Latin America to begin launching more extensive offerings to reach the second- and third-level customer segments.”

The session ended with the question, “How much of a threat is Netflix in the region?” Cepeda said it was a threat and an opportunity at the same time. “Netflix pioneered the SVOD market in Latin America and when you look at the subscription rates for video-on-demand in the region, you realize it has a very high market share. Being the first player, Netflix has an advantage in having started its operations in the U.S., where it acquired its experience before later moving on to Latin America and seizing the opportunities offered by the region.”

The executive also said that the use of SVOD, AVOD and TV Everywhere services will lead to the growth of existing branded services in the region, which will also help attract younger audiences while driving new content strategies.