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On the other hand, electronic media continues to benefit from a pandemic-mandated confinement environment, remote-working arrangements at most office businesses and an already large user base of mobile devices, despite marginal growth on fiber to home penetration in Mexican households and growth during 2021 was noticeable and reported by major analysts.
As part of market consolidation activities in Mexico, 2021 saw the acquisition by Grupo Lauman of 100% of the Mexican operations of Fox Sports, Live Nation acquired 51% of Ocesa, Mexico’s largest live event organizer. Also, market rumors persist on the potential sale of two of Mexico’s mobile operators, which have yet to significantly dent America Movil’s Telcel mobile offering in Mexico which preserves a 63% dominant market share in wireless telephony and 71% in wireless broadband, in great part due to the perceived disdain by the Federal Administration to adequately implement market competition rules that foster network and user base growth.
All while LTE rollout continues, but nationwide 5G is still only in the plans and also while America Movil continues to seek for authorization to enter the video market, which as of this paper has been stalled at the Mexican telecoms and broadcast regulator (IFETEL), despite public announcements by its major shareholder to invest USD400 million in fiber to the home deployment in underserved markets.
US-based Starlink broadband satellite internet started operations in Mexico in 2021, which brought a refreshed offering to remote areas in the country and to specialized users in vertical applications, which may path the way for new entrants in the satellite-based field, while also relieving pressure for the cellular-based remote area rollouts.
Analyst reports informed that OTT video platforms, Internet advertising and online gaming saw the most growth, where cinemas, outdoor advertising and traditional broadcasting advertising showed the most dramatic decrease in revenue in 2021.
OTT platforms alone have created a USD1 billion market in Mexico in 2021, leading all other countries in Latin America, as Mexican consumers are avid users of streaming video platforms and quickly replacing traditional broadcasting media. 2021 saw the market entry of Roku’s renewed offer, HBO Max, Paramount+, Disney+ and content production in country has continued to increase
While traditional broadcasting advertising shows a rather flat growth, during the pandemic Internet advertising surpassed its traditional counterpart in 2019 and analysts predict aggressive growth in the next five years.
A law was passed in June 2021 and effective as of September 2021 to control advertising in Mexico, including electronic media (and social media), which resulted in an uproar due to its lack of clarity and resulted in significant disruption to advertising agencies, advertisers and advertising media. Still in early 2022, several of the implications and processes remain unclear and its effects have so far been an increase workload and cost on all links of the advertising chain, without much benefit to the industry or the country. The bill is thought to be aimed as a means for the Federal Government to have access to advertising spend by political adversaries.
Also, Mexico City authorities have announced plans to introduce a special tax to online concerts transmitted over the Internet, just after having passed a law to tax online food delivery platforms for the use of the city’s infrastructure.
Also in early 2021 and later in the year, proposals for a nationwide cybersecurity law have been presented, but still sit in Congress commissions pending analysis.
Also, other regulatory challenges and hurdles continue to arise, as the populist policies of the Lopez-Obrador administration and its allies in Congress continue to propose and pass bills of law that impose additional burdens and complications to the industry at large. For instance, a mandate for broadcasters to identify journalism reports from opinion-based journalism and alert viewers has been received by the broadcasting industry as an attempt by the Federal Government to curtail freedom of expression and further expose journalists to harm in a country that is already considered one of the most dangerous in the world for journalists.
IFETEL continues to be under scrutiny and attack by the Lopez Obrador administration and is currently operating with five of the required seven commissioners and will most likely by end of February operate with only four commissioners, leading to ever-growing concerns by investors and industry participants on the discretionary decision making and control by the Federal Government. Mexican President Andres Manuel Lopez Obrador has missed the deadline to appoint new Commissioners for over a year and has given no signs of interest in appointing new Commissioners, even as the current Chairman at IFETEL is scheduled to step down in late February 2022.
These industry-adverse approach by the Federal Government has triggered discussions in the US and other countries, including pressure by both US parties in Congress and the US Trade Commission regarding breach by Mexico to its commitments under the United States-Mexico-Canada Agreement (USMCA), which replaced the North America Free Trade Agreement (NAFTA).
As of January 2022, predictions for nationwide gross national income growth are slim and may indicate that Mexico will go into a recession with an estimated 2.2% growth.
Overall, 2022 will most likely be a year of continued growth for Internet-related businesses in Mexico and new entrants, including disruptive business models. New business models are booming in fintech, proptech and crypto-related activity, a sign of things to come, while Citigroup has announced its interest to sell Citibanamex, Mexico’s second largest bank, which may also be a sign of changing times and that competitive models can thrive, even in countries where economic and regulatory policies seem more backwards than ever.
Mexico: Market Overview
As we enter 2022 and evaluate the outcome of 2021, the preliminary conclusion is (as expected) that the media industry is still on a hybrid performance mode, where traditional television, radio broadcasting, printed media, cinemas and physical concerts have yet to show strong signals of revenue recovery. Market consolidation has happened and will probably will continue to occur as a method of efficiency and survival.
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Sergio Legorreta G. heads Dentons’ Mexico Venture Technology practice encompassing technology, media, communications, intellectual property and life sciences and co-chairs Dentons’ Venture Technology and Intellectual Property in Latin America and the Caribbean. Sergio focuses on representing disruptors, innovators and leading players in the technology, communications, media, entertainment, transportation, fashion, apparel and retail industries on regulatory matters, operations, expansion, brand enforcement and anti-counterfeiting, venture investments and on all strategic aspects of business operations from a legal perspective. Sergio is also heavily involved on entrepreneurship and emerging company advisory with major incubators and accelerators.
Sergio Legorreta G.