Latin America to Double Pay-TV Revenue by 2017 amid Increasing Competition

As the market gets more crowded, the Latin America pay-TV segment is set to double in revenue, according to a report from Frost & Sullivan. The market earned $15.23 billion in 2011, but that will reach $28.75 billion in 2017.

A major factor driving the rise is a drive by operators to stretch their services beyond urban areas as competition escalates, bringing new service to small and medium cities. Frost expects this to be a potentially lucrative segment, as the low-income group is increasingly moving up to subscribing to pay TV services as economic growth in the region continues.

"Investments in wireless technologies and hybrid set-top-boxes will aid the offer of lower-priced services aimed at low-income users," said Frost & Sullivan (News - Alert) Research Analyst Guilherme Faggion. "This will considerably enlarge the subscriber base and open up additional revenue streams."

The rising competition will especially be felt among cable TV, satellite operators and IPTV (News - Alert) operators in Brazil, Chile, Colombia and Mexico in particular, the firm predicts, thanks in part to the merger of the fixed and mobile operations of America Movil and Telefonica (News - Alert) S.A. in several countries in Latin America.

"The entrance of telecommunications companies will intensify competition in the market," said Faggion. "The emergence of IPTV services in all the countries in Latin America; the launch of hybrid DTH, IPTV and digital terrestrial television set-top-boxes; as well as the deregulation of cable TV in Brazil are likely to solidify this trend."

However, the heavy tax burden on pay-TV services, especially in Brazil, and the difficulty of obtaining ROI from the implementation of networks in distant geographic areas and small cities remains challenging for operators looking to gain scale and offer convergent services, he warned.

Meanwhile, he noted that the over the top (OTT) market is not a threat to the market yet, but that may change, depending on the quality of broadband offerings, applications with attractive content for the Latin American market, and growth in online video games and connected TV boxes such as Apple (News - Alert) TV.