The launch of Games4U is part of Vivo‘s strategy in a very promising enterprise: Brazil is the 13th largest game market in the world and mobile gaming is the fastest growing segment, claiming 42% of the global gaming market.
By Carla Ponte, with Luiz Duarte.
There is a global population of 2.2 billion gamers, or should we say “game enthusiasts?” According to Newzoo’s 2017 Global Games Market Report, this is a more accurate term as this planetary crowd includes a much wider variety of interests: playing intensely, casually, professionally; viewing game content on-demand and live streaming; following the news and championships worldwide or just engaging in so many other innovative practices we cannot even imagine today, but will soon see. The fact is, digital games are rapidly becoming the world’s favorite pastime.
Vivo Games4U wants to be the digital platform of choice for these consumers in Brazil. The service is accessible through Android apps by any mobile user, with added exclusive premium content for Vivo subscribers. Besides access to over 300 games, the digital platform offers information about the main games on the market, trailers for new games, and news coverage about games and sports events along with all sorts of content regarding the topic. “Our strategy is to be closer to this audience, understand their demands and contribute to strengthening this market, says Marcio Fabbris, Vivo B2C Vice President.
Brazil represents only 1.4% of the “game enthusiasts” population, with 30 million consumers generating US$1.3 billion, according to Newzoo Report. Compared to the global figures these are not impressive numbers at all, but for Marcio Farris it is clear that “each year, the game market consolidates itself as one of the greatest drivers of the digital economy in Brazil,” whose revenue is just behind that of Mexico in Latin America. The region is expected to grow by 13.9% year over year – the highest rate worldwide – to reach US$4.4 billion this year and US$6.3 billion by 2020.
Brazil represents only 1.4% of the “game enthusiasts” population with 30 million consumers generating US$1.3 billion
The figures presented in Newzoo’s 2017 Global Games Market Report support Vivo’s strategy, as consumers increase their migration to mobile gaming. Already the largest segment – accounting for 42% of the total global gaming market –, mobile (smartphones and tablets) growth is set to continue, claiming 50% of the market by 2020.
Brazil: Inside the Game
In Brazil, there are some 30 million gamers generating about US$1.3 billion in revenues. These figures are mainly related to clients of the giants of the entertainment industry. But behind the screen, the Brazilian games market is experimenting a very exciting moment, exploring the more independent sector. “The development of indie games in Brazil is booming,” says Eliana Russi, Executive Director of the Brazilian Association of Digital Games Developers (Abragames, in Portuguese). “In 2008, we counted 43 companies, in 2014 we jumped to 130 and today we have 300.”
According to Abragames, 70% of Brazilian developers begin their business as outsourcing companies, but many are growing beyond that role. “We started in 2012 creating games for other companies and nowadays we are focused on producing our own brain puzzle games. This is our niche: games to exercise the brain.” João Vítor de Souza – CEO at Cupcake Entertainment – explains that defining a niche was a key decision to achieving a 45% year over year growth, with 90% of their consumers being women 35+ and most of them from the US.
70% of Brazilian developers begin their business as outsourcing companies, but many are growing beyond that role.
Having their main consumers out of the country is a common feature of the Brazilian indie games industry, which saw its exporting revenues jump from US $1.5 million in 2013 to US $19 million in 2017. Eliana Russi says that “it is amazing how this industry responds and does not take any opportunity for granted.” Abragames and ApexBrasil – Brazilian Trade and Investment Promotion Agency – support and organize delegations to events abroad and are also behind the 3rd biggest game event in the world, hosted annually in São Paulo City. BIG Festival – Brazilian Indie Games Festival – will be hosting its 6th edition. “Our main goal is to keep growing the international business and get the Brazilian game consumers closer to the Brazilian game developers.”
