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April was a turning point for the streaming industry. For the first time in a decade, Netflix lost subscribers, while the service that CNN launched with fanfare a month ago, CNN +, spent $ 350 million, simply stopped. These two stages caused the alarm not only for the two companies, but for all platforms.

Some analyzes are worrying, but the scenario needs to be seen in context. Streaming exploded during the blockade, and now, thanks to vaccines, its growth curve goes back to pre-Covid times.

But the business is really in transition to a new model.

The merger of Warner and Discovery explains the cancellation of CNN +. Discovery CEO David Zaslav has been left in charge. After analyzing CNN + (which had less than ten thousand active users), he decided to cancel the service because it was an unnecessary distraction from the new company’s big goal: to join forces behind HBO Max. According to the New York TimesZaslav learned while working at Discovery that niche streaming platforms are expensive and prone to failure.

CNN + stopped only a month later (Photo: Unsplash)

Netflix is ​​living in difficult times. It lost 200,000 subscribers in the first three months of the year, and the company predicts the second quarter will be worse: two million will leave the platform. The company blames inflation and consumers who share their passwords. The war in Ukraine also affected him: it lost 700,000 subscribers in Russia by suspending its service there.

Despite these things, Netflix continues to lead comfortably worldwide with 221.8 million subscribers. After them is Amazon Prime Video with 200 million; Disney + with 129.8 million; HBO Max with 73.8 million; Paramount + with 56 million; Hulu with 45.3 million; Discovery + with 22 million and Apple TV + with 20 million.

To deal with the use of busy passwords, Netflix is ​​conducting a pilot plan in Peru, Chile and Costa Rica, charging an additional approximately $ 3 to share the account with people living outside the home. This strategy (which is also being explored by Disney +) will be under evaluation for a year. If it works, the company says it will expand worldwide, but people in those countries have protested. Under the hashtag #ChaoNetflix, they are threatening to cancel their subscriptions.

Netflix is ​​also raising prices: it recently raised interest rates by $ 2 in the United States, and in the UK the premium plan is now reaching $ 22.6 a month, to give two examples.

Significant increases and avoidance of account sharing are new strategies: given the stagnation of subscribers, especially in the US and Canada, the business model aims to make current users profitable and capture some of the 100 million people the company estimates. that they watch Netflix free of charge, with busy accounts. Thus, the focus now is on increasing profits with users who already use the service. If it works, the number of subscribers will be less critical in the future.

However, this financial logic may clash with the current scenario. Today, all streaming services have cheaper monthly payments than Netflix and sometimes aggressive discounts, seeking to increase their market share at the cost of losing money for a while.

Latin America: a lot for growth

While streaming is experiencing a minor crisis in the United States, the outlook for LatAm seems more favorable. There is a lot to grow: It is estimated that the penetration of streaming in the region is 10%, with 93.7 million subscribers.

As in the world, Netflix also leads here with 41 million subscribers. They are followed by Disney + with 12 million; Amazon Prime Video, with 7.2 million; Claro Video, with 2.9 million; HBO Max, with 1.3 million and Apple +, with 815 thousand subscribers. In terms of streaming revenue, Brazil is ahead.

The pandemic marked a milestone for the regional television industry in 2020: for the first time, platforms surpassed cable television: 62.2 million subscribers versus 57 million subscribers. This holiday made the eyes turn to the business on the rise. TelevisaUnivisión, the media giant, launched its ViX platform on March 31, promising to be the most Spanish-speaking platform. With telenovelas such as “María, la del barrio” or “La rosa de Guadalupe” as copies of copies (many of which have ceased to belong to the Netflix catalog in the region) and to a lesser extent American and European productions.

The launch, which took them a year, was for Mexico, the United States and 19 Latin American countries. Its beta version is free, with ads at the end of each episode or movie and a friendly but simple interface. In the second part of the year, they will release ViX +, with paid first-class content that will include original shows and exclusive football shows. With a strong focus on Mexico and the Latin American market in the United States, they announced two innovations: Salma Hayek has signed a two-year contract with ViX + to produce films, while Yalitsa Aparisio’s new film (Roma) will be released exclusively on this streaming service.

“We will be a major product among Spanish-speaking people and have an exceptional market share,” said Wade Davis, CEO of TelevisaUnivisión, while giving evidence of how they intend to compete: at a “much lower” price than the competition. along with launch promotions and offer packages.

Wade Davis, CEO of TelevisaUnivisión, and Pierluigi Gazolo, President and CEO of TelevisaUnivisión’s transformation, at the launch of ViX, a streaming service aimed at Latin American audiences and Latinos in the United States. (Photo: TelevisaUnivisión).

If TelevisaUnivisión manages to be a strong competitor, this remains to be seen, given that on average each country in LatAm has 35 streaming platforms. For example, on April 18 Anime Onegai debuted throughout the region. Founded in Mexico as the first Latin American Japanese animation platform, it distributes directly from Japan without intermediaries. There are 120 productions that can be watched for free with advertising. The ad-free plan costs $ 2.7 a month.

