OTT opportunity in Brazil grows; so do woes for country’s pay-TV industry

Brazil OTT

Pay-TV providers in Latin America’s largest economy continue to see erosion of their subscriber bases, with a new report saying the market lost 6.7% of subs in May, compared to a year ago.

Brazil’s telecom regulatory agency, Anatel, said subscriber numbers nipped below 16.9 million in May, showing losses of 1.4 million in the past 12 months. That loss continued a contraction in the market that began in 2014, the peak year for the industry there.

Brazil has seen some two million subscribers cut the cord between 2014 and 2018. And, while Digital TV Research posits that the country will remain the largest in the region in terms of pay-TV revenue of $5.57 billion in 2024, it notes that figure is lower than its 2018 revenue total.

The sector has been hit hard by a lacklustre economy, which has struggled with inflation and unemployment. But last month could prove to be a bit of a pivot point, as consumer price inflation eased in May to 4.66% for the 12 previous months, down from April’s 4.90% rate of consumer price inflation. It was the first annual decline of 2019. The monthly rate was 0.13%, down from April’s 0.57%, the lowest rate since November, according to IBGE, Brazil’s government statistics agency.

Unemployment through the three months including April also improved, according to the government.

OTT adds oomph in the market

Brazil’s pay-TV market problems are many, and the segment’s performance isn’t likely to improve, creating OTT opportunity.

Aside from OTT competition, Netflix – which was one of the first international markets the company launched in 2011 – has made substantial strides, with one study saying it had as many as 12.5 million subscribers in the market (more conservative estimates placing the number at under 10 million). And, other SVOD services, including Disney+ and Apple TV+, both are set to launch there soon, bringing the markets total number of SVOD players to about 80.

Locally grown streamer Telecine – a JV between LatAm media conglomerate Globo, Fox, MGM, Paramount and Universal – has an arsenal of Hollywood fare and locally produced content it feels can compete not just with Netflix, but with pay-TV operators for younger viewers.

Additionally, over-the-top sports services are expected to open up that market and take share from traditional distributers like NET and SKY Brasil. Last month, sports SVOD service DAZN announced it was launching in Brazil, joining Grupo Globo’s Premiere Play, Fox Sports and UOL Esporte. And, in Brazil, as in the US, Twitter and Facebook also are streaming more live sports.

An Ipsos report in 2018 found that 58% of Internet users in Brazil watched sports content on mobile phones and desktops, up from 53% in 2017. That also will increase OTT opportunity.

The bottom line

Anatel reported that fixed broadband accesses continues to grow, increasing 5.5% year-over-year in May. Nearly 32 million Brazilian households now have fixed access, many of them over fiber connections, which increased 88% in the period to more than 7.1 million households.

The mobile market, meanwhile, slowed slightly in 2018, but was still strong, with a 6% revenue increase for the year. Sales were off 6.8% to 46.9 million units. 2019 is expected to see sales recover slightly, although they’ll still be down about 4.3%, to 42.5 million units sold, according to analyst firm IDC.

Brazil – and much of Latin America – will be relative latecomers to 5G compared to Western Europe, parts of Asia and North America, where several dozen 5G trials already are underway. With a 2021 date for commercial launch in the country, only Telecom Italia’s TIM subsidiary has kicked off a 5G trial in the country. The technology, which promises speeds up 20X faster than current mobile broadband, could further disrupt the pay-TV industry.

In whole, those problems continue to create OTT opportunity for broadcasters, operators and studios for D2C plays.

Stay tuned.

Jim O’Neill is Principal Analyst at Brightcove. You can follow him on Twitter @JimONeillMedia and on LinkedIn