Equipment manufacturers and distributors attending NAB this year in Vegas will meet an unusual deal interest among the Latin American buyers participating at the show. That's because several governments hace decided this year to join the digital television bandwagon -after several years of wait and see attitude- and will spend more than one billion dollars in acquiring equipment for the public television and State- owned broadcasters within the region. Argentina alone is expected to spend some $200 million, according to CADIEEL, the local trade association that gathes the electonic industry entreprises.
Why such a sudden intertest? Blame it on the 2010 World Soccer Cup, to be held in South Africa in June-July this year. True, the top sporting event of the world -outside the United States- would probably not have been able to change the shape of television by itself. But, throw in the fact that Brazil President Luiz Inácio Lula da Silva, one of the world leaders at this moment (in case of doubt, ask President Barack Obama: at an international council, he jested ‘This is my guy!”), is decided to make a dent in his country's history. Always confident that the Brazilian national team will win this contest, he sped up the decision to adopt digital television by December 2008, chose the Japanese standard ISDB-T instead of the U.S.-designed ATSC and the European DVB, then convinced four other South American nations (Argentina, Chile, Peru and Venezuela) to join him in this drive. While Colombia and Uruguay decided to choose DVB, there are three other countries -Paraguay, Bolivia and Ecuador- that may follow Brazil, adding a total of 110 million other potential customers to the 190 million Brazilian inhabitants eager to watch the Cup in High Definition.
The political aspects of this decision should not be underestimated: on the one hand, the Argentina government, for instance, is committed to have available one million decoders by June, at the same time it is implementing a five-channel DBS system that will be available for free to those obtaining a basic dish and decoder. Chile has already digital TV sets for sale at departments stores, for early adopters willing to watch the test transmissions and get a preview of its advantages.
On the other hand, the Latin American prívate broadcasters and the cable operators are being forced to play the game in order to not be left behind. Therefore, they will need new transmitters and all the gear necessary for the transition, in most cases without the assurance that this will be a profitable investment. The upside here is that many of them, trying to find additional revenue streams, will push towards applications such as mobile television, reinforcing the trend started by mobile Internet access, which is growing at a faster pace than fixed Internet connections.
There are also a few new networks: the most important one is the third terrestrial network in Colombia, to compete against Caracol and RCN. The bidding process was suspended when only one candidate -Grupo Planeta, in partnership with Bogota City newspaper El Tiempo- remained interested. Two competitors, Grupo Prisa and Inversiones Rendiles (related to Venezuelan broadcaster Venevisión) backed out claiming that certain aspects were not clear enough. The CNTV denied any wrong doing; the process is expected to resume at some point after the Presidential elections are held in that nation, next month.
Technology helps
History tells that technical developments foster consumer markets: much in the way the CD helped the music industry to enjoy a new life, and DVD's helped the homevideo business, digital television may spark new interest in the medium at a time when the Internet is gaining the attention of consumers, although statistics show, for the time being, that the amount of time spent watching the TV screen have not decreased significantly in the recent past. TV set manufacturers agree: sales of large screen sets are outpacing the ancient CRT versions, rendered obsolete by the higher definition and attractive picture offered by the plasma or LCD devices, not by malfunction of the older receivers.
The transition to digital requires new hardware to better process and store images, too. So, the situation is appealing not only to those who manufacture transmitters, antennae and receivers, but also to everybody in the middle of the food chain. But, it's not just more of the same: the entire trading process is being affected by sweeping changes as well.
Pay TV industry evolution
If political decisions are driving the broadcast industry, Latin American pay television is moving ahead thanks to competition. Brazil is, again, the most active market, with between 100,000 and 150,000 new subscribers being added each month. It's a small wonder that President Da Silva mentioned the issue at his Congress opening speech. Net Brasil is back at the top place among the Latin American cable systems, with some 3.8 million subscribers, but DTH provider Sky -where TV Globo and Liberty Media are partners- is also growing. And telcos Telefónica, Oi and especially Embratel -controlled by Mexican Telmex- are increasing the DTH share of the total market, while the number of wireless subscribers is declining sharply.
Mexico is growing, too, while Argentina remains almost flat. The Mexican industry grew 16% in 2009, according to trade association Canitec, but most of the impulse came from new Internet access and digital telephony subscribers, while the pay TV subscriber component grew 6%. That's not bad, considering that the Mexican Gross National product plummeted about 7% due to the loss of export revenues tied to trade with U.S. The difference between the Brazilian and Mexican growth rates implies than the former will become the largest Latin American pay TV market later this year, instead of 2011 or 2012, as it was expected prior to the 2008 world financial crisis. At NAB, the buyers from the Latin American pay television companies are expected to focus on newsgathering and digital imaging equipment needed to upgrade the large number of in-house channels produced by Televisa Networks, Globosat and other producers within the region.
IPTV developments may be expected, too: in Colombia, a number of cable operators have applied for IPTV licenses because the fee on gross revenues to be paid is less than one third what they must pay the National Television Commission (CNTV) for distributing television. Telcos from other countries are interested in this technology, too, while most cable operators are focused on digitizing as many subscribers as possible, increasing the ARPU and decreasing bandwidth usage at the same time.
Market concentration is shaping the industry as well: in Brazil, French conglomerate Vivendi acquired regional telco GVT after divesting from NBC Universal prior to this company being sold to Comcast. In Chile, GTD Manquehue has acquired Telsur, the first telco installed in that nation; this move turns GTD into more of a nationwide player, although it still lacks presence in the Northern part of the nation. In Argentina, the government is fighting a possible merger of Spanish Telefónica and Italian Telecom, claiming this would result in a monopoly; in Brazil, the government allowed local telcos Oi and BrasilTelecom to merge, assuming that the resulting company will be better prepared to compete against Embratel (controlled by Mexican Telmex), Spanish Telefónica, Italian Telecom and Portuguese Telecom, which have different degrees of association. In Mexico, the government is resisting Telmex's efforts to be allowed to distribute television, and appears prepared to alleviate the cap currently imposed on foreign investment concerning wireline telcos.
Commercial evolution
Greater value is to be extracted by the vendors through deeper involvement into the mechanics of broadcast equipment distribution within the region. Decades ago, a good deal of product was sold FOB Miami or, when portable, the buyer just picked up the box at the seller's wharehouse. Nowadays, the major manufacturers and distributors are much better acquainted with the purchasing power of each market and its major players. And, convergence has blurred the distinctions between broadcasting and telecommunications. Many major companies that relied exclusively on local representatives are now keeping an eye on the evolution of each territory and the weight of the major local players.
Market concentration has also turned assemblies of scattered buyers into marketplaces where a couple of major players and a handful of middle-sized contenders are competing. Regional offices and representatives that scan the region looking for business opportunities and providing customer assistance have also helped to revamp the activity.
It's fortunate that Latin America, as a group of nations, has suffered the least from the 2008 economy turndown. And some of its components are now moving ahead to the point of being considered -especially Brazil and Mexico- markets with a future. But the list should also feature Colombia, Peru, Chile and Argentina, by a variety of reasons ranging from pure growtrh to official investment strategies. The vendors attending NAB will be able to ascertain, when discussing business with the hundreds of participants flocking from Latin America to the Las Vegas Convention Center, how much of this activity will each entrepreneur be able to grasp.
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