Latin American streaming industry vying for market position

Latin America is gaining more and more relevance in the plans of the big Video-On-Demand (VoD) streaming platforms. In fact, several elements seem to indicate that the region will be emerging as one of the most important markets to drive the long-term growth of these companies.

Estimates by Digital TV Research indicate that, between the end of 2021 and 2026, the population of subscribers to VoD streaming services (SVOD) in Latin America is expected to grow 72%. This variation is much higher than that expected for North America in the same period, at just 33%. It also exceeds the 39% growth expected by the firm for the Asia Pacific (APAC) region over the next five years.

It is worth noting that progress would be less than in other emerging markets. In the Middle East and Eastern Europe, the number of SVOD users is expected to more than double between the end of this year and the end of 2026. In Africa, the number of streaming customers is expected to triple. However, in absolute terms, these markets are still far from competing with the massive numbers in Latin America.

Together, Africa, the Middle East, and Eastern Europe would only account for just over 77 million subscribers in 2026. By the end of 2021, Latin America would have 76 million, and in five years it would reach 131 million SVOD customers. This is not a new phenomenon. Since as far back as 2017, Netflix was announcing the expansion of its content hub for Latin America, with a special interest in the Mexican market; in line with the trends of creating regional productions to attract local consumers.

However, according to Amanda Boucault, LATAM PR coordinator at public relations (PR) agency Sherlock Communications, it is clear that COVID-19 played a crucial role in positioning the region as a striking market for the streaming sector. She notes that, during the health crisis, large companies noticed "the potential of the Latin American market and began to invest much more in every sense, not only a financial investment but also in local productions".

There are several examples that corroborate this statement. In early 2020, Nickelodeon's U.S. offices acquired the Mexican production Dani Who? with the intention of turning it into a franchise extending to podcasts and new TV adaptations. For its part, HBO Max announced it would produce 100 original productions for Latin America between 2020 and 2021; while Netflix promised to open a new headquarters in Bogota, with the promise of launching 30 projects for the Colombian market between 2021 and 2022.

These types of strategies are even proving to be very profitable for the global business of these streaming platforms, with more and more productions in Latin America gaining traction and popularity among audiences in other countries.

The appeal of the Latin American streaming consumer

Despite its appeal, Latin America also threatens to be a more complex market for streaming companies to conquer than North America or Europe. To start with, the overall internet penetration rate in the area was between 62% and 72%, depending on the sub-region, as of last February; above the global average of 60% but still below the +90% figures of the more advanced Western economies.

One promising entry point could be mobile connections. In Latin America, as many individuals tend to have multiple phone lines, mobile internet penetration ranges from 103% to 77%, depending on the sub-region. However, it is important to note that the mobile broadband experience is not optimal in Latin America. A report by Open Signal points out that, during 2020, the video experience (on a scale from 0 to 100) was below 55 points in at least three countries in the region, and in none of them it was rated as excellent.

Not only that, but it could also be more complex to establish a business model in the region, due to different payment preferences. While subscription streaming is more popular in the West, ad-supported models, where users pay a preferential rate (or nothing at all) in exchange for consuming ads during their media session, are gaining traction in Latin America. According to Amanda Boucault, though, Latin American users have a characteristic that tends not to be present among consumers in Europe and the United States that makes them more valuable.

She states that "in all countries, Latin America is much more connected to brands. It's not just a service we are buying. We buy the idea, everything that is the brand in general. And there is a potential to be more creative and get more involved with audiences. In the United States and European countries, the perception is that the service has the movies and series that I like. But here, you can see how they get on viral gossip, how they talk to users".

This level of interaction with the brand is fundamental considering the platform abandonment trends that are beginning to consolidate in the most established markets in the West. According to Deloitte, between January and October last year, the percentage of people who had discontinued at least one subscription to an SVOD service in the last six months had risen from 20% to 46%.

The war to capture the Latin American streaming consumer

Despite the attractiveness of Latin American consumers, VoD companies will face a considerable challenge in their conquest of the region: the looming competition with traditional TV producers. According to Statista statistics, streaming revenues in the region should total some US$1.4 billion (MD) by 2022. But by 2024, pay-TV would generate US$17.8 billion.

The figures are understandable considering that TV is a very well-established market in the region. However, as is the case in Europe and the United States, several players expect streaming to quickly take business away from the TV giants. Since 2020, the firm Ampere Analysis expected SVOD to surpass, at least in a number of subscribers, pay-TV; almost doubling the number of total customers before the middle of the decade.

In fact, a report on the consumption preferences of streaming audiences in Latin America by Sherlock Communications found that by 2020, in all countries surveyed in the region, at least one-third of the audience said they were tired of traditional TV. Also, around half of those surveyed by the PR firm in each country said they were looking for new series and movies, something in which SVOD leaders have invested heavily.

But it is also important to note that the traditional TV giants have not stood idly by and have begun to mobilize to directly confront their new digital rivals. One need look no further than the announcement of the merger between Univision and Televisa's content unit, executed with the ultimate goal of launching a global streaming service. To this must be added that, in the face of the advance of digital entertainment multinationals around the world, several countries (including agents in Latin America) have begun to establish a legislative response focused on the protection of local productions.

Boucault confirms that the dynamics between streaming platforms and traditional TV players in Latin America are complex. SVOD players, on the one hand, have the advantage of greater knowledge of the digital market and online interaction and promotion strategies. On the other hand, local content producers have the muscle of content creation, audience understanding, and a solid TV infrastructure that they have built over several years of experience.

This has led, Boucault says, to large streaming platforms developing "partnerships with local productions because, initially, to be in every country in Latin America and generate content at the pace that consumers are watching it. [We will also see] connections between brands, not to compete for the audience but to gain more audience. For example, to reach the TV audience, streaming platforms are going to run promotional actions on these channels."

This vision aligns with one of the four scenarios put forward by Deloitte for the future of streaming on a global scale: A content consumption ecosystem where neither digital platforms, international content creators nor local production companies have clear market dominance, and where partnerships and agreements between players abound. According to Boucault, it is not yet possible to say with certainty whether this will be the scenario that remains in Latin America when the streaming war comes to an end in the region, or whether any of the players will decisively prevail over the rest.

But she does predict that in the next five to 10 years, the number of players (both digital and traditional) will be substantially reduced, thanks to the unification of companies in a quest to capture larger and larger audiences in order to make the business model sustainable. And the companies that remain at the forefront will be those that "best adapt to the local audience and understand their audience. [Successful content companies will be those that] can produce locally, talk to the players, and have accurate communication for each country. They can't treat Latin America as one big nation. They are different cultures and different audiences to reach".

Source: Arena Publica