So far, Mexico is the only nation to have implemented a full conversion to digital television. And it has been a process that resulted in --according to official statistics-- more than 3 million households, among a total of about 35 million, without service.
Brazil, which started the migration studies in 2008 and expected to lead the region in this field, is still switching to digital on a piecemeal basis, city by city, and finding huge hurdles due to geography, low income households and other reasons.
Chile tried an ambitious start but is also mired in problems regarding the infrastructure investments the private broadcasters have to face, and differences in approach between the players that have, for instance, slowed down the effort to share this infrastructure.
Uruguay, a small country, has already started digital transmissions in Montevideo City and added a few new channels to the three traditional outlets; but, the new broadcasters have been so far unable to find an additional audience or seize market share from the incumbents.
Argentina expects to move to digital in a couple of years but there is little official action in this direction, aside from adding, as in Uruguay, a few new channels. The onetime ambitious Television Digital Argentina (TDA) digital terrestrial television infrastructure was put on the back burner by the new government that took office in 2016. It decided to focus its financial efforts on a nationwide broadband network in order to improve Internet access in large parts of the country, and leave TV to the private cable and satellite providers, which have reached 85% penetration among households, the highest in the region.
Migration to OTT platforms
Yet, as in most parts of the world, young audiences are migrating from linear television to online programming options, among them Netflix and other SVOD providers. Facing this problem, the broadcasters have started multiscreen efforts in order to retain at least part of these audiences. Several outlets offer online versions of their scripted programming that can be downloaded at any time and, in certain cases, are able to carry advertising and deliver additional revenues.
The most powerful broadcasters, among them Televisa in Mexico and Globo in Brazil, are now offering streaming options to the audiences, but their effect is not solving the advertising decline caused by advertising migration to digital platforms. Therefore, the Latin American engineers, technicians and executives attending IBC this year will be alert to any sign of how this problem is being confronted in other parts of the world. Also they are looking at what software and hardware vendors have to offer in terms of creating a certain degree of interactivity they could offer to audiences that no longer believe in “channels” or are not willing to wait until certain content is aired.
Regarding screen definition, there has been some progress in Latin America in the past year, especially due to the soccer World Cup held in Russia, which spurred sales of Smart TV sets, large screens and, to a lesser degree, UHF 4K-compatible receivers. A considerable number of broadcasters have already equipment that allows them to record 4K programming, but this technical enhancement has not reached so far the consumer area, with a few tests being held during the Cup but little more.
The number of TV sets used to download online programming has been growing at a constant pace, which is little comfort to terrestrial television. As an example, in Buenos Aires City and its surroundings, barely 30% of the TV sets are connected to broadcast stations at primetime, and cable television watching often surpasses broadcast viewership.
In nations where pay TV penetration is lower, as Brazil, its incidence in total viewership is smaller, but Mexico, a longtime broadcast hot spot, is currently experiencing “telenovela” (local drama) falling ratings figures due to young audiences migrating to SVOD and videogame experiences.
The problem with digital is compounded by the fact that, as French expert Bruno Patino recently stated at a master class in Buenos Aires, ‘digital platforms result in new viewing patters but destroy analog television business models’.
A look at the financial aspect of SVOD leader Netflix may help explain this situation: while the company has more than 125 million worldwide subscribers, its yearly revenues are in the order of USD 13 billion –up one billion from last year estimations– but it is investing USD 8 billion per year in content production and acquisition, and 1 million in marketing expenses. An ironic U.S. analyst defined it as a “cash-burning machine”.
And, there is increasing competition from Amazon Prime –which gives away video content to people subscribing to its Amazon Prime yearly (and now monthly in Mexico) service, plus free shipping and other perks. Mexican telco América Móvil is also giving away video content to its smartphone customers, and Spanish Telefónica is eyeing this market too. This, complemented by some 300 OTT other providers within the region, focused on niche audiences.
Last month, at a MediamorfosisBA conference held in Buenos Aires with European and U.S. experts attending, it was noticeable that Virtual Reality (VR) and Augmented Reality (AR), despite having been available already for several years, still lack a monetization model and depend mostly on subsidies, grants and other monetary contributions from governments and institutions, as well as help and support from universities.
The Enemy, an interactive experience created by Belgian former war correspondent Karim Ben Khelifa, has already received about USD 3 million applied to its production and remains an experiment. It doesn’t come as a surprise that, under these circumstances, many of the interactive projects developed so far have been funded by public television entities, as it has been the case with Skam in Norway, L’Oeil de Ninon in France and Spanish RTVE’s Playz online channel, among others.
All in all, IBC offers this year an impressive agenda on the future of television and how the technical developments will improve viewer experiences and allow access to content not available in the past. Latin Americans will have to adapt this array of information and examples to their reality, an universe of mostly private channels fighting to retain both audience and advertisers in order to remain profitable under growing competition.
In the U.S., the answer has been concentration, with examples such as the acquisition of most of the Rupert Murdoch’s empire by Disney, which is expected to now give Netflix a run for its money, or the still disputed acquisition of Time Warner by telco AT&T, which has already purchased DirecTV.
The Latin American players cannot aspire to such deals: in Brazil, TV Globo’s cable division Net was sold to Mexican America Móvil after the government ruled in 2011 that programming producers could not distribute content. In Argentina, a merger among cable TV leader and broadband player Fibertel-Cablevisión merged with local telco Telecom, was immediately contested at court by competitors Telefónica and América Móvil, which have been requesting to be allowed to deliver linear television via satellite. Such move was objected by some 700 independent cable operators in diverse cities, that are already facing sometimes subsidized competition from telephony cooperatives that can offer video programming at low cost because of their infrastructure investment has been covered by voice and data services.
Aside from these major issues, the Latin American buyers are expected to focus again, as in the past, on the technical developments applied to cameras, editing, storage and transmission equipment. The region is increasing its output of original content, both for internal exhibition but also comprising coproduction with European and even Asian partners, an effect of increased interconnection.
To this purpose, new software and hardware technology has to be applied, and this is the reason why Latin American participation at IBC is expected to increase this year, despite economy turbulence at some of the countries but supported by the strong will to be part of the future of television, whatever it may look like.