Latin America. The Restricted Television segment, also known as Pay or Subscription Television, has been characterized by an important dynamism in several Latin American countries, such that household hiring coefficients of more than 50% are recorded in most of the main markets in the region.
In this way, according to the most recent report by The Competitive Intelligence Unit S.C., taking into account the wide gaps in terms of income that international organizations have documented in most of the region, a marked preference is identified on the part of the Latin American population over the consumption of audiovisual content through the Subscription Television service.
As previously documented in the analysis "Communications: Anchor of inflation in Latin America", communications services, in general, have been characterized in recent years by registering a price dynamics that contrasts with that generalized consumer prices of the economies as a whole, since while the latter often follows an upward route, the former has a downward or stable trend.
However, the general or average picture does not necessarily reflect the particular situation of each of the segments within the component called "Communications" within the Consumer Price Indices in countries of the Latin American region. Such is the case of Pay Television, a segment that, despite being considered part of the Telecommunications industry, is subject to cost structures different from those of the rest of the sector and, therefore, to differentiated price dynamics.
In this sense, when analyzing the behavior of the prices of the service reported by the national statistical bodies in six representative countries of the region, upward trajectories are recorded. Thus, when calculating the variation in accumulated prices between the first quarter of 2015 and the third quarter of 2017, Uruguay registers the largest increase (27.4%), followed by Colombia (23.0%), while Brazil (13.9%) is close to the average of the set of countries (14.3%), below which Mexico (8.7%), Costa Rica (7.7%) and Chile (4.1%)
This responds to the fact that, due to the high preference among the Latin American public for international content, operators have to face the cost of disseminating these that are mostly valued in US dollars. As a consequence, the fluctuations in the exchange rate experienced by the currencies of each of these countries preeminently determine the prices that the final consumer will face.
As can be seen in the following graph, most of the countries analyzed have accumulated, in turn, strong depreciations with respect to the exchange rate registered in January 2015. Thus, at the end of the third quarter of 2017, Colombia registered the largest variation in the price of the dollar expressed in local currency (23.6%), followed by Mexico (21.2%), Uruguay (19.1%), Brazil (17.9%), Costa Rica (6.9%) and Chile (1.3%).
While it is possible to explain to a large extent the upward trends in pay TV prices due to exchange rate movements, other factors must be taken into account to understand the magnitude of this impact on each market. In this regard, three additional factors stand out: competition within the market, the proportion of local content within the programmatic grids of operators and vertical integration in the generation and dissemination of content, factors that in some cases may contain the effects of exchange rate depreciation.
Such has been the case of Mexico, a country whose currency registered at the end of the third quarter of the year the second most important depreciation within the analysed markets and which, however, registers an increase in prices below the average of the six countries considered. This, in part, as a result of a significant proportion of local content within the Restricted Television offer, as well as the presence of vertically integrated operators in the dissemination, production and marketing of content, a fact that allows them to achieve higher levels of cost efficiency and thus contain the effects of acquiring international content at a higher price.
Text written by Gil Daniel Fosado and Santiao Yunes of The Competitive Intelligence Unit S.C.
