Mexico: Linear pay TV doing well, OTT growing at fast pace (Part I)

After strong market growth in 2016, partly due to the 'analog blackout' ordered by the Government at the end of 2015 and the lack of digital receivers in 3 million homes, the linear pay TV market slowed down its expansion in 2017 while OTT grew strongly.

Mexico continues to be the most important linear pay TV market in Latin America, with more than 20 million subscribers according to the Federal Institute of Telecommunications. It surpassed Brazil in 2016, despite the larger population (213 million against 130 million in Mexico) of that country. A lower availability of Free To Air TV channels is one of the reasons for this. In Brazil there are six national and several regional networks. A the lower average subscription price counts, too. Business Bureau (BB) consultant estimates the total at 'more than 22 million' with a of 6% growth from March 2017 to March 2018. By 2022 Business Bureau estimates that the linear pay TV subscriber base will exceed 28 million, with an annual growth of 4.31%. According to consultant Dataxis, the market fell 0.9% in 2017, reaching a penetration of 62.3% nationally and adding up to a 27.5% share of the Latin American total. It must be taken into account that these figures vary depending on what each institution or consultant considers "a subscriber" and the source of their data.

The sustained growth of recent years has not prevented from insistent claims of 'dominant position' against Televisa, which has about 64% market share under the Izzi brand. But, evaluations show that the presence of Dish Mexico as a DTH service of national scope, as well as cable competitor Megacable with more than 3 million subscribers in many States, and the recent appearance of Star TV as successful third national DTH service with presence already in 26 states do not allow confirming the effects of such assumption. On the other hand, the government has also been delaying authorization for América Móvil to offer pay TV, which would imply strong competition to the incumbents. In the rest of the Latin American countries these situations are usually solved (in Uruguay state telco Antel holds a broadband monopoly of), but in Mexico the permit requested by the telco headed by Eng. Carlos Slim is still pending.

The FTA television market witnessed in 2017 the appearance of Imagen Television, third broadcast network of national scope, and there is now a bidding process to occupy the spectrum left by the resignation of the group Radiocentro to what would have been the fourth national network. On the other hand, the configuration of a public TV network remains pending; this should already be in operation by combining into a network the operation of several public broadcasters existing throughout the Republic.

The proximity of the general elections, to be held on July 1, has affected the making of many decisions that could define expectations for the near future. The government measures taken in recent times --such as the separation of Telmex into two companies, which should be self-sufficient and independent of each other-- might be modified by the oncoming government. And, there are other aspects where definitions are not expected to happen in the next months. While AT & T appears as the main competitor of the group headed by Eng. Slim and Telefonica has had an ostensibly conservative policy in recent years in terms of competition, it is difficult to predict what may happen in the next six years.

Regarding video streaming over the Internet, usually called OTT (Over The Top), its growth is a result of the expansion of broadband access, which already exceeds --especially through mobile connectivity-- pay TV penetration; and, slashing costs to the user is another reason. According to consultant The Competitive Intelligence Unit, in the fourth quarter of 2017 there were 7.7 million subscribers to Video On Demand By Subscription (SVOD) platforms, out of a total of 79.1 million Internet users, 12% more that at the end of 2016. The OTT industry had revenues of MXP 3,314 million, about 1,340 million dollars, in the last quarter of 2017, due to its lower subscription cost. As a reference, the wireline telecommunications segment accounts 25.5% of industry revenues.

During the first quarter of 2018, according to the same source, pay TV generated revenues of MXP 22,400 million (19.4% of the industry's total), equivalent to approximately 1,140 million dollars, which would represent –through projectiong-- a volume close to 4,600 million dollars per year. In Mexico, OTT audio and video, satellite TV and cable are grouped in the definition "restricted audio and video services" and the STAR acronym, with a total of 27.7 million accounts. For more information, see México: market share de OTT muy cerca de TV por cable (in Spanish).

Full story Part I