Another push is coming from the government. Ancine – the Brazilian agency that regulates the audiovisual market – approved tax incentive mechanisms and FINEP – a Research and Innovation public company –is selecting companies in which to invest and help them take the first steps into the market. João Souza says it is very good to see these moves. “For sure it will help the beginners, but for the ones already in the game the main sources are really coming from abroad.”
In Cupcake’s case, 80% of the company’s revenues come from the international market, especially the U.S. In tune with the mobile wave, the company’s 03 brain puzzle games – initially accessible on Facebook – are already available for smartphones. João Souza notes that due to the demand, all new products are already being created for mobile devices. “Our long term goal is to be the world’s number one company in brain puzzle games. Recently we got an investment of US$1 million from Playlab – of Thailand – to help us achieve this audacious goal”, states the Cupcake CEO. As the Executive Director of Abragames says, Brazilian game developers are alert and taking every opportunity to play big in this promising market.
In this new article of Portada’s new Brazil Corner feature, Carla Ponte and Luiz Duarte describe the latest trends in the Brazilian Pay-TV market, the eighth largest worldwide. While subscribers have declined, a substantial increase in audience per minute and higher advertising investment bode well for the sector’s future. More than eight in ten marketers consider Pay TV a key tool for brand communications in Brazil.
By Carla Ponte with Luiz Duarte.
Brazil is the eighth Pay TV market in the world and despite losing one million subscribers in the past two years, it retains a strong interest from the advertising community. According to a study published in June at ABTA’s Mídia Fatos (ABTA is the Brazilian Association for Pay TV) Web site, between 2015 and 2016 the advertising investment in the sector increased 9%, jumping from US$4,5 billion to US$4,9 billion (1USD/3,3BRL). The figures, coming from Kantar Ibope Media, are significant, considering that Brazil’s economy was officially in a recessionary period and Pay TV is not a must-have product.
The survey also indicates that Pay TV’s audience per minute more than doubled since 2013. Although the number of subscribers is suffering a huge drop in Brazil, those who did not “cut the cord” are spending more hours watching Pay TV. Ironically, for some analysts this is a consequence of the economic crisis itself. For those who could keep the service, the variety of channels became a viable entertainment alternative, much cheaper than going out.
Those who did not “cut the cord” are spending more hours watching Pay TV; audience per minute more than doubled since 2013.
A SOLID POINT OF VIEW
For the advertising market, these figures represent a very strong message. “Pay TV is already part of people’s life and a key tool for brand communication,” says Maurício Almeida – Media General Director at F/Nazca. As a top Brazilian ad agency, part of Saatchi&Saatchi International Group, F/Nazca is not alone in this conclusion. According to PMV – Pay TV, an annual research focused on Brazilian Pay TV, some 86% of advertising professionals have a positive perception of the industry. As Almeida summarizes , ”Pay TV offers very interesting planning possibilities with a qualified audience, which is a main target for the clients, besides segmentation and communication flexibility.”
The PMV is conducted by Singular Arquitetura de Mídia with marketing executives of major advertisers and media companies, including the top ad agencies in São Paulo and Rio de Janeiro. “We present them a list of 12 possible strengths and weaknesses related to the media outlet, such as segmentation, engagement, interactivity, among others”, explains Geraldo Leite, Singular Partner – Director, responsible for the survey.
Pay TV reaches less than 30% of the homes in the country.
For practically all (99%) interviewees, the main strength of Pay TV is its role in complementing other media buys. Advertisers can acquire a larger audience reach at a fraction of the cost of broadcasting options, while at the same refining the target through careful selection of channels better tuned to their consumers. Almeida explains that media planning is a combination of various points of contact with clients. “And Pay TV is a strategic point due to its capacity to engage audience as a second screen, amplifying the coverage and the value of the message sent by video.”
Among all items evaluated in the PMV – Pay TV study, only one stood out as a weakness: the lack of penetration. Pay TV reaches less than 30% of the homes in the country. But not even the recent cracks on this limited subscriber base seem to shake the confidence of the marketers on Pay TV. ”These are temporary bumps directly related to the economic crisis, but the main strategic strengths of Pay TV are preserved”, says the F/Nazca Saatchi&Saatchi executive.
