Analyst: Netflix’s Mexican SVoD dominance under challenge
February 27, 2019
The Mexican video entertainment market saw steady 2 per cent growth in 2018. However, this doesn’t fully reflect the structural changes in the wider video landscape, according to the latest Video Insights report from Futuresource Consulting.
Home video spend (DVD, Blu-ray, EST, SVoD & TVoD) grew 20 per cent in 2018 to 10.3 billion pesos. “SVoD is powering the home video market. In 2018, it accounted for 77 per cent of home video spend and posted annual spend growth of 26 per cent to 7.9 billion pesos,” says Tristan Veale, Market Analyst at Futuresource Consulting. “It is currently dominated by Netflix, but there are strong competitors emerging.”
TVoD movie spend (iVoD & Pay-TV VoD) grew 28 per cent to 551 million pesos, as emerging initiatives (including a premium VoD window at twice the price of standard VoD) prove successful. 10.7 million movies were rented, with the online video providers contributing most of this growth.
“With VoD capability amongst pay-TV households increasing, and new services still to implement the premium VoD window, pay-TV VoD is expected to see continued, albeit, single digit spend growth, with a CAGR of 7 per cent between 2018 and 2022. This is despite the flat development overall in Pay-TV subscriptions,” commented Veale.
SVoD subscriptions are expected to grow 11 per cent per year between 2018 and 2022, rising from 9.4 million in 2018 to 14 million in 2022. “In 2018, Netflix accounted for 63 per cent of subscriptions, it’s a household name and the go-to SVoD service for Mexicans,” said Veale.
The other two major SVoD services, Claro Video (2.2 million subscriptions at end 2018) and Blim (estimated 0.9 million at end 2018) make extensive use of bundling with broadband subscriptions to gain subscribers. “There are significant new entrants already active or potentially ready to enter throughout 2019 and 2020, which will drive the market. For example, Disney+, Apple, Hulu, Starz and Walmart may make an entrance, and all have strong financial backing and an incentive to break into this market, which has been highly successful for Netflix.
The EST movie market has taken off over the past three years, posting annual growth of circa 50 per cent per year. Consequently, digital sell-through is expected to exceed physical sell-through in terms of spend and units in 2019, reaching 919 million pesos from 5.2 million transactions. Smart TV growth has been a key facilitator of the physical to digital video switch over; as of the end of 2018 there were nearly 25 million in use, equivalent to 72 per cent of all households.
“iTunes has been key to this market historically, although it has lost share lately to Claro Video and Cinépolis KLIC,” commented Veale. “These two services have been aggressive since launch and successful with attracting users directly via a smart TV, an advantage over iTunes currently.” Moving forwards, growth is expected to tail off, 2018 to 2022 CAGR estimates are 22 per cent for transactions and 24 per cent for consumer spend, although further service launches (e.g. Amazon) could reinvigorate growth.
Pay-TV accounted for two thirds of total video consumer spend in 2018, despite it declining by 1 per cent. High churn has been a contributing factor, as subscribers are moving away from satellite and cable to IPTV propositions, reducing industry monthly ARPU, whilst providing access to other subscription services. This switch is expected to fuel growth for pay-TV VoD as penetration of VoD capable set-top boxes increases.