With the number of smartphone connections in Latin America set to expand from 427m in 2018 to 543m by 2025, according to the GSMA, the regions mobile network operators (MNOs) are in a strong position to grow their subscriber base. But increasing average revenue per user (ARPU) in the face of stiff competition from pan-regional rivals will depend on their ability to deliver compelling audio, video and gaming content to mobile devices in a way which is fast and convenient for consumers to access and pay for.
In its Mobile Economy Latin America 2019 report, the GSMA estimates there were 416m unique mobile subscribers across sixteen countries in 2018 –Argentina, Brazil, Colombia, Mexico, Chile, Peru, Costa Rica, Cuba, Uruguay, Panama, Nicaragua, Guatemala, Honduras, Venezuela, Paraguay and El Salvador. While some of those territories – Chile, Panama, Uruguay and Costa Rica – for example, are already approaching saturation in terms of penetration rates of around 80%, there are significant opportunities for growth elsewhere, particularly Nicaragua, Cuba, Guatemala and Honduras. In 2018, 80% of LatAm mobile subscribers (326m) also used mobile Internet, a figure forecast to reach 87% (422m) by 2025.
Many of those new subscribers will be tempted onto commercial services offering more bandwidth and greater coverage than were previously available. The GSMA estimates that combined mobile network operator (MNO) revenue and investment in the region will swell from US$67bn in 2018 to US$76bn by 2025, by which time 468m citizens of Latin American countries will have access to fourth-generation (4G) infrastructure and bandwidth, up from 263m in 2018.
5G offers longer-term potential
While the GSMA has estimated that fifth-generation (5G) mobile networks will evolve to provide faster downloads (up to 1Gbit/s), lower latencies, better coverage and improved reliability, they will account for only 51m of total connections by 2025 as most of the regions citizens continue to connect via 4G. The GSMA stated that LatAm 5G adoption rates currently trail most other regions of the world, notably North America, Asia Pacific, Europe, and the Commonwealth of Independent States (CIS – the former states of the Soviet Union).
But, as in other regions of the world, concerns over the use of Huawei telecommunications equipment within critical national infrastructure, alongside regulatory issues, and the onset of the Coronavirus pandemic in the first half of this year, may combine to delay 5G rollout plans in Latin America further. Countries like Mexico and Brazil have already either postponed or are considering postponing auctions of 5G wireless frequency spectrum originally planned for the end of 2020.
Whatever the eventual timescale, there is no doubt that 5G is coming to Latin America. MNOs including Claro working with Ericsson and Qualcomm in Brazil, and Antel partnering with Nokia in Uruguay, have already conducted trials of the technology, with consumer and business fixed and wireless data services on the roadmap alongside Internet of Things (IoT) applications in manufacturing, transportation, broadcasting and virtual reality.
4G good enough in the meantime
While 5G brings capabilities, which are ideally suited to certain applications, 4G is already more than capable of delivering high definition (HD) video content to smartphones and other mobile devices. And the demand for that video content is already well established and growing.
Digital TV Research calculates that the number of paying subscription video on demand (SVOD) accounts in the LatAm region will almost double from just over 42m in 2018 to 81m by 2025. By this time, five US-based platforms – Netflix, Amazon Prime Video, Disney+, Apple TV+ and HBO Play – will own 88% of those subscriptions. The Latin America OTT TV and Video Forecasts report also expects local platforms like those offered by Claro Video and Telefonica Movistar Play to stall as pan-regional players come to dominate. Those predictions may prove far off the mark, however, with market research firm Business Bureau estimating that Claro Video accounted for 33% of all LatAm SVOD accounts in 2018, second only to Netflix with 36% and way ahead of nearest rival Amazon Prime Video with 3%.
Futuresource Consulting points to healthy ongoing competition from Claro Video and Blim, as well as recent market entrants Disney+ and Apple TV+. The market research firm also predicted growth for Canadian streaming platform StarzPlay, which debuted in Brazil and Mexico last year and recently signed a distribution deal with Apple TV+, as well as Walmart’s advertising video on demand (AVOD) competitor Vudu. Although the latter has since been sold off to NBCUniversal’s online film ticketing and information service Fandango for an undisclosed sum.
And while it expects Netflix to increase its subscriber base from 31m in 2019 to 42m by 2025, Digital TV Research notes that the company’s market share will fall from 75% to 52% in the same period as rivals enjoy faster growth from a smaller base. Amazon Prime Video is forecast to almost triple its LatAm SVOD subscriptions to over 10m, with newcomer Disney+ expected to reach 15m subscribers by 2025. By contrast, local players including Claro Video, Blim and Movistar Play will be still be measured in the hundreds of thousands.
