Latin American Market Poised For Growth

Often bundled together as one sales territory, the region of Latin America includes an assortment of countries, cultures, and languages. Many experts and analysts agree Latin America is not only a viable territory for independent films and TV series but is also poised for growth in the coming years. Local currencies are slowly rising in value, investment in infrastructure is aiding broadband penetration and the growing number of affordable OTT services is converting more users to VOD.

While 2016 was a strong year for the theatrical market, it still reflects the effects of currency devaluation. Mexico retained its number one spot hitting US$796.1 million (down 1.8% from 2015). Brazil was number two with US$744.2 million (up 14%), followed by Argentina’s US$246.2 million (down 2.6%) and Colombia at US$143.9 million (down 12%). Although revenues in USD were down, most box offices saw increases in the local currency as well as an increase in admissions, especially for local titles.

Online media is the fastest growing sector in Latin America. Although it has yet to replace the nearly extinct DVD market, OTT revenue reached US$1.6 billion in 2016 and is forecast to hit US$3.59 billion by 2021. The majority of the projected growth is due to the rise of SVOD which will account for 58% of the projected 2021 numbers.

SVOD is dominated by pan-regional services such as Netflix and Claro Video while TVOD remains a less concentrated market with most Pay TV providers offering pay-per-view or download-to-own services. Insufficient broadband infrastructure and high piracy levels are just some of the challenges obstructing the development of OTT in the region. Regional media groups and large Pay TV providers are investing in infrastructure and new technologies to help stir OTT growth. As more legal options for streaming become available and affordable, piracy numbers are dropping slightly.

This projected SVOD growth has caught the eye of international services Netflix and Amazon which are now available across Latin America. Netflix has numerous of original productions in Spanish and Portuguese, partnering with a number of Latin American production companies and utilizing local talent. Amazon bowed its first Spanish-language original series in mid-2016 and announced plans for further investment in original international programs.

While the theatrical and VOD markets are strong for independent and local titles, Free Television is a difficult market. Currency devaluations have upset the budgets of most broadcasters, leaving little money for acquisitions outside of their established major studio output deals. Most programming on Free Television has shifted to local content often produced by the broadcasters themselves: telenovelas, reality programs, comedies, and news. While most film slots have been eliminated, some international TV series are still acquired for broadcast on over-the-air television.

Basic Pay Television is a much stronger market for independent titles. Pay TV subscribers grew to an estimated 54% penetration but numbers are starting to plateau as the currency problems continue. There are a number of channels available across the region, some even focusing on arthouse and independent content. Premium Pay TV offers less opportunity for independent films. Much of the Premium TV programming is dominated by major studios through channel ownership and output deals.

Deals are typically struck as Pan Latin America All Rights or Pan-Latin America Pay TV deals and then divided and distributed regionally by local distributors. Brazil and Mexico are the largest markets of this region, each accounting for 40% of the value of a Pan Latin America deal. The outstanding 20% is split between the remaining territories, the largest being Argentina, Colombia, Chile, Venezuela and Peru/Ecuador/Bolivia (often sold together). However, government restrictions in Venezuela have made it virtually impossible to transfer funds outside the country. Without the ability to remit USD, the territory is almost completely lost as a market for any platform.

When selling a film to this region, it is difficult to find a title which will have guaranteed success in every market. For example, horror is a popular genre in Mexico while these films are much less successful in the Southern Cone states (Argentina, Chile, Paraguay and Uruguay). Audiences in the Southern Cone like arthouse, independent titles. However, these films are usually outperformed by more commercial product in Brazil and Mexico. Utilizing a local marketing team is one-way distributors tailor titles to the individual markets.

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