V I D E O • A G E Ja n u a r y 2 0 1 2 24 (Continued on Page 26) (Continued from Cover) Mexico’s TV TV Azteca. This is compared to, for example, just nine percent taken by radio and eight percent by newspapers. And Mexico’s advertising market is a sizeable one. In their Entertainment and Media Outlook 2011 to 2015, PricewaterhouseCoopers (PwC) gives a provisional figure for total Mexican television advertising in 2010 of U.S.$2.8 billion (up from $2.56 billion in 2009) and predicts that this number will rise annually to hit just under U.S.$4.1 billion by the end of 2015, representing a Compound Annual Growth Rate (CAGR) of 7.7 percent. Media analyst Screen Digest, meanwhile, put the number of cable homes at the end of 2010 at 5.8 million, and predicted that this will grow to 7.2 million by the end of 2015. Plus, they estimate that satellite subscribers numbered 4.4 million households at the end of 2010, predicting that this number will rise to 11.7 million by the end of 2015. The figures for revenue generated by Internet access are even more impressive. PwC’s provisional figure for 2010 is U.S.$2.7 billion (up from $2.2 in 2009) and this is predicted to have more than doubled by 2015, hitting U.S.$5.7 billion at an eye-popping CAGR of 16.1 percent. In these strained economic times, many would think these figures make Mexico a market worth fighting over — and they’d be right. The three richest and most powerful media barons in Mexico — the world’s richest man, Carlos Slim; Televisa owner Emilio Azcarraga Jean and Ricardo Salinas Pliego, owner of TV Azteca — are engaged in a battle to become not merely Mexico’s triple-play operators (TV, Internet and voice), but Mexico’s quadplay monopoly holder, which includes mobile telephony. At the start of the year, Slim was missing the broadcast license, and still is, althoughhismaincompany,Telmex,does handle marketing and billing for satellite operator Dish Mexico. Azcarraga was missing a mobile operator, and Salinas, who owns a mobile operator, Iusacell, was struggling to get the company’s share of the mobile market — 70 percent of which is controlled by Slim’s Telmex — to reach a five percent market share, and to deal with debt of just over U.S.$1.5 billion. Iusacell was also involved in a protracted legal wrangle with another Mexican mobile operator, Nextel, over last year’s government spectrum auction; however, the two companies agreed to drop this case last month. Iusacell also took action against Televisa on the same issue, but dropped it earlier last year when it agreed to sell a 50 percent stake of the company to Televisa for a reported U.S.$1.6 billion. Of that amount, U.S.$1.57 billion will be used to clear Iusacell’s convertible debt. The advantages of this deal for Iusacell are clear, and for Televisa the deal offers the Holy Grail of quadplay operator. (Megacable, which controls about half of the Mexican cable market, announced in October that it would offer quadplay by teaming up with the Mexican subsidiary of Spain’s Telefonica, but the service will be a Mobile Virtual Network Operator, which means that it will offer mobile services to its customers, but will not own any infrastructure, such as frequency licenses or transmitters). So, superficially, it looks like a good deal all around, but not everyone thinks so. Televisa’s shares fell 9.7 percent on the announcement of the deal, and corporate finance house UBS commented, “the key notion behind Televisa’s intent to be a telecom player, and especially one in the mobile business, is defensive.” It went on, “we see the point, but fail to understand why equity, as opposed to commercial agreements, is a must.” Meanwhile, Slim, a man used to getting his own way, has started streaming content, including news, sports and cultural programming, prompting TV Azteca to sue his carriers America Movil and Telefonos de Mexico. Matters were brought to a head by the recent streaming of the Pan American Games, of which Telmex was both a sponsor and owner of the Mexican online rights, while TV Azteca owned a portion of the Mexican broadcast rights. Looking at these developments, all of which have occurred in the past 12 months, it would be easy to think that Mexico is now a dynamic market about to enter a period of significant change, but Eddy Ruiz, EVP and general manager of Miami, Florida-based A+E Ole Networks thinks otherwise. “Television in Mexico,” he asserted, “is dominated by Televisa and TV Azteca, and I don’t see that changing much — not in our lifetime anyway!” Explaining his reasoning, Ruiz continued, “Mexico is a broadcast intensive market, and, although cable has been growing considerably in recent years, these two companies are by far and away the dominant force.” Even so, there are tangible signs of change in the market, brought about by the growth of cabsat. In just a few years since it entered the market, Dish has grown to around 2.7 million subscribers at the end of 2011 according to Screen Digest, which predicts that number will grow to 4.9 million by the end of 2015. And, as Ruiz points out, cabsat channels such as A+E’s are now producing local content. While Ruiz insists that these locally produced series demonstrate the growth of cabsat, and “set us apart and give subscribers a sense of getting value for their money,” he is just as adamant that, “I don’t see any major changes happening in the immediate future.” He added, “even five or six years down the road, I see the Mexican market as being just like now, only more so.” the major distribution systems (such as broadcasters) there is really no alternative. According to New York City-based Entertainment Studios’ Tom Devlin, who’s considered a king of the jungle, stations bet on familiarity: “Fresh and innovative product scares them,” he said. On top of this, there is the inequitable competition from larger outfits. A Las Vegas-based program distributor complained that, in Latin America a producer from the U.K. and one from Canada sell children’s animation for just a few dollars because their main revenue comes from merchandising. One thing is clear: Indies will have to spend more money and man hours than the studios do to make any sale. And, the jungle out there only allows for the survival of the smartest. This is because the television programming sales business is now very complicated. Without considering variation and subvariation (e.g., subscription VoD and a la carte VoD) of various distribution outlets’ licensing, there are at least 15 main ways to sell content rights with opportunities to repurpose existing content. But, even though there seems to be a good number of ways to exploit rights, program producers and syndicators still have to find new ways of generating revenue, keeping in mind that small indies often cannot reach big buyers and there are only three ways to make money with content: through advertising, licensing and direct sales. For example, for Montreal, Canadabased XII Tribes Entertainment’s Michel Zgarka, “viral revenues (i.e. YouTube) represented major revenues for Gummibar & Friends. With close to two billion hits and having been able to monetize the hit, it was for us a key element in the financial structure of the TV special and series.” Indeed, if revenue from major TV outlets can be called “macro,” “micro,” is a myriad of little payments that producers and distributors can extract from the online universe. This is a good way to monetize content that is difficult to sell to TV outlets (e.g., comedies) or that are outside the popular cycle (e.g., primetime soaps). Older archives are also perfect candidates for micro-payments. Researchers in the U.K. have found that, for such content services, consumers are willing to spend anything from 10 cents to $3.25. Micro-payments for digital content are estimated to have reached worldwide $12 billion. Los Angeles-based Opus Distribution’s Ken DuBow has found a good strategy in shared windows, though it’s not a new concept. This adds revenue when a Carlos Slim Emilio Azcarraga Jean Ricardo Salinas Pliego Bumping into each other? (Continued from Cover) It’s a Jungle Out There
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