In Brazil, TV takes 73.8% of all non-digital advertising investments.
A MATTER OF SHARE
In Brazil, TV takes 73.8% of all non-digital advertising investments. And even though more than half of this investment is concentrated on free broadcasting television, Pay TV is gaining relevance each year. Leite highlights that Pay TV advertising investment is gradually growing. 2016 consolidated numbers show that the Pay TV advertising investment is 19% versus an audience share of 22%, which suggests marketers should consider investing more in this type of media. “Brazilians have always had a passion for TV, developing a deep engagement with brands through TV screen. A passion extended to Pay TV, adding the strategic factors mentioned in the PMV study.”
On the other hand, the advertising executives are already alerting television distributors about the growing fragmentation of audiences. Almeida reinforces that “It is essential to invest in technology, such as Video on Demand and TV Everywhere, to keep up with the growing tendency of consuming content on different screens and platforms, anywhere and anytime.”
This is the fourth BRAZIL Corner: 280 Million Devices Are Ready for Online Videoedition of Portada’s new Brazil Corner feature. According to Accenture, in the past year alone, more than half of online users favored devices other than TV sets for video viewing. This is a trend that definitely is also taking place in Brazil.
By Carla Ponte with Luiz Duarte
The room is quiet. The only sound is coming from the screen on the bed, not the table or the wall. In the family room the TV is also off, but someone on the sofa is deeply involved by the drama on another screen in their hands. The bus is not comfortable at all, but with earphones plugged in the smartphone, someone is watching a TV series. If you have not incorporated these new habits into your lifestyle yet, you have probably been experimenting at least one of them one time or another. In the “Consumer Centric Era”, consumers are not only determining which content and when they want to watch it, but also on which screen.
The past four years show dramatic shifts in how consumers use devices to watch video content. As recently as 2014, the survey revealed that nearly two-thirds (65 %) of consumers preferred the TV set for viewing TV shows. In 2016 that percentage dropped to 55% and then suffered a steep decline over the past year, dropping to 23%. According to research by Accenture, more than four in ten online consumers said they would rather view TV shows on a laptop or desktop. And some thirteen percent said they prefer watching TV shows on their smartphones, compared with 10 percent last year. The survey involved approximately 26,000 consumers in 26 countries (*), including Brazil. Ages from respondents ranges from 14 – 55 and over.
44% of the 26,000 interviewed globally think that getting personalized advertising based on past online searches is useful.
An Unstoppable Move
This new consumer is creating and engaging a new behavior that leads to new demands and new services. But this “connected lifestyle” also provides a precious tool to media companies. “This new consumer leaves a digital trail with an immense amount of personal data”, says Rubens Oliveira, Accenture Communications Media & Technology Executive Director. Products and Services like the OTTs invest a lot in how to use this data. They consider the kind of film you watch, how long you stay connected, how many times you access certain content. “It is a package of info collected through the digital trail each of us leave behind, which is used to keep suggesting new customized content to keep us hooked.”
According to the Accenture survey, this is what this new consumer wants. They are looking for new personalized interaction to enhance their overall video experience. For instance, 44% of the 26,000 interviewed globally think that getting personalized advertising based on past online searches is useful. And eight in each 10 consumers wish they received an authentic response from a customer service representative that didn’t feel standardized or automated.
Oliveira states that this is an unstoppable move. “For this new generation and for the ones to come, broadband is like electricity. For them, it is unacceptable to live without being connected.”
The Magnifying Glass on Brazil
“Brazil follows this global trend as Brazilian consumers are submitted to the same international online products and devices, despite having less diversity and poorer wi-fi infra-structure”, explains Oliveira. Illustratively, Netflix and Spotify are already established in the country, while Amazon and Crackle are stepping up. Apps like HBO Play, among other online services provided by Pay TV companies in Brazil, are very similar to the ones offered abroad.
