Over the past two years, the Latin American pay-TV subscriberbase has grown at a 10.6% compound annual growth rate (CAGR), outpacing all regions except Asia”, says a recently released report by Kagan. More than 20 million Latin American households are subscribers of pay TV services.
Subscription revenues are by far the majority of revenues of Pay TV service providers, in most cases they amount to at least 90% of revenues. However, advertising revenues do provide a nice addition to the bottom line. Due to their middle and high income demographic, Latin American pay TV subscribers are an interesting target for many advertisers. The upcoming Soccer World Cup is likely to be a blessing for advertising through pay TV channels. “We are obsessed with soccer in the region. It’s nearly a religious event”, says Cynthia Evans, Director of Research Group M/Mediaedge in Miami, who buys media for companies including Colgate, Sprint, Sony, Colgate Palmolive, Sony Ericsson and Energizer. “We have several advertisers around the world who are sponsors of Fifa World Cup,” Evans adds. “Largest is probably the various Sony companies and our MEC Access division globally is working with Fifa directly, so we are ramping up and actively following details”.
According to Jesus Mata, Sr. Director, Advertising Services at DirecTV Latin America, “the ratings of the World Cup games amount to a month of Super bowl broadcast. It requires a special treatment both by marketers and media companies.” DirecTV Latin America will be the only television service to transmit all 64 games live (no one does that in Latin America) and will also be the first and only full high definition television broadcast of the tournament in the continent. It plans to devote several 24-hour television channels to Fifa and World Cup content in preparation for the actual tournament.
MAJOR INTERNATIONAL STRATEGY
DirecTV has made Latin America a major component of its international strategy. It is the largest satellite TV provider in Latin America, where it has 6 million subscribing households (including Puerto Rico). The average household size is 4.5 persons. The only countries it is not present in Latin America are Bolivia and Paraguay. The 2006 consolidation of Sky Mexico and DIRECTV Mexico enabled the provider to grow unchallenged in the satellite space until the end of 2008 launch of Dish Mexico, a joint venture from DISH Network Corp. and MVS Televisión S.A. de C.V. owner MVS Comunicaciones.
At the end of the second quarter of 2009, Sky Mexico, had 1.5 million subscribers. While both Sky Mexico and Sky Brasil have rolled out robust interactive platforms, SNL Kagan analysis indicates he lack of triple-play products will limit the satellite operator’s long-term competitive viability. Sky Mexico’s share of the local pay-TV market declined from 22.5% at end-2006 to 21.4% at end-2008. New DTH player Dish Mexico, served an estimated 530,000 subscribers as of first-half 2009, according to Kagan. An additional sign of the consolidation of the Latin American satellite operator sector happened in late February when EchoStar acquired an ownership interest in Satmex. another Mexican cable operator that delivers video, audio and data services to the Americas. MVS Comunicaciones, EchoStar's partner in the Mexican direct-to-home TV service Dish Mexico, also participates in the ownership of Satmex through a joint venture with EchoStar. Together, EchoStar and MVS Comunicaciones acquired all of the outstanding stock of Satmex for approximately $267 million in cash, plus up to $107 million in cash on Satmex's balance sheet. The transaction is expected to close early in the third quarter 2010.
In Brazil, where Net Serviços, owned by Embratel/ Telmex is the market leader, “Sky Brasil, has grown subscribers from pre-DIRECTV Brasil merger levels of 869,000 at end 2006 to 1.7 million in second-quarter 2009. In addition, to the above mentioned DirecTV (including Sky Brazil and Sky Mexico) and Brazil’s Net Serviços’ other major Latin American Pay TV providers include: Cablevisión (Grupo Clarín, Cable, Argentina), Telmex (Grupo Telmex International, Colombia), Megacable (Teleholding SA, Mexico, Cable), VTR GlobalCom (Liberty Global, Chile), Cable Mágico (Telefónica, Peru, Cable), Intercable (HM Capital Partners, Venezuela, Cable), Cablevisión (Grupo Televisa, Mexico, Cable).
THE PANREGIONAL MARKET
Pay TV (Satellite and cable) has historically been the leader in panregional advertising as many media buyers have traditionally regarded them as an efficient way to reach upper and middle class Latin American audiences. Historically, at least 50% of the overall panregional advertising market has been used to buy advertising in subscription TV channels (see table per media channel above, as reported in a recent report published by Portada). Portada defines the panregional advertising market is defined as advertising placements bought in two or more Latin American countries by clients and agencies both outside and inside of Latin America.
Panregional advertising decision making has historically been concentrated in Southern Florida, particularly in Miami, an area with a strong connection to Latin America that offers corporations and agencies the opportunity to activate centralized panregional buys. In recent months, several networks have strengthened their panregional advertising sales teams. Last month, A& E, Ole Networks appointed Santiago Herrera as Senior Sales Director Panregional: Herrera, based in Miami, will work closely with advertisers and agencies to provide attractive opportunities for Latin American sales for signals A & E, History Channel and Biography Channel.