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For Brazilian Pay TV Players, OTT Is Complementary Rather Than Competition

Traditional pay-TV market players in Brazil, from operators to networks, so far seem unfazed by the increasing competition of over-the-top players. Netflix Inc. reached an estimated 4.1 million subscribers in Brazil in 2016, while multichannel subscriptions dropped 1.4% year-over-year to 18.8 million. Many speakers at the Streaming Brasil conference, held July 17 in São Paulo, said Netflix is less of a competitor for operators than it is for networks such as HBO, given the OTT giant's increasing focus on original content.

Video product director Alessandro Maluf of América Móvil SAB de CV voiced this opinion, echoing comments made by SKY Brasil President Luiz Eduardo Baptista in an interview with newspaper Folha de S. Paulo the previous week, in which the executive also announced that the AT&T Inc. subsidiary will be bringing a service like DIRECTV NOW to Brazil in 2018.

Maluf's presentation focused on América Móvil's expanding distribution platforms and models. The Mexico group controls 52.3% of Brazil's multichannel market through direct-to-home satellite provider Claro TV and NET, which has been offering video-on-demand to its cable subscribers since April 2011, five months before Netflix landed in the country.

The company's VOD service, NET NOW, began as a set-top-box-only platform and eventually migrated online, and is now also available to Claro's DTH subscribers. As well as aggregating networks' TV Everywhere content and access to the group's subscription video-on-demand platform, Clarovideo, NET NOW uses transactional, free, and subscription VOD models to take advantage of all the different windows for content availability. More recently, the service has been offering movies on a transactional basis simultaneously with their theatrical window.

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The cable operator has also recently launched a video offer for its stand-alone broadband subscribers, providing users with a VOD-enabled set-top box for an extra 20 Brazilian reais per month. As well as enabling TV access to Clarovideo's 15,000 titles, the device will also allow users to subscribe to on-demand linear TV packages for 15 or 30 days at a time, in a model similar to the prepaid packages offered to DTH users across Latin America. The company doesn't intend to integrate Netflix into their set-top boxes, however, as is common in European and Asian markets, but is still an emerging trend in Latin America.

For networks, the analytics that online distribution platforms provide are especially valuable, given the limited subscriber data provided by operators.

Brazil's largest pay-TV network, Globosat Programadora LTDA, has been launching new TV shows first on its on-demand platform, Globosat Play, to identify who's watching and figure out how to best market the show and where it fits in linear programming. Parent company Globo, which is the country's largest broadcaster, has been taking a similar approach, launching many TV shows first on its subscription video-on-demand service, Globo Play, to add value to the OTT platform.

Globosat recently announced its intention to provide either stand-alone OTT subscriptions or bundle with broadband some of their TV Everywhere/VOD platforms of their premium channels, namely Telecine Play, which focuses on movies, and Combate Play, a wrestling channel. Digital platforms manager, André Nava, was quick to point out, however, that the company's main business continues to be its linear channels, which have been growing in ratings.

Another speaker to highlight traditional pay-TV's growth was Ermindo Cecchetto Neto, residential products director at telco Oi SA, which was the fastest-growing operator in Brazil in 2016 due to its triple and quad-play bundles. According to Neto, 50% of Oi's net adds are first-time multichannel subscribers, proof that between cord cutters and cord nevers, there is still a large potential market for multichannel in Brazil, where service penetration is still low, at 28.5%.

The operator has since launched its own OTT product for non-pay TV subscribers, Oi Total Play. The company has been offering standalone broadband subscribers access to the TV Everywhere platforms HBO Go and Sony’s Crackle in select markets since December 2016, and has now expanded its offer to include content from other networks, such as Discovery, ESPN, Fox, and Viacom, as well as aggregator Vubiquity.

Broadband penetration vs. multi channel penetration

Another option for consumers who can't afford traditional pay TV services (a likely driver of Brazil's recent cord-cutting trend, which has been most prevalent among DTH services, traditionally more expensive) was presented by DIRECTV NOW's acquisitions strategy director, Jenn McGinnis. McGinnis said the virtual service provider's skinny bundles target not only cord-cutters and cord-nevers, but also underserved potential pay TV subscribers.

While this type of VSP model has yet to emerge in Brazil, SKY's and Oi’s recent announcements, as well as the emergence of hybrid services such as EnterPlay's set-top-box offering may help drive a new kind of multichannel growth in the Brazilian market.

Global Multichannel is a service of Kagan, a research group within S&P Global Market Intelligence's TMT offering.

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