When it comes to Brazil, one trend in particular called his attention. “I use a lot of public transportation to get a sense of a market and it is amazing the number of Brazilians watching movies and other kinds of entertainment on smartphones.” Indeed, this behavior is multiplying, especially in cities like São Paulo, where commuting can take from two to three hours each day. Oliveira notes one more particularity among Brazilian consumers already detected by OTTs. “Recently, Netflix provided to clients in Brazil the download option and Amazon followed the same track. Due to the high prices of Internet connectivity in Brazil, users often download content using free wi-fi connection wherever possible. The download availability will probably accelerate the VOD consumption in Brazil and the use of more types of screens.”
This perception pointed by the Accenture survey is echoed in another recent research conducted by Professor Fernando Meirelles from FGV – Fundação Getúlio Vargas – a top institutional reference for Economical Studies in the country. According to his study, Brazil has 280 million mobile devices capable of online connections, including notebooks, tablets and smartphones. “It means that we already have 1.4 mobile devices per habitant”, says Professor Meirelles. “We are living in a moment of rupture yet to be understood on all fronts: business, personal and educational. Why do young people prefer the small smartphone screen instead of the high-end TV screen just a couple of meters away? Maybe this new behavior and its consequences are going to be understood when we have native digital teachers.”
(*) Australia, Brazil, Canada, China, Czech Republic, France, Germany, Hungary, India, Ireland, Italy, Japan, Mexico, Netherlands, Poland, Romania, Saudi Arabia, Singapore, Slovakia, South Africa, Spain, Sweden, Turkey, United Arab Emirates, the United Kingdom and the United States.
In the first article of Portada’s new feature Brazil Corner, Sao Paulo, Brazil, based journalist Carla Ponte interviews João Daniel Tikhomiroff, one of the top producers and filmmakers in Brazil. Tikhomiroff is founder and partner of Mixer, a Brazilian production company.
THE BACKGROUND: With a prolonged political crisis, an economy struggling to overcome a long recession and endless scandals feeding an almost chaotic circle, Brazil has certainly provided an amazing collection of stories to writers and content producers. Nevertheless, the Brazilian entertainment sector has been growing at a high rate. Ancine, the agency that regulates the Audiovisual market in Brazil – reported that in recent years – 2007 to 2014 – the Audiovisual sector grew almost 9% per year. In 2014 the sector had an overall size of US $7.9 billion. The figures for 2015 and 2016 have not been reported yet, but some analysts suggest an average growth of 2% per year, which is still higher than most sectors of the Brazilian economy. An institutional factor that explains the growth of the Brazilian Audiovisual sector is the Incentive Law that supports TV and cinema productions as well as by the implementation of national content quotas on Pay TV. These quotas were activated at the end of 2011 and require international channels to display 3 and a half hours per week of local content during primetime. The Pay TV sector is facing a lot of pressure by a decrease of subscriptions – after a huge jump from 5 million in 2007 to 20 million in 2014 – and also by the growth of VOD and OTT services, which are growing in number of offers and subscribers everywhere in the world, including Brazil. What to expect for 2017? Will the Brazilian Audiovisual sector keep growing despite the country’s economy? How to break the chain and be less dependent on government support?
João Daniel Tikhomiroff (photo) answers the below and more questions in Portada’s Brazil Corner. Tikhomiroff is the most awarded publicity director in Latin America, with 41 Cannes Lions, and 10 years ago migrated to the Entertainment world to found Mixer, which ranks the top 5 Brazilian Production Houses with an internationally awarded portfolio.
