Brazil’s Audiovisual Industry is undergoing a process of reintegration and increasing competitive intensity. Since the 1990s, the deployment of pay-TV, the introduction of new consumer technologies, and the digitisation and video-streaming have brought a milestone change in the global and Brazilian audiovisual market.

Ferocious competition in the video distribution sector, content production, and adaptation of content to localised requirements are all severely harming the growth of Brazil’s promising industry.

The study released by Telecom Advisory Services, an international consulting firm specialised in the development of business strategies and public policies for digital and telecommunications companies, governments, and international organisations funded by AT&T and conducted by MIT and Dr Raul Katz, the Director of Business Strategy Research at the Columbia Institute for Tele-Information, demonstrated both the barriers the audiovisual market’s growth is facing and the requisite reforms to enhance it.

To respond to the market’s needs, the Brazilian government passed in 2011, the SeAC Law, which regulated the audiovisual market and pay-TV services, including cable, DTH, MMDS. In particular, SeAC imposed quotas of Brazilian content to TV programmers and increased the number of CONDECINE (Contribution for the Development of the Film Industry), taxpayers, fuelling the demand for Brazilian films and TV shows and the production of national content.

As a result, Brazilian production reached 177.7% of pay-TV programme hours in 2017, while national movies currently represent 6.3% of the libraries of the top seven OTT platforms and series amount to 23.1%, according to the study.

Although its enactment created a boom in the film and television Brazilian market, the regulation is believed to pose barriers to the industry’s development, hinder competition and harm the protection of the local audiovisual industry. Despite constraints, the Brazilian Audiovisual Industry remains increasingly competitive both within pay-TV and OTT sub-segments, due to the vertical integration approach and the proliferation of over-the-top (OTT) video platforms. Both factors advance competition and provide more benefits for the local content production industry and the customers, such as programme diversity, lowered prices. and improved customer experience, as well as for industry players that contribute to industry sustainability. 

Eliminating restrictions on vertical integration in the audiovisual market is pivotal for the sustainability of the national audiovisual market, as the report urged, provided that the goal is to maximise the diversity of content, keep prices low, while also maintaining content choice and competition.

The aforementioned restrictions refer to those imposed by the SeAC Law, such as the restrictions to vertical ownership, the limits to telecommunication operators on the hiring of national artistic talent and the licensing of major national events.

The report demonstrated the need to monitor the audiovisual market in terms of conventional market structure mechanisms, to eliminate over-regulation and its negative impact on consumer welfare and competition, and to safeguard the innovative nature of OTTs rather than regulating them as pay-TV services. Concerning the latter, having two types of services could encourage competition between them, through the creation of a competition field, rather than harm the competition, as considered, until now.

While the Brazilian Senate and the Congress are working on modernising the problematic SeAC regulatory framework that deprives Brazil of a fast-growing audiovisual market and a leading position in the rapidly evolving audiovisual global industry, the country’s president, Jair Bolsonaro keeps on slashing the budget for the audiovisual sector.

In September, Bolsonaro requested a 43% cut in the Audiovisual Sector Fund (FSA) in 2020 that targeted the National Cinema Agency. With Bolsonaro already risking the Mercosur agreement, Brazil has little space for her audiovisual market to grow, both in national and global terms.

Regulatory stagnation could spell trouble in Brazil for WarnerMedia

Though the takeover of Ole Communications stake will see WarnerMedia own 100% of all HBO, MAX, Cinemax and HBO Go services in Spanish-speaking Latin America and the Caribbean, the ownership structure of HBO Brasil Partners, another joint venture between the companies that operates HBO in Brazil, remains unchanged.

Amending the SeAC regulation was a prerequisite for WarnerMedia to go forward with the investment. WarnerMedia was believed to be pursuing a clear and predictable regulatory framework that fosters growth in the industry.

We have the option to acquire the business in Brazil but are not doing so at this time. As we have said, additional, direct investment in Brazil is not currently attractive to us because of the existing regulatory uncertainty in the country. We support and remain optimistic about the ongoing efforts to amend the SeAC law to ensure the media industry has a clear and predictable regulatory framework that fosters investment and innovation,” said Zeiler.