The company estimates that total OTT TV and movie revenues for 19 LatAm countries combined will hit US$8.2bn in 2024, more than double the US$3.3bn in 2018. SVOD will account for US$6bn of the total, vastly exceeding turnover from AVOD and TVOD services. Two countries together – Brazil and Mexico – will account for two-thirds of that total OTT video revenue between them.
Pan-regional operators dominate OTT video landscape
Indeed, the most successful OTT video services in Latin America to date are those which deliver films and TV series in multiple countries simultaneously, whether in English or Spanish. Some providers have also built their subscriber bases by offering a mixture of free, AVOD supported and premium subscription content.
LatAm telco America Móvil made its Claro Video Básico service free to fixed and mobile broadband subscribers across its operating territories in 2016 for example, offering a library of up to 500 movies, TV series, children’s videos, sports, short films and documentaries. Users also have access to its TVOD based Pay Per View content through mobile apps and website.
Blim TV – the OTT service developed by Mexican media giant Grup Televisa – is available in 17 LatAm countries via a combination of website, mobile app, games consoles and smart TVs. It offers popular television series and soap operas and films in Spanish as well as English content aggregated from Disney Paramount, MGM and the BBC for around US$4.50 a month (or US$12 for a three-month subscription and US$23 for a year). Since adding around 30 live channels to its catalogue last year, the company also offers free to air content alongside its SVOD platform.
Another OTT service for??? (I think that’s the missing word) movies, series, music shows, documentaries, children’s programming in Brazil – Looke – can be accessed through PC, smartphone, smart TV and STB apps is available for US$1 a week or US$4 a month, through post-paid subscriptions to TIM’s mobile phone packages. The telco offers similar access to Netflix. Developments elsewhere reflect the challenge smaller providers now face from Netflix, Amazon and Disney+ however. Sony Crackle shut down its Latin American SVOD operations in April 2019 saying it was simply unsustainable in the face of fierce competition.
AVOD and aggregation approaches
A Latin American subsidiary of the Fox Play app for PCs and smartphones launched in 2015, with AVOD supported content available to customers signing up to local Pay-TV services. Tigo, the pay-TV entertainment platform developed by global telco Millicom, announced it would start to integrate Amazon Prime Video into its ONEtv platform, on a country by country basis, in January 2019. Starting with Columbia, it is delivered as an add-on for existing post-paid customers and as part of an introductory bundle for new ones.
DISH Network’s Sling TV was another OTT service originally designed to aggregate other company’s video content (notably Fox) but has since switched to a more personalised platform that allows users to buy live channels on demand. AT&T’s adopted a similar more sport focussed content approach, with its service available on PCs, smartphones, select set-top boxes (STBs) and smart TVs. The US telco debuted the DirecTV Go platform in Chile and Colombia in 2018 before spreading to Ecuador, Peru and Uruguay last year. However, it has recently been forced to close down operations in Venezuela due to regulatory demands.
Grupo Globo’s Globoplay launched in Brazil in 2015, offering both AVOD plans and premium paid-for content, much of it original Portuguese language programming sourced from Rede Globo’s free to air television network. A recent deal will see it shortly included in Roku’s Brazilian proposition, alongside other aggregated video content from Netflix, HBO Go, and Apple TV+.
With competition for SVOD and AVOD subscribers in Latin America only set to intensify over the next five years, providers need to make sure of a few things to cement their position. Firstly they must broaden their reach to offer services to as many potential customers as they can, and forge distribution partnerships with regional MNOs that can provide access to large client bases which are already downloading and streaming video to smartphones, laptops, PCs, tablets and other portable devices.
A good example comes from Telefónica, which last year developed a direct carrier billing (DCB) relationship with mobile commerce enabler DOCOMO Digital. The arrangements allow subscribers of the telco’s Vivo and Movistar services across multiple countries starting with Chile, to pay for digital content through their mobile phone bills as well as purchases through Apple iOS and Google Play app stores. Large sections of the population in Latin American countries are “unbanked” – they do not own accounts with financial institutions or have access to credit/debit cards. Providing alternative forms of payment mechanisms which are simple and convenient to transact is likely to reap dividends, particularly amongst younger demographics.
DOCOMO Digital’s platform also helps both content providers and telcos with end to end subscription lifecycle management that aids customer retention, alongside fraud prevention and analytics tools. Outsourcing transaction management to a third party also prepares telcos to quickly take advantage of new mobile payment opportunities in the form of public transportation and ticketing services recently enabled by the new regulation. As the OTT video streaming market continues to develop and expand in parallel with increased end-user demand, having the agility to distribute digital content across multiple countries quickly will be critical to future success.