Brazil Corner – Your agency Mixer opens 2017 with the release of the film “Os Saltimbancos Trapalhões – Rumo a Hollywood” directed by you; your company is also producing another season of “O Negócio” for HBO Latin America – the first Brazilian series to reach a fourth season on the channel; you just got the renewal of the series “A Garota da Moto” for SBT – Open TV Network ; besides various non-fiction productions for multiple channels of Discovery Networks, including large realities as “Desafio Celebridade”. What share of the business does content production account for at Mixer? Is advertising still essential to pay the bills, even in this period of crisis in the advertising market?
JDT – Mixer’s revenue structure still needs the advertising market to pay its bills. But Entertainment – both content and branded – already represents 50% of our revenues. We closed 2016 with a 50/50 advertising/content revenue split. And, until very recently, the ratio was 60/40 (60% Advertising – 40% Entertainment). According to our business plan, in 2017, Entertainment should surpass 55%.
Brazil Corner – And what is the company’s main strategy for content production?
JDT – We take great care with the structure. Mixer is the only Brazilian production house with its own development team, ie permanent writers (chief writers and writers who develop). And that is on both fronts, both in the fiction and non-fiction entertainment space. This structure that is part of our DNA, because our aim was always to be a content producer which develops, and owns content and not merely provides service. Mixer was born with the goal of being a producer that, in fact, has its identity, its brand recognized through the work we create, develop and produce.
Brazil Corner – Ancine – Agency that regulates the Audiovisual market in Brazil – reported that despite the country plunged into economic recession, the Audiovisual sector grew on average 8% per year. This growth rate is largely explained by tax incentive laws. How can you overcome this dependence of the sector’s growth on tax incentives.?
JDT – “There are two issues here. The first is that tax incentive are key in any country that wants to create a new industry. And this goes for any activity, not only for audiovisual sector. The automobile industry always had tax incentives to set up plants in several states. And don’t forget that the United States also has state tax incentive, which is very strong in the production of TV series. In most American series, about 30% to 40% of the cost of production comes from tax incentive state laws. This happens in California, Florida and many other states. In addition, it is important to remember that when the TV entertainment industry was born in the United States, the US Congress passed a law that prohibited the channels to produce their own content. This law required that 100% of the content would be produced by independent producers or studios. And I’m talking about the Open TV channels in the decade of the 1940s and later, Pay TV in the United States, was born in a similar way to the current situation in Brazil, where content is produced by independent producers.
Tax incentive are key in any country that wants to create a new industry.
Brazil Corner – It would be a legislation in the mode of Law 12.485 / 11, the so-called Cable Law, which came into force near the end of 2011 and which among other rules, requires international channels to display 3 and a half hours per week of local content in primetime.
JDT – “In Brazilwe have a tiny share… and in the United States, the production process for TV in the forties started with a quota of 100% in Open TV channels. And that American law lasted 50 years. Only in the 1990s, the law was abolished by Bill Clinton, saying he believed that from that moment, the entertainment market was already mature and able to self-regulate. But nothing would prevent that, in case the reverse phenomenon is observed, a new request be presented to Congress to revive the law again. In the United States, this law helped regulate and create a way of doing business between channel, creators-writers and producers that lasted for decades. In other words, a relationship that has matured to the point of creating an audiovisual industry that is an economic powerhouse. So when we talk about Brazil and Latin America, we are still in our infancy. Because, in Brazil specifically, our content production for TV began in the opposite way compared to the U.S. As there was no law, it was considered best to follow a verticalization of production in Open TV with almost all content being produced internally. For Pay TV it was a semi-verticalized process, with several projects done internally, but, at the same time, opening a loophole for partnerships with independent producers for more specific projects, such as series and reality shows, because they had the know how and the financial savvy. That is how Brazilian independent production was born. We got our first break, obviously, with the mechanisms of Tax Incentive Laws and also the so-called Cable Law that prescribes compliance with Brazilian content quotas. And this quota is very small compared to other countries like France, Spain, Canada.
Brazil Corner – But how do you create other mechanisms and business models so that the independent production can be structured by creating a parallel dynamic to the stimulus already guaranteed by Law?
