Televisa-Univision marriage portends a new rival in Mexico pouring out of wars

Who killed Sarah? It remains a mystery.

But the Mexican movie popular on Netflix revealed that Latin America is the latest front in the global broadcast war raging between the world’s largest media groups.

For giants like Disney, Amazon Prime, and Netflix, countries like Mexico with a population of 126 million — plus 60 million Hispanics in the United States, and 600 million Hispanic markets worldwide — present an exciting growth opportunity.

Actually, Who killed Sarah? It was Netflix The most popular non-English language program in the US For the first month after its March launch and one of the biggest streaming successes overall, proving to Latin producers that there is a huge international market for Spanish-language content.

It is also a tempting target for traditional broadcasters who are making a painful transition to the digital age.

In mid-April – just before the Netflix reveal Disappointing quarterly subscription Numbers in Latin America, a region that has long been an engine of growth – major Mexican channel Televisa and New York-based Univision have unveiled $4.8 billion content integration.

Backed by $1 billion in funding from Japan’s SoftBank, they aim to launch a streaming service next year targeting the global Spanish language market.

The as-yet-unnamed project will face stiff competition: Netflix entered Latin America a decade ago, while the past two years have seen the arrival of video-on-demand service from Amazon Prime and Disney Plus. WarnerMedia is launching HBO Max in the region this month.

But Emilio Azcárraga, CEO of Televisa, is confident they can make it happen. “Either Univision or Televisa alone will find it impossible to get the scale to generate cash to be able to be relevant in content production and distribution,” he said. “Together, we have the reach and the scale and we have the money.”

He points to the group’s experience partnering with satellite television service Sky in the 1990s, aiming to take on a much larger competitor, DirecTV. “A lot of people said we’re totally crazy – how are we going to be competitive?” He told the Financial Times. “[But now] In the area where we operate, DirecTV no longer exists.”

However, it is still difficult for Televisa which has a library of hundreds of thousands of hours of melodramatic soap known as TV soap, movies and sports, but little experience in producing more exciting shows or tailoring content to what audiences want to see the way broadcasters do.

Even Disney Plus isn’t expected to be profitable until 2023 while Netflix only said in January it expects Cash flow to break the tie This year, after years of extensive investment in content.

Few of the local streaming services have succeeded in taking on the big global players. Nent, a Stockholm-based group, was able to do this in part by ramping up production original scandinavian drama.

Encouragingly, however, for the new project, Spanish-language content and especially made from Mexico are thriving in the important US market, according to data provider Parrot Analytics.

Emilio Azcaraga: Together [Televisa-Univision]We have the range, we have the scale, we have the money.” © Daniel Becerril / Reuters

The Televisa-Univision project will utilize Televisa’s production capabilities and seek to take advantage of an extensive back-end catalog. But Televisa only spends $1 billion a year on content compared to $17 billion on Netflix and Azcárraga did not say how much it would invest in content in the future.

“The truth is that Televisa can’t compete with Netflix products,” said Barclays analyst Gilberto Garcia.

In addition, it appears that at least some of what Televisa-Univision produces is content that viewers of the content do not want. “Since 2015, Univision’s audience has fallen by more than 50 percent,” Garcia said.

It will be essential for Televisa to shift my mindset from just mass-producing content to analyzing what consumers actually want, said Alejandro Rojas, Director of Applied Analytics at Parrot Analytics. “It’s a completely different mindset than TV,” he said.

Azcárraga admitted that people want more than just telenovelas. Romance is always sold out [but] There are things we have to do differently. . . We are not closed to anything.”

Televisa-Univision sees it as an attractive shop window for independent producers looking to produce content for the Latin market and has highlighted Televisa’s success in films, but has not specified where it wants to focus as the project competes head-to-head with film-loaded competitors such as Disney.

“It’s like an arms race,” Rojas said. “Everyone needs to produce more.” In fact, Netflix plans to set up a new office in Colombia later this year and shoot 30 new series, documentaries, and other shows from 2021 to 2222. It’s betting on new Latin productions like the reality dating show. Too hot to handle Teen drama Z . control To reignite regional growth, according to Ampere analysis.

Column chart of demand for Netflix originals as a percentage of the streaming market showing Netflix content fading into LatAm's appeal at the start of the year

But even the streaming giant is faltering in Latin America in business where size is everything.

Netflix subscriptions in the region rose less than 1 percent in the first quarter compared to the end of last year. Total subscribers in Latin America rose 19 percent last year, after annual increases of 20 percent in 2019 and 32 percent in 2018.

“What the pandemic has shown is that people are offering their paid membership – people who may have signed up in 2021 signed up early, so we are seeing a slowdown now in terms of increased growth in 2020,” said Rahul Patel of Ampere Analysis. .

Azcárraga said that no decision has yet been made on whether the new service should be made subscription-based or ad-supported.

Televisa’s advertising sales in the first quarter were up 28 percent compared to the same period last year, while content revenue was up 10 percent and 200,000 subscribers were added. Univision’s pay-TV venture, PrendeTV, launched in March with nearly 900,000 subscribers in its first month, and core advertising revenue rose 7 percent in the first quarter.

Marcelo Clore, CEO of International SoftBank, told analysts that the combined entity “has the potential to be rewarded in the same way that the market is rewarded by Disney Plus, which is now trading at 35 times before interest, taxes and depreciation.”

Televisa’s revenue has remained largely flat for four years, but net income has declined. Analysts estimate that it is currently trading at about 6-7 times EBITDA.

“Watch the numbers [at Televisa] “Definitely better and the content is getting brighter,” said Sumit Datta, analyst at New Street Research. “But they will live or die on the quality of their content.”

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