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The Televisa-Univision wedding heralds a new challenge in the Mexican streaming war

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Who killed Sara? it remains a mystery.

The highly successful Mexican thriller Netflix has revealed that Latin America is the latest front in the ongoing streaming world war between the world’s largest media groups.

For the giants of Disney, Amazon Prime and Netflix, countries like Mexico are a country with a population of 126 million (in addition to 60 million Hispanics in the US and 600 million in Latin American markets worldwide).

In fact, Who killed Sara? It belonged to Netflix The most popular non-English show in the US was launched in March in the first month and is generally one of the streamer’s biggest hits, proving to Latin producers that there is a large international market for Spanish content.

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

Mid-April – Before Netflix introduced it a disappointing quarterly subscription Latin American figures, the region that has been the engine of growth – presented by Mexico’s main television station and New York’s Univision Consolidation of $ 4.8 million content.

With a $ 1 billion grant from SoftBank Japan, they aim to launch a streaming service next year aimed at the global Spanish-language market.

The project that is yet to be named will face stiff competition: Netflix entered Latin America a decade ago, and in the last two years Amazon Prime’s video order service and Disney Plus have arrived. WarnerMedia will launch the HBO Max platform in the region this month.

But Emilio Azcárraga, chief executive of Televisa, is confident they can move forward. “Univision or Televisa alone would not be able to scale the money to be relevant to the production and distribution of content,” he said. “Together we have reach, size and money.”

He highlighted the experience of the team in collaboration with Sky satellite TV service in the 90s, with the aim of achieving a much bigger rival DirecTV. “A lot of people said we were absolutely crazy – how were we going to compete?” he told the Financial Times. “[But now] In the region where we operate, DirecTV no longer exists. “

However, it’s a big order for Televisa, which has a library of hundreds of thousands of hours of melodramatic soap known as. TV soaps, movies and sports, but little experience in producing fewer shows or adapting to what the audience wants to see as streamers do.

Although Disney Plus is not expected to be profitable until 2023, Netflix said it only expected it in January to match the cash flow this year, after years of large investments in content.

Few local streaming services have managed to hold up against the world’s biggest players. Nent, a Stockholm-based group, has achieved this in part by increasing production original Nordic drama.

Going forward, it is gratifying that content in Spanish and especially Mexican is growing in the major U.S. market, according to data provider Parrot Analytics.

Emilio Azcárraga: ‘Together [Televisa-Univision], we have reach, size and money ‘© Daniel Becerril / Reuters

Televisa-Univision will use Televisa’s production capabilities and take advantage of its extensive background catalog. But Televisa spends only $ 1 billion a year on Netflix compared to $ 17 billion, and Azcárraga has not said how much he would invest in content in the future.

“The reality is that Televisa can’t compete with Netflix productions,” analyst Gilberto García told Barclays.

Moreover, it seems that at least part of what Televisa-Univision is currently producing is content that viewers don’t want. “Since 2015, Univision’s audience has dropped by more than 50 percent,” García said.

Alejandro Rojas, director of applied analytics at Parrot Analytics, said it will be essential for Televisa to make a mental shift from producing large amounts of content to truly analyzing what consumers want. “It’s a completely different way of thinking about television,” he said.

Azcárraga admitted that people wanted something more than soap operas. “Love always sells [but] there are things we need to do differently. . . we are not closed to anything. ‘

Televisa-Univision considers it an attractive showcase for independent producers who want to produce content for the Latino market and highlighted the success of Televisa with films, but did not specify where it wanted to go, the project is full of films. Rivals like Disney.

“It’s like an arms race,” Rojas said. “Everyone needs to produce more.” In fact, Netflix will host a new office in Colombia this year and will shoot 30 new series, films, documentaries and other programs between 2021-22. She is opting for new Latin productions like the reality dating show Too hot to handle and teen drama Control Z to rekindle regional growth, according to Ampere Analysis.

Netflix’s original demand column chart shows the attractiveness of the entire LatAm at the end of the year as a% of the playback market showing content made by Netflix.

But the streaming giant is also making Latin in a business that is all scale in Latin America.

Netflix subscriptions in the region it rose by less than 1 per cent in the first quarter compared to the end of last year. All Latin American subscribers rose 19 percent last year, rose 20 percent in 2019 and rose 32 percent in 2018.

“What the pandemic has shown is that people are advancing paid memberships – people who could have subscribed in 2021 were subscribed earlier, so we’re seeing a slowdown in relation to increased growth in 2020,” Rahul Patel told Ampere Analysis.

Azcárraga said the decision to accept the new service based on subscription or advertising is yet to be made.

Television advertising sales rose 28% in the first quarter compared to the same period last year, content revenue rose 10% and 200,000 subscribers increased. Univision’s pay-TV company, PrendeTV, was launched in March with 900,000 subscribers in the first month and basic advertising revenue rose 7% in the first quarter.

Marcelo Claure, SoftBank’s chief international executive, told analysts that the combined entity “has the potential to reward the market, just as it rewarded Disney Plus, which is now trading ebitda 35 times.”

Television’s revenue has been fourfold for four years to a large extent, but net income has fallen. Analysts estimate that it currently trades ebitda 6-7 times.

“Seeing the pictures [at Televisa] they are definitely better and the content is getting more serious, “said Soomit Datta, an analyst at New Street Research.” But they will live or die with the quality of their content. ”

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