Latin America seeing golden age of TV in form of SVOD

By Jim O'Neill on Aug 22 2017 at 7:30 AM

Globally, subscription video on-demand (SVOD) is on a rocket trajectory and Latin America is deeply in the mix. While Netflix, Amazon and Hulu have been the leaders of subscription video on-demand growth, an increasing array of subscription services – there are more than 100 in the U.S. and Canada alone – are seeing fast subscriber growth and adoption across demographic groups.

The combined number of subscribers worldwide to “other” SVOD services vastly outnumbers the number of subscribers to the “Big 3” in the U.S. market. That gap is expected to widen as SVOD become the norm in the market.

In Latin America, a recent report from Digital TV Research posits that SVOD will dominate the over-the-top movie and TV episode segment (OTT), with an expected 62% share worth $2.86 billion by 2022, more than double what it was a year ago. The overall OTT market is pegged at $4.6 billion. The report forecasts the region to have 32.5 million SVOD subscribers, up from 17.1 million in 2016.

Brazil’s SVOD share of SVOD subs is expected to be 34%, with Mexico second at 28%.

As in the rest of the world, Netflix will have a major piece of the subscriber pie, but it’s expected to decline in share to 50% (16.32 million) versus the 64% (11 million) it saw in 2016. Amazon Prime Video which is just beginning to solidify its LatAm rollout plans, is expected to climb to 3.68 million, Blim could hit 3.04 million, Claro Video 2.79 million and HBO 1.07 million.

In Mexico, the region’s second-largest economy after Brazil, OTT is booming.

A recent report from the country’s Competitive Intelligence Unit (CIU) said OTT is the fastest-growing segment of the video entertainment industry in Mexico with streaming platforms now being used by 7 million users. While satellite pay-TV (11.2 million) and cable (8.6 million) subscribers remain dominant, the CIU said OTT grew 24% Y/Y in Q1, compared to satellite (up 3.7%) and cable (up 1.1%).

“Exclusive content available to be consumed everywhere on-demand has boosted OTT subscriptions. OTT’s market share is of 24.4%, nearing cable TV’s (31%),” the report said.

Mexico’s telecom authority, the IFT, last quarter said rising pay-TV prices have driven a burst of cord cutting, with operators in the first quarter losing virtually all their subscriber gains from 2016. The result has been more subscribers to SVOD services where more options “can deliver the same experience as pay-TV,” said Analyst and former IFT member Abel Hibert.


Mobile delivery will be a major driver

Mobile services are expected to play a larger role in the expansion of SVOD services than they do in more developed markets. In Brazil, for example, smartphone penetration is the highest in the region, with more than 65.7 million devices on networks.

Overall Internet penetration sits near just 60% in Latin America, but more than three-quarters of Latin Americans who are connected to the Internet watch content online. Reports say more than half watch via a mobile device like a smartphone or tablet.

Ooyala found in its 2017 Q1 Global Video Index – which interprets more than 2 billion anonymized data points from its customers to paint a picture of what’s happening in the online video industry – that more than 56% of all video views globally are on mobile devices.

Latin America, during the quarter, was in line with the rest of the globe in terms of videos watched on mobile devices matching the world’s 56% figure, a big jump from the 46% witnessed a year earlier.

Again, mobile network expansion will be the driver of expansion to new audiences. Wireless carriers are leveraging the relative low-cost of mobile network expansion, which is far less expensive than trying to run fiber to the home (FTTH), coax or copper (DSL).

In the first quarter of 2017, fiber accounted for roughly 10% of fixed broadband connections in Latin America, about 68.11 million households and DSL remained dominant at 51%.

But, by 2020, it’s expected the region will see 150 million new mobile Internet subscribers, far overshadowing fixed Internet expansion.

One example: Samsung Electronics and America Movil announced this week said they would partner to bring 4.5G mobile network to Mexico and other Latin American countries.

Ooyala, in its Q1 2017 Video Index, also found that long-form content, for the first time ever, made up the majority of time watched on all devices, connected TVs, computers, tablets and even smartphones. That shift is a huge opportunity for providers, especially in regions like Latin America where wireless infrastructure expansion is accelerating.

The migration of longer-form content to mobile devices also means that content providers need to be sure that the experience they offer on smaller screens is at least as good as the experience they offer on traditional screens, especially when you consider that the most avid consumers of that content are young and will be customers for a very long time.

Original content will be key

Original content continues to be a major selling point for consumers looking to turn away from traditional pay TV and more broadcasters and content owners are looking to stream content direct to consumers, eschewing pay-TV middlemen, creating a market that will give consumers multiple sources of content in an a la carte setting, a “create your own” bundle that’s likely to include live sports and other live events.

Again, niche content will have a significant role in the ecosystem with smaller studios and content owners gaining access to an increasingly willing-to-stream audience.

But content creation and distribution can be both difficult and expensive, especially if companies hope to leverage regional (even country-by-country) differences. Assuring the highest return on investment will require a technology solution that helps by compressing time-to-market, reduces overhead through automation and tracks content as it goes from concept to production to distribution.

What do you need to not just survive, but thrive in a booming SVOD marketplace??

The key is engagement and loyalty, delivering an experience that’s enjoyable enough to keep your subscribers coming back for more.

The ability to deliver a smooth, TV-like experience to your users that includes great recommendation and discovery, easy navigation, regularly refreshed content and the willingness to treat streaming video as a new business with a new business model. Now is not the time to reach back to your old business model for “new” ideas.

And remember, if you don’t act now, someone else will.

Stay tuned.

Jim O’Neill is Principal Analyst and Strategic Media Consultant for Ooyala. You can follow him on Twitter @JimONeillMedia and on LinkedIn

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