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Race for streaming

Everyone wants their own Netflix: why telcos start the race for video on demand

Telecom, Telefónica and Claro: why the three telcos and Netflix need each other to grow in Argentina
Companies in the sector want to assert their infrastructure and deploy a strategy to avoid losing customers in a growing market
07.11.2018 18.30hs Innovación

The geographical expansion of fiber optic infrastructure and the preference of Argentines for video on demand started the career of telephone companies to offer the most varied menu possible for their customers.

Until just three months ago, the Netflix and Flow services, and the HBO and Fox channels were brands identified by the market as competition, in an effort to differentiate themselves from each other and at the same time capture the local consumer with their new habits.

But the presentation of Movistar TV, a new product that offers embedded content from Netflix and other platforms, made it clear that being the owner of the network is what ensures profitability for the business and where telephone companies feel more at ease.

"We are a new player in the entertainment market," they say from the operator and they show it with an offer of their own content, in addition to the usual offer of premium cable channels with the usual sports signals.

Meanwhile, Telecom does not lose footprint and announced that it will also include Netflix on its Flow platform, which at the end of this note had not yet occurred.

After the merger with Cablevisión, the operator added not only its infrastructure, but also the know-how of hundreds of executives and employees in the entertainment area.

At September numbers, Flow exceeded 1.2 million users in Argentina and Uruguay, of which 71% accessed the content from the mobile device. It is worth clarifying that the app was granted without cost in the launching stage.

Penetration
According to Carlos Blanco, a market analyst at Dataxis, Netflix's strategy of joining other platforms to market its product is due to the fact that "very likely it has found the limit of low bank penetration".

In Chile, the streaming service is offered in the Entel package, while in Brazil it will soon be with Claro Video.

At the end of the second quarter of this year, Argentina had 950,000 active paid video accounts on demand. 86% corresponded to Netflix, which outperformed 13 other Over The Top companies (OTT, that is, those that do not depend on the Internet provider) by subscription.

"The number is relatively low compared to Brazil and Mexico," Blanco tells iProUP, adding that in those countries "there is a greater number of actors focused on specific thematic segments."

In Latin America, the expert said, up to the second quarter of the year there were 18.6 million active paid accounts, of which Netflix had 70% of the market.

These levels of penetration are directly related to the investment plan of the US company: only this year it will disburse between US $ 12,000 and US $ 18,000 million, counting both its own and third-party productions.

In the region, Claro Video is located behind the leading platform. This operator is one of those who pushed and maintained their own streaming service for their customers.

Consulted by iProUP, from the company note that "worldwide, more and more people adopt OTT as their content provider, for the virtues and qualities they possess."

Among these, they highlight the client's freedom to choose when and through which device to see the content of their preference, with an increasingly prolific offer.

"These features are part of Claro Video, since more and more the platform has new titles available within the catalog", without forgetting that for the company's customers "the service is included at no additional cost in their plans".

What comes
Towards the immediate future, companies do not see that the video on demand market is going to register a threat, despite the macroeconomic conditions that reflect a retraction of consumption in Argentina.

"Streaming is growing daily worldwide and an example of this is the increase in the number of platforms offering content that is appearing in the market, it is a path in which there is a lot to travel," said Claro.

All the companies mentioned here, both operators and pure OTT, have general content proposals.

"In the United States, the audiovisual offer exceeds 200 platforms, because the vertical ones have a lot of development", explained the analyst, who adds that in the region "there is no intense development, for example, in sports proposals".

In business terms, the forecast is that the profits of audiovisual content companies will jump in the region from US $ 500 million in 2015 to US $ 1,200 million last year. And that the trend continues to rise.

On the other hand, the average revenue per user (ARPU) also rises in all markets, where even Netflix has a price flexibility policy to sustain its omnipresence.

One of the first actions of the leading streaming platform to adapt to the Latin American market was to accept local currencies.

Thus, it was able to deploy in each country the strategies that would allow it to compete with the offer of traditional pay television and establish itself in the case of markets with high, medium or low penetration of the TV with charge.

The regional average of the ARPU in Latin America of the OTT, according to Dataxis, is similar to that of the United States, where the average benefit per customer of the cable / satellite television is much higher than the Latin American one. For Blanco, that reflects that "there is a barrier to entry" in Latin America.

In fact, a new indicator shows that the difference between the number of accounts and the total of profiles in the OTT in Latin America increased between 2015 and 2018, and maintains this trend.

Better if it's mobile
In market numbers, fixed broadband connections in the region maintain positive growth, with a penetration of 38.8% over households.

The forecast is that high-speed connections will reach more than 70% of Latin American homes by 2013.

But mobiles, especially smartphones with 4G connections, became, according to Blanco, "the ideal platform for the expansion of OTT".

At the end of last year, 61.6% of the inhabitants of Latin America had a smartphone and 62.5% of the population was connected to the Internet. These percentages would rise to 76.6% and 77.6%, respectively, by 2023.

"Streaming services on demand tend to become more individual options than home," Blanco concludes.

This summarizes an increasingly marked trend: the consumption of audiovisual content ceases to be a collective experience that leaves the living room of the home to become the favorite entertainment for downtime in the bar, a waiting room or public transport.

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