Brazil’s video entertainment market has emerged from the shadow of recession, as 2019 ended with consumer spend levelling off after three years of decline. This is according to an industry report from Futuresource Consulting, which cites new SVoD services from global players and increased investment in pay-TV and OTT services from local media companies as the key drivers of consumer spend.
However, investment in local content production is under threat, as Brazil’s government has announced budget cuts of more than 40 per cent to its film agency, Ancine. This has halted work on around 400 film projects and is impacting almost all indie and documentary films in the country.
The report was published prior to the Covid-19 outbreak, which brings an added layer of uncertainty to the sector.
“Despite the government’s withdrawal of funding at a grass roots level, there’s a new mood of cautious optimism in the overall video entertainment market,” says David Sidebottom, Principal Analyst at Futuresource Consulting. “The market achieved R$22.3 billion (US$4.9 billion) in 2019, which is a slight uptick from 2018. Meanwhile, an upsurge in SVoD activity is laying the foundations for future growth and almost completely cancelling out the decline in pay-TV subscription revenues, which are heavily influenced by Brazil’s financial volatility. As the majority of Brazil’s economic improvement kicked in during the second half of 2019, it did little to slow the descent of pay-TV subscriptions, which fell 7 per cent in 2019, following on from a 9 per cent decline in 2018.”
The combination of a recovering Brazilian economy, an improving digital infrastructure and an increasingly web-savvy consumer base is applying upward pressure to premium digital video markets across both SVoD and transactional digital video. SVoD in particular has entered a new phase of development, with Futuresource figures indicating that total consumer spend on SVoD reached almost R$2 billion in 2018, accelerating up to R$3.1 billion in 2019.
“Moving forward, multiple SVoD uptake will be the norm in Brazil,” says Sidebottom. “Since its Brazilian launch in 2011, Netflix has become commonplace in many urban areas, particularly among those aged 16 to 35. Our market assessments suggest around 90 per cent of Brazilian SVoD households subscribe to Netflix. Launches from Amazon Prime and Apple TV late last year will help drive both subscriptions and consumer spend to new levels rather than erode Netflix’s dominance. Combine this with the Disney+ launch scheduled for Q4 2020 (or perhaps sooner), and the newcomers will be battling it out with established local players Telecine Play and GloboPlay to achieve second position in the marketplace. While Netflix subscription growth will naturally slow and new services will compete for share of wallet, its longstanding content reputation and brand equity ensure it of a robust future.”
In February, ViacomCBS Networks International announced that its Pluto TV, the free, ad-supported streaming service, will launch in Brazil at the end of March, with Pluto TV Brazil expected to launch by the end of the year, offering programming in Spanish and Portuguese. It’s a move that could pose a minor challenge to subscription services in the region. However, localised content such as the Reality Z series from Netflix, set to premiere later this year, will help to fend off low cost and ad-funded aggressors.
Moving forwards, Futuresource expects overall video consumer spend in Brazil to achieve average annual growth of 2 per cent, reaching R$23.9 billion in 2023, although this doesn’t take into account any impact from the Covid-19 outbreak.