IP&TV News gets the lowdown on the vibrant state of Chilean connected entertainment and pay-TV from Gonzalo Dona, CEO, Stel Chile.
IP&TV News: Hi Gonzalo. Pay-TV in Chile really seems to have exploded in this last year. What are the reasons for this?
Gonzalo Doña: There are mainly two reasons. The first is the increase in coverage and competition. The most important factor that explains pay-TV growth is the entrance of new satellite operators. Players like Entel, Claro, Telefonica, and TuVes are now competing with VTR, the largest Cable TV operator, and Directv, the first satellite operator. Claro also offers Cable TV services. Then we have much more coverage and competition than a few years back.
The other is the reduction of piracy in 2012. The pay-TV industry got stuck in 2012 due to the high level of piracy with massive selling of open STBs. All players reacted to this and dramatically achieved a reduction of piracy levels by the end of 2012, allowing the industry to show that explosive growth rate in 2013.
Are telcos well positioned to take advantage of this?
It is not clear that telcos are well positioned to take advantage of the current market growth.
Pay-TV players (Cable and Satellite) are reacting to the OTT pay-TV service, especially Netflix, responding with better and more aggressive bundled offers. By the end of 2013 some of them offered Internet TV services, such as Claro Video and Movistar Play. This move is more an immediate reaction to the threat of connected entertainment players than a decision to drive innovation in this space.
Additionally, HBO and MovieCity initiated the provision of OTT services with HBO GO and MovieCity Play, that for the moment apply only to current Cable/Satellite customers.
There are many threats coming from connected entertainment that will affect both the TV and the Internet Service businesses of current pay-TV players.
What is the demand like for connected entertainment in the Chilean market?
Connected entertainment is clearly growing. At the very least it has the sympathy of customers that are looking for more diverse and complete content, and the possibility to watch what they want at any moment, on any device. On-demand content includes information from different sources, properly sorted and displayed: movies (not only the most recent ones), sports, content for children, documentaries, customized information channels, etc.
Worldwide there are new providers similar to Netflix, but with a different focus on content. Claro Video, Movistar Play, HBO Go and MovieCity Play launched in 2013, are a good example of this. In Chile, VTR is working to launch a similar service; in fact they own a company called Bazuca that has been providing this kind of services for several year. There are also other small providers like Kanguroo, launched last summer.
What factors distinguish Chile from other LATAM markets?
Chile is an open market with a high level of competition and a good enough level of regulation in the telecommunication industry.
In addition to the above, the correct handling of the Chilean economy has permitted telecommunication companies to innovate and grow.
This growth is also displayed in the Broadband Internet Services, and this will help Internet TV Services to develop faster. I expect Chile to probably show a faster growth on this service in comparison to the rest of the region.
In terms of the evolution and diversification of telcos (and excluding Stel Chile just for the moment), what are the most exciting stories in the LATAM market at present?
Telcos that provide pay-TV services using Cable or Satellite technologies delayed their entrance to connected entertainment services because it could cannibalize their current business. However, new participants in the telecom industry that wants to provide TV services are completely open to the idea and are pushing for the use of Internet-TV services.
Clearly Netflix has opened the door to connected entertainment with good content, good quality, and good user interface solutions. Telcos are now responding with their own kinds of “Netflix” services. They are really reacting not leading the evolution.
I think the TV industry is in a transition from the old pay-TV services to the new connected entertainment services, but it is not clear how the business case behind it will evolve.
And what kind of innovations has Stel Chile introduced in terms of connected entertainment, and what kind of response have these innovations received?
Stel has been focused primarily in the Broadband Internet Services and now is planning the second step to include TV for its customers. In this initial phase we are moving to have two complementary kinds of TV services. The first one includes an alliance with a pay-TV operator to offer bundled services. The second one considers an OTT complementary offer with specific niche content.
You’ll be appearing at TV Connect LATAM this year. What is the main appeal of attending an event like this for an operator?
It is an event that provides operators with a big picture perspective of the industry and its major trends, where the industry is heading: what are the relevant topics, realise how trends are changing, and how they can affect the strategic plan to innovate and drive growth.
The event also gives the operators the opportunity to get in contact with others’ realities at different levels of development and to be exposed to distinct approaches to business, including the chance to engage in alliances or partnerships.
Gonzalo Dona will be appearing at Broadband and TV Connect Latin America 2014