Northern Sky Research

Shifting DTH Demand in Latin America

Sep 17th, 2013 by Blaine Curcio   More from this Analyst | Profile

The Latin American DTH market has in recent years seen excellent growth in both household and revenue numbers. With just under 22 million DTH subscribers as of 2012, Latin America as a whole represents almost 20% of global DTH subscribers, and during the next 3-5 years, it will be the fastest growing region in the world in terms of subscriber and revenue growth, especially among Basic subscribers. Long-term, Premium (HD) subscribers will see growth accelerate, as the middle-class grows throughout the region over the coming years.

With current Latin American DTH penetration rates at around 14%, NSR expects an increase in uptake of DTH services amongst existing TV households moving forward. Taking data from NSR’s Direct-to-Home (DTH) Markets, 6th Edition, the number of DTH subscribers in Latin America as a whole is expected to more than double, from around 22 million in 2012 to 46 million by 2022. More importantly, however, will be the timing of said growth.

Of the total growth occurring from 2012-2022, nearly two-thirds will occur from 2012-2017. DTH subscribers will increase by nearly 16M from 2012-2017, and then will increase by “only” another 9M or so, despite a higher base year total, from 2017-2022. While overall subscriber growth will be driven by “Basic” subscribers, which will just under double from 18M to 34M, “Premium” subscribers will see a far more impressive CAGR, with the number more than tripling from just over 2M to nearly 8M by 2022. Premium subscriber growth, however, will in fact come in the later years of the forecast, reflecting fast growth in the short-term of Basic subscribers, and more long-term Premium subscriber growth. This trend indicates a shift in Latin America to HD programming, and other higher-ARPU services, and the fact that it will be a long-term shift.

The regional shift to HD services is best exemplified by looking at subscription revenue growth. Total regional subscriber revenues are expected to increase by around $8.5B to 2022. While “basic” revenues will continue to reign supreme long past 2022, “premium” revenues will increase their share of the overall revenue pie from 16% in 2012 to 27% in 2022, increasing from $626M to $3.25B in the process, indicating a strengthening regional middle-class with an appetite for higher-quality television content.

A recent example of the shift to HD occurred in June 2013, with SES launching their new satellite SES-6. SES-6’s anchor customer, Oi!, is a Brazilian DTH provider, which has publically stated that their goal in securing capacity on SES-6 is to increase their HDTV offerings to the Brazilian DTH market.

Further regional trends moving forward will include market deregulation, particularly in countries like Mexico, which has a history of governmental monopolization. As deregulation brings about increased competition, it should also breed new opportunities for operators to cash in on markets that are being made more efficient, potentially increasing their bottom line in the long run.

Bottom Line

Revenues and subscribers in Latin America will continue to show strong growth moving forward. While the bulk of new subscribers will continue to be “Basic”, especially in Central America, there is an undeniable shift towards HD programming, “Premium” revenues, and subsequently higher ARPUs from these newly-minted middle-class customers.

Further, growth, particularly among Basic subscribers, will accelerate remarkably quickly in the short-term, with total subscribers increasing by nearly 75% from 2012-2017, for a CAGR of over 11%. Long-term growth will be slower overall, but faster among Premium subscribers, reflecting a shift towards a larger middle-class. With sports programming being a key differentiator, and with regional competition intensifying due to governmental deregulation, specifically in Mexico, these new subscribers will be hotly contested among operators. However, with the overall revenue pie growing by over $8B, there should be more than enough to go around, provided operators are able to cater to the needs of a new class of Latin American customers.

Information for this article was extracted from NSR's report: Global Direct-to-Home Markets, 6th Edition