The Pay-TV Innovation Forum is a global research programme for senior pay-TV and content executives, developed by NAGRA and MTM, and designed to catalyse growth and innovation across the global TV industry, at a time of tremendous change and disruption.
As part of the programme, we are publishing a series of interviews with leading TV industry executives from around the world to explore their views, perspectives and experiences of innovation. In this interview, Marco Dyodi Takahashi, CMO for Residential Bundles Business at Claro Brasil, shares his views on the evolution of the pay-TV market in Brazil, the growing importance of OTT services, the threat of piracy, user experience as a key differentiator, and the shape of next-generation pay-TV packages.
How would you describe the pay-TV market in Brazil today?
The challenge we face is in growing the pay-TV market in Brazil. We have reached pay-TV penetration of around 40%, but it’s hard to increase that further. When financial conditions in the country were better, we were still competing with a strong free-to-air TV industry, which probably meant that some people didn’t want to go into pay-TV. After the recent financial crisis, it became even harder for the pay-TV market to grow.
How has the growth of OTT services impacted the pay-TV market?
We haven’t yet seen cord-cutting activity at large scale in Brazil. However, it’s having more of an impact on the premium part of the market as people are moving to fewer pay-TV services and are reducing their spend. The growth in OTT that we’ve seen so far has been primarily driven by the improvement in broadband. As consumers start getting access to faster and cheaper broadband, they start migrating to OTT services. However, with the growth in broadband, we also see a big increase in IP piracy, which is a more significant concern. People have less money than ten years ago, and piracy starts to become an attractive alternative. Moreover, pirate services are becoming more professional and better in terms of both quality and user experience, so we need to respond.
How are you tackling piracy in Brazil?
We’re doing a lot of things as a company but also jointly as an industry, to develop efforts to counter piracy. Streaming devices with KODI apps are widespread, but through our trade body – ABTA – we’ve launched a big educational campaign explaining to customers that streaming piracy is a crime. At the same time, we are also thinking about how we can improve our product offering and user experience.
Where do OTT services sit in your overall consumer proposition?
It’s a key element. We have an on-demand and OTT service called NOW, which is available to all of our broadband, mobile, and pay-TV customers. As a pay-TV subscriber, you get access to all of your pay-TV channels and related catch-up content and buy movies and TV series. As a broadband and mobile subscriber, you can still get access to the service and access all of our video assets available to them, apart from the pay-TV content. We’re trying to drive video viewing across all of our customers by offering a user-friendly OTT platform. We also offer Claro Video, an SVOD service already included on our NOW platform, which provides access to over 15 thousand contents. It is available free of charge to Claro broadband and mobile subscribers. This helps us position Claro as a content-driven company rather than just a provider of broadband and mobile services.
How are you approaching innovation and what are your key priorities?
The way we see it, content and experience will be central to our platform. However, in Brazil it is hard to differentiate on content – unlike OTT providers, pay-TV providers cannot offer exclusive content due to regulation. If content is a commodity, then user experience is the only USP. To that end, we’re investing in better features on the set-top box, launching a catch-up feature that you can go back seven days for almost 40 channels, rolling out cloud PVR, and offering seamless viewing on multiple devices. NAGRA is one of our biggest partners in this area. We have around 9 million pay-TV subscribers in Brazil, whose main entry point to TV content is their set-top box. We want to add as many user-friendly features to the box as possible so that people don’t need to switch devices. We want to win what we call the ‘war for HDMI1’. There is a lot of competition from the likes of Apple and Samsung, with everyone wanting to be the content aggregator.
We also need to think about how we develop services for the next generation of customers. Every service provider and paid channel are realising that the model we have today won’t stand in the future. It’s holding us back. We have to rethink how we’re packaging and selling content to customers who are not the target audience for traditional pay-TV services. Service providers have long-term contracts with channels, but at the same time, they want to attract new customers, who are seeking flexibility to pay only for the content they like. Our broadband customers, for example, might want to buy just one or two channels or buy a new movie and we want our OTT platform to be their preferred way of doing that. That is something the pay-TV industry needs to adapt to.