Analyst Angle:Â Guilherme Faggion, Telecom Research Analyst, Frost&Sullivan
The Brazilian pay-TV services market has been growing at an annual rate of more than 30% in terms of subscribers in the last two years. This results from the service’s low penetration in the country and the end of regulatory restrictions in 2011. Moreover, the inclusion of lower priced basic plans (or even prepaid plans) has allowed lower income families to enter the market, further accelerating growth. However, in the first quarter of 2013, we have already seen this growth rate slow down. This article aims to evaluate the causes and consequences of this reduction, as well as the future of the market for non-linear programming in the region.
Although the market has grown at a lower rate this year, there is still increasing household adoption of the service in Brazil. The share of services via satellite has been increasing in the last few months and more than other technologies have, reaching 61.6% of the total Brazilian subscriber base while cable service attained 37.7%. In February 2013, however, Direct to Home (DTH) grew only 1.36%, adding 137,500 new households to its subscriber base. Cable services reported 34,800 new subscribers, representing an increase of 0.56% in February.  Multichannel Multipoint Distribution Service (MMDS) providers, however, lost 10,400 subscribers in the same period,  a decrease of 7.86% over its base.
Given this scenario, telcoms are re-evaluating their offerings with the objective of presenting a unique experience for each subscriber, while they observe a new wave of video on-demand consumption growth. On April 4, at the TV2.0 conference held by Converge Comunicações in São Paulo, Frost & Sullivan introduced insights based on the latest research of non-linear service expansion in the country.
During the presentation, telecom industry manager Renato Pasquini presented an overview of non-linear service offerings, highlighting that non-linear services should represent 35% of revenues in 2017 compared to the current 17%. The expansion of Internet protocol TV (IPTV) service, which now has 1% penetration in Latin America and is expected to reach 4% in 2017, should boost the offerings in the medium term. However, operators still need to gain scale, reaching new subscribers to leverage their margins and profits.
Also, it is still possible to infer that there will be a greater investment by operators that do not yet provide this type of service. This should occur because of the huge opportunity to generate new revenue sources, such as advertising monetizatio and transactional video on demand, in which the subscriber pays to rent videos.
Furthermore, with the increasing number of video on demand users in Brazil, pay-TV operators should invest in new business models to create a second screen experience via any device (smartphone, smart TV, tablet and PC). This trend has already blossomed in more mature markets such as North America and Europe, while in Brazil, it is still at a very early stage.
In terms of TV applications, increasing the amount of available applications and their use depends on the development of pay-TV platforms, as well as the conception of ecosystems, such as for smart devices. The development and enhancement of applications will be essential, aligned primarily with operators’ improvement of broadband services.
In conclusion, the increased adoption of pay-TV services should depend on non-linear interface enhancements, analytics and expansion of multi-platform use. By providing these tools, operators will enable end users to enjoy high-quality services without any delay in accordance with their tastes and usage preferences, and create their own channel grids which can be accessed at any time and any place.
