Report: LatAm SVOD to double by 2026 as pay TV plateaus

OTT sets sail in LatAm with SVOD at the helm

LatAm OTT
LatAm's OTT market is setting sail... don't be left standing on the dock.

The LatAm SVOD market is hot, with subscriptions to video streaming services set to more than double by 2026. Brazil and Mexico are expected to lead the charge. The region’s struggling economies, meanwhile, are impacting the pay-TV industry, which has seen millions of subscribers cut that cord since 2017.

A new report from Digital TV Research (DTVR) forecasts LatAm SVOD subscribers to number 116 million within five years, up more than 118% from 53 million at the end of last year. DTVR sees Brazil with 38% of the region’s total, about 44 million subscribers, while Mexico follows at 25%, or 29 million subscriptions.

Five US-based platforms already distributing in the region (Netflix, Amazon Prime Video, Disney+, Apple TV+ and HBO) will account for 90% of the region’s paying SVOD subscriptions by end-2026. They’ll also account for about 125% of the growth in total subscribers.

Claro Video, which currently has about 5% of the market is forecast to decline to just 3% by 2026, but still is expected to grow about 28% over 2020.

And, said DTVR’s Principal Analyst, Simon Murray, there are other U.S.-based SVOD services poised to launch in the region this year, including Paramount+ in March, and HBO Max and Star+ in June. Discovery+ is also expected expand in the region this year.

Netflix is forecast to grow 31%, to 49.1 million subscriber from 37.5 million in 2020. But it will lose share to Disney+, which is forecast to grow a whopping 1,415% to 33.3 million subs, up from 2.2 million in 2020.

Pay TV continues to lose ground

Pay TV, meanwhile, through 2017 was a growth industry for the region, with service in more than 72.2 million households.

By the end of 2020, that number had fallen to 64.6 million.

RELATED: Economy, OTT exacerbate Brazil’s cordcutting woes

And, economic struggles have pretty much put a cap on its future growth. In fact, the region has seen 4 million subscribers abandon the industry in 2019 and again in 2020. Venezuela, with the combination of political and economic unrest has seen its pay-TV industry decline 2.4 million subscribers in 2020 alone. Much of that came as the result of DirecTV’s withdrawing from the market.

Brazil, the region’s second-largest pay-TV market with nearly 14.5 million pay-TV HHs, is expected to see a 2% decline by 2026. Mexico, the No. 1 market at 19.6 million HH in 2020,is expected to grow about 2%. The region overall is forecast to be, essentially, flat, with less than 1% growth to 65.0 million HH from 64.6 million

Smartphone growth soars in the region

The number of smartphone subscriptions in the region is outpacing pay-TV’s growth and that’s expected to continue through 2026.

The region had 510 million subscriptions in 2020, but that’s expected to grow to more than 560 million by 2026, an increase of nearly 10%.

About 15 million consumers are forecast to be using next-gen 5G devices by 2022, growing to 62 million by 2025, according to industry group GSMA. That 5G growth carries with it access to higher speeds, ultra-low latency and additional resources for consumers looking to watch video.

Mobile internet is available to more than 9-in-10 consumers in the region, and 5G will potentially lower data caps and costs, making it an ideal way to deliver video content.

Adoption of 5G already is outpacing LTE adoption at a 4X pace. By the end of Q3 2020, there were more than 143 5G commercial networks active across the world, with more than 229 million 5G subscriptions across the world, according to 5G Americas, an industry trade organization. As of December 2020, there were 11 active 5G networks in LatAm and the Caribbean.

The bottom line

We’re seeing a confluence of events – all interconnected – that are prompting strong growth in LatAm’s OTT space.

The doubling of SVOD subscribers likely overshadow growth of ad-supported users, but that may change as more options arise. Pluto TV (from ViacomCBS) has launched in more than a dozen countries in the region and Roku continues to explore the space.

The key to success for both SVOD and AVOD players, obviously, will be the size of their libraries and consumers’ value perceptions and tolerance for subscribing to multiple services. One useful metric is to calculate the number of shows or hours of programming available per dollar. It’s a good, loose, estimate of value for consumers.

That goes out the window a bit when you start to look at originals and live events, especially sports. But it does help estimate what you really can charge.

Make no mistake, however, this is a true inflection point for OTT in LatAm. Pay TV is flat to declining, users own more screens, especially mobile ones and internet penetration is highest among mobile device owners throughout the region.

You need to take advantage of this crossroads, this confluence. You don’t want to wait too long… this ship is about to sail.

Stay tuned and stay well.

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