Disney + revealed a few weeks ago that it will launch a cheaper subscription version with ads, which will be released in the US later this year and the rest of the world in 2023. Paramount +, Hulu and HBO Max already have advertising options at lower costs for its users in this country, a trend that Netflix plans to join early next year.

This model is one of the strongest trends to come and breaks the idea of ​​being an ad-free space that streaming services have ever embodied, something that sets them apart from traditional television. Given the stagnation of subscribers, this is the necessary way to survive. This new reality can be called the “end of the honeymoon phase” between these services and the people. The current model is not resisting as it is, and this once ad-free paradise is coming to an end.

Content, the other battle

According to Organization of telecommunication services of Iberoamerica, the countries of LatAm that consume the most of this content are Mexico, Brazil, Argentina, Colombia, Peru and Chile. For the same reason, they are the markets where companies gamble the most, and in all of them they have bought or produced local content in alliance with producers. Original content is the best tool to stand out from the pack in an increasingly competitive environment. It is estimated that the region already produces more than 150 series or movies a year for streaming platforms. And that number will continue to grow.

When reviewing the ten most watched productions in the countries with the most Netflix subscribers in Lat Am, half are regional fictions. They rage from “Yo soy Betty, la fea” and “Café con aroma de mujer” to “Pasión de Gavilanes” and “La reina del Flow”. The same company premiered this month the fourth and final season of the Argentine series “El Marginal” and announced the debut of its first Chilean series and its first Uruguayan film.

Star +, a new competitor to LatAm, launched Argentina’s Terapia alternativa last year, although its significant advantage – and what makes it a high-potential platform – is in sports. There are many football matches (with a focus on the Argentine tournament) and exceptional events on a global scale, such as Formula 1 or the UFC.

A recent example of the impact of streaming in the region is La Jauría, which has just released its second season on Amazon, starring Daniela Vega (“Fantastic Woman”). This show, made by the Chilean production company Fábula, the Argentine Kapow and the influential British company Fremantle, was purchased and exhibited in the United States by HBO Max. More than 70 countries in Asia, Europe and Oceania have acquired the rights to broadcast. Its profits are not disclosed, but the industry estimates that it is one of the most profitable productions in recent times, with a turnover that is light years away from what it would have if it was broadcast only locally.

There is also room for smaller platforms. Reevesfor example, is a free streaming service, born late last year in Chile and now in Peru and Colombia, with exclusively Latin American productions (it will arrive in Mexico in 2023). There are 100,000 active users and a catalog of 500 movies and series from 17 countries. It is financed by advertising, but only at the beginning of each production.

Another streaming model that is growing in the region is state-funded streaming, as is the case with Ondamedia in Chile or CINE.AR Game in Argentina, which offer local productions freely. In Mexico, the Ministry of Culture and the Mexican Film Institute have partnered with the Spanish company Filmin to have a free catalog of Mexican cinema on this platform, called GratisMx. The Brazilian platform is also free, although funded by Itaú bank Cultural play Itauwith a catalog of 135 titles from Brazil.

But the analyzes are not optimistic in the long run about smaller-scale streaming, as they cannot match the multimillion-dollar sums invested by large companies, as they have a smaller scale and model that does not support such costs.

One calculation for investing in original content remains that as platforms expand globally, investment in original content increases well. In addition, investing in original production is a way to increase your catalog without spending on licenses and acquisitions.

Strategic alliances

One of the challenges of streaming is not so much in the quality of its catalog as in what is called “consumer decision fatigue”: faced with a huge variety of options, people do not know what to watch and overload, complaining for years of cable TV operators, as people have more than 100 channels and know little about what is being broadcast.

With this in mind, artificial intelligence and big data have become vital, with recommended algorithms based on what users have seen before. A feature that is currently in the works for most platforms. Netflix is ​​the best in this regard, which may partly explain its success. This point will be crucial to the survival of any service: the idea that you don’t need another platform, that there is always something new to watch.

As part of the strategy of adding subscribers, streams use special measures, such as alliances. Rappi has just launched a partnership with HBO Max, delivering the streaming service with Rappi Prime Plus for $ 8.5 a month. Available in Argentina, Brazil, Chile, Colombia, Costa Rica, Peru, Uruguay, Mexico and Ecuador. HBO Max has also allied with Claro Video: access to HBO Max is free if you have the latter.

Other collaborations are being made with celebrities. Amazon Prime Video, for example, has signed a contract with production company Three Amigos, owned by Diego Bonetta (Luis Miguel, the Netflix series), to create content for LatAm audiences. Meanwhile, Netflix bought Oscar-winning film Alejandro Gonzalez Iñárritu’s new film to premiere on its platform.

But the alliance that can bear the most fruit is the one Netflix is ​​making with video game developers. The world’s fastest-growing streaming platform industry could turn the tables if the result is convincing.

So far, the company has conducted tests with a reduced catalog of games, but one that promises to expand by the end of this year – another example of how the business model is changing and far from stagnant.

Streaming platforms are rethinking their strategy

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