May 2014
Volume 34 No. 4

April 2014
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Mexico: The New TV Battle Of The Giants

By VideoAge’s staff writers

Mexico is a big country full of TV giants: Think of Televisa’s Emilio Azcárraga Jean, Azteca’s Ricardo Salinas Pliego and Movil’s Carlos Slim Helu, the world’s richest man.

Among these giants stands the tiny but powerful IFT, or Federal Telecommunications Institute, created last year as part of a telecommunications and broadcast media overhaul initiated by the country’s president, Enrique Peña Nieto.

IFT is now imposing restrictions and increasing competition by offering concessions for two new digital broadcast networks (from which Televisa will be excluded), which will be announced and launched in 2015. Plus, to attract foreign players, it is allowing 100 percent foreign ownership of telecommunications and satellite TV companies. Finally, IFT is allowing more 90-second TV spots for local stations and 180 more commercial seconds per hour for local independents.
All of this prompted Televisa to state: “We’re pleased that the IFT is proceeding with the tender of new TV stations. It’s an important event for competition. We hope the same applies for the telecommunications sector.”

And if the piñata weren’t already full, there is a ratings war pitting Nielsen against those TV giants, and a battle among Charlie Ergen’s Dish Mexico, Televisa and Azteca.

Looking at the Mexican communications landscape, Slim’s Telcel has around 70 percent of the country’s mobile subscribers, and his Telmex around 80 percent of the fixed lines.

Televisa commands over 60 percent of the broadcast television market, around 45 percent of cable TV and 11 percent of satellite television with 21 pay-TV channels.

Azteca enjoys a comfortable 30 percent of the TV broadcast market. In terms of annual ad spend, Mexico’s FTA is worth U.S.$2.7 billion.

With about 2.2 million video subscribers, Guadalajara-based, publicly traded Megacable is Mexico’s largest cable TV operator.

Movil is one of LATAM’s major cable and satellite TV services with 16 million subscribers in 18 countries, but not in Mexico. In view of all these developments, Movil bid for and was awarded the rights to the Sochi Winter Olympics and the 2016 Summer Olympics in Rio de Janeiro on media platforms across LATAM, excluding Brazil. Movil can re-sell the rights in LATAM and broadcast the Games in Mexico if its Telmex gets a broadcast license, which it is prevented from owning until 2016.

Last year IFT set a 50 percent market share as the threshold for a group to be considered dominant. However, a lower court already overturned some aspects of the IFT requirements, while IFT contested that the judge’s ruling interfered with its ability to regulate the industry.
The dispute arose when Dish Mexico, the country’s second largest satellite-TV operator, and phone carrier Axtel, founded in Monterrey by Tomás Milmo Santos, added signals from Televisa and Azteca to their channel lineups without compensating the broadcasters on the grounds that IFT allowed it. Axtel is the country’s second largest fixed-telecom company with 10 percent of the market share and, last January, entered the pay-TV market via its end-to-end fiber-optic network.
The confusion was caused by the “must-offer” IFT provision, which forces broadcasters with TV signals accessible in 50 percent of the country to provide programming free of charge to smaller cable and satellite providers.

Dish Mexico competes with Sky Mexico, in which Televisa has a 58.7 percent stake (and DirecTV 41.3 percent), and Axtel competes with Televisa’s cable interests Cablevisión, Cablemas, Cablecom and TVI and with its telcom interests in Bestel (a long-distance phone carrier), and Iusacell (a mobile-phone provider co-owned with Azteca). Iusacell also competes with Movil’s Telcel. To further complicate matters, Movil’s Telmex allows customers to pay for Dish subscriptions via their phone bills, which prompted Azteca to accuse Telmex of controlling Dish.

Among the IFT measures, Televisa will be required to offer its transmission grid at a fee, and Movil to share its infrastructure with third parties, with a fee to be negotiated among the parties. In addition, Televisa is also barred from acquiring some exclusive content, such as professional football (soccer) league playoffs and must request IFT approval to take part in buyers clubs for content acquisition.

On the ratings battlefront, the problems started after Nielsen acquired control of Mexico’s ratings service Ibope in 2012 and discovered that the information on the sample families had been stolen. At this point both Televisa and Azteca filed criminal and civil charges against the ratings group, with Televisa unsuccessfully seeking an arrest warrant to jail Nielsen-Ibope executives.
The problem was exacerbated by a highly contested 2013 Nielsen report stating that the share of FTA viewers fell from 84 percent in 2008 to 72 percent in 2013, and that the affluent 25-45 demographic watches FTA 68 percent of the time, down from 77 percent during the same period.
Indeed, according to stock researcher, Televisa’s total audience share in Mexico is only three percent down from 2002.

For its part, Azteca no longer uses the group’s ratings services in Mexico (but it uses Nielsen in its U.S. operations) and instead of using ratings points to charge advertisers, it now charges a flat fee.

In addition, both Televisa and Azteca pulled out of the Mexican Media Council, the association that represents broadcasters, advertisers and the ratings company, and now they want the broadcast association, CIRT, to hold an auction for a new ratings service.

However, it is not expected that Mexico’s battleground will leave any company wounded. According to stock analysts, Televisa’s FTA revenue will continue to grow at 6.7 percent a year until 2017, satellite business will grow nine percent and cable and telecom segments seven percent. Similarly, Fitch Ratings has affirmed that Azteca’s financial profile is strong and has been stable in recent years.