JDT – “There are several business models that can be followed. The first and the most obvious is to work with original content. Original productions for channels or platforms that do not use incentive laws and pay 100% of the production, but the channel owns the content. Mixer produced the series “O Negócio” for HBO Latin America under this model and the channel invests a lot more. The value per episode is much higher (than compared to projects linked to incentive laws) because the channel wants to achieve a standard of quality that guarantees the export of this product to other countries.”
Brazil Corner – And what does the independent producer get from this business model, since in exchange for this investment the channel retains the rights of the work?
JDT – “First, the producer has the opportunity to produce at a very high quality level, showing that it is capable of producing a series with a quality level on par with other international series and can be broadcasted in any other countries. And another very important point for the producer is that we make our mark on the international scene as a player able to compete in the top markets. Therefore, the business model based on producing original and exclusive content for the networks opens the door to the international market, both for the producer and for all professionals involved in the series. And this is extremely healthy and desirable in this maturation process of our audiovisual market.”
Brazil Corner – The series “O Negócio” was even mentioned in BuzzFeed as one of the 26 non-American series that deserve to be followed. It is a series that could be sold as a format, but in this case the rights belong to HBO. Does Mixer have other products of your property that it can be turned into international formats?
JDT – “Yes, since our DNA lies in the development of content, we have series both fiction and non-fiction with good chances to catch on as formats in the international market. The youth series “Julie e os Fantasmas” is an example. It was a co-production with Nickelodeon, including a 2011 parallel airing in Open TV channel BAND (TV Bandeirantes Network) and caught the attention of some countries. Italy aired with dubbing on TV. And since the series was also among the five nominated to International Kids Awards, it won a high international profile and we are reaping the results now. We are currently in talks with players in the US to sell the format. And in this case, the business model can be a mere sale format, or may include an artistic supervision with monitoring by our head writer, who headed the development of the Bible production and the format and general director of the series, in an exchange with the professionals who will be in charge of the work abroad. And also in the youth genre, we have another series in pre-production that has everything to become a format model. We cannot yet disclose the channel, but it is a business model using incentive laws to gain the funds, as “Julie e os Fantasmas”, providing that Mixer keep the rights of the work. That is, the channel has distribution rights, but in the case of format sales it is one more product that we can sell freely and reap new rewards later.”
Branded entertainment and product placement are still a misnomer in Brazil.
Brazil Corner – In this business model, we have witnessed a growing trend of brand positioning in reality shows and other non-fiction programs that sponsor productions. However, in fiction productions for Pay TV, product placement is rare. Why has this practice, already proven successful in the United States, has not grown in Brazil?
JDT – “The use of product placement on Open TV helps fund telenovelas, series and other entertainment programs, generating a fundamental income stream for the channel. However, on Pay TV, the vacuum starts by the lack of a structure in the networks which relates to advertisers. The producers don’t have contact with the advertising community. So, it is important that the channels have executives that focus on seeking opportunities to place products in the productions in partnership with independent producers.”
Brazil Corner – This already happens in non-fiction programs. Pay TV network have departments focused on this business, but this is not the case for fiction content. Do you think that in Brazil brands are open to invest in branded content and product placement?
JDT – “Very little. In the United States, no marketing professional thinks of doing marketing and advertising of their products without considering product placement and branded entertainment. In Brazil there is still a classic mentality that is vested more in traditional advertising. And the marketing people are still not fully convinced in branded entertainment From the point of view of creation and production, it is essential as a business model because it brings resources to production. It is a win-win relationship. At the same time it helps finance series and audiovisual products in general, the brands presence also helps to promote the products of the advertiser. Undoubtedly, this a business model that is hardly in practice in Brazil. In Argentina, the use of product placement is already more widespread both in series and in cinema. In Mexico, Chile, and Colombia as well. But it is in fact a business model still little common in the Latin American market. A loss of opportunity from all perspectives: the advertiser, the network and the producer.”