MEXICO CITY — Mexico’s media industry will grow 5 percent to over $6.3 billion this year as a digital boom in luxury and women’s lifestyle magazines offsets sluggish growth elsewhere, experts said.
Digital revenues will gain 10 percent to $1.7 billion as mobile penetration jumps 50 percent, said Deloitte’s TMT head Francisco Silva.
He added the broadcasting sector will also expand sharply as two new open-air TV channels are set to be auctioned this year as part of a highly watched telecommunications overhaul to dent Televisa and TV Azteca’s long-time duopoly. Print, radio and outdoor gains will remain sluggish, growing 1 to 2 percent, according to Silva.
Martín Caserta, president of trade lobby Asociación de Agencias de Medios, estimated media buying will rise around 3 percent to nearly $6 billion.
Telecom firms apart, a key energy-reform plan that will open Mexico’s oil market to foreign investors will draw new corporate advertisers to Latin America’s second-biggest economy, observers predicted.
“The reforms are going to bring more employment, more consumption and more ad spending,” Caserta said, adding that 2015 is looking better than 2014 when growth neared 3 percent. Still, it won’t be as strong as 2013, which saw a 6 percent increase in revenues as a result of a stronger economy.
More robust growth is guaranteed for digital, however. Observers say Televisa, Azteca and telephone monopoly América Móvil are rushing to create new mobile platforms to draw the growing number of young and smartphone-obsessed consumers.
“Mexico, unlike other countries, has a very big population of young people under 30, of which 60 percent is consuming digital information and content,” Silva said. “There are 120 million consumers and exponential smartphone growth. Average consumption is growing faster than Brazil and Argentina.”
Luxury, women’s and other lifestyle magazines are also thriving on the back of strong growth in luxury consumption. Mexico’s upscale market is expected to grow 9 percent to sales of $15.3 billion this year, attracting a pack of high-end labels to the country.
“There is a very important luxury culture that is fueling investment from luxury brands and a proliferation of titles,” Caserta noted.
In recent months, titles such as Vanity Fair and The New York Times Style Magazine have entered the market, followed by several lifestyle and business magazines such as Robb Report, Gentleman and Forbes.
Vanity Fair spent $1 million to issue 900,000 copies of its debut issue featuring Spain’s controversial new queen Leticia. Condé Nast Spain, Mexico and Latin America’s president Javier Pascual del Olmo boasted the Conde Nast-owned title will do well with the country’s growing set of sophisticated readers.
Five years ago, the presence of such magazines was largely unheard of. But as luxury labels and lifestyle publishers seek growth outside mature developed markets, Mexico has stood out as a promising emerging economy.
“Luxury brands have realized Mexico is a powerhouse,” Caserta said. Economic volatility hasn’t sapped interest because spending from a small, yet rapidly growing affluent consumer base continues to drive demand for pricey items, he added.
Mar Abascal, publishing director of Editorial Televisa’s women’s magazine portfolio, said luxury brands are constantly arriving in Mexico, fueling interest in associated content.
“The big opening we are having of El Palacio de Hierro Moliere at the end of the year is a big reflection of luxury brands’ success in Mexico,” Abascal said, adding that the phenomenon is driving growth in her portfolio featuring Marie Claire, Grazia and Vanidades.
Brands including Prada, Gucci and Louis Vuitton are set to open flagships in the revamped El Palacio flagship, located on Moliere Street in Mexico City’s posh Polanco quarter — an event many expect will open a new chapter in Mexican luxury retail.
Abascal said her team is investing to create new digital platforms to meet growing mobile readership demand. However, she noted traditional print is not dead, especially in well-established titles such as Vanidades, which she claimed has Mexico’s and Latin America’s biggest and most loyal female audience.
“Digital is complementing and adding ad investment that magazines didn’t have before,” she said. “It’s a wonderful plus for all titles and especially for Televisa, which has 35 million users.”
José Luis Carrete, Editorial Televisa’s regional digital director, said the 80-strong magazine franchise of Latin America’s largest broadcaster will grow by up to 10 percent in 2015, helped by a major shift to online content.
However, he said traditional titles ignoring digital could see revenues shrink 5 percent.
Like other countries, Mexico is jumping into the digital conversion, he said, adding that some print firms closed last year as the space undergoes a deep restructuring.
The magazine sector is also struggling from a distributor crisis after two large firms – Citem and Dimsa – shut down, leaving Televisa-owned Intermex as the only large player.
“Magazines are struggling at the point of sale,” said Pólux Arañó, founding partner of research firm Marketing Group, adding that a lack of adequate newsstand marketing is hurting visibility and denting revenues. “Apparently, there aren’t enough distributors to do the job.”
Carrete predicted online magazine growth will surpass 30 percent this year with female, luxury and travel categories topping the list, at least in Televisa’s case, though he noted the teen segment is struggling.
He said the company’s magazines draw about 80 percent of revenues from print editions and 20 percent from digital compared to roughly 60/40 percent in the U.S. and Europe.
According to Carrete, social media is also booming in Mexico, with Google and Facebook taking up to 70 percent of ad revenues compared to mainly Google a few years ago. He said Facebook has become a key traffic generator for the sector.
Even as revenues grow in many cases, the industry faces key challenges.
Muscling into the Internet will require bigger investment and smaller profits for some time. Televisa itself will invest $5 million annually to expand its online assets in three years when it hopes to double its unique users to 100 million, Carrete said.
The conversion will remain challenging with firms struggling to hammer out new platform concepts; create compelling content, and find qualified professionals for the job.
“Print firms’ digital arrival was late,” Carrete conceded. “We are halfway to where we should be. This is still a human process that is difficult to change, especially in a very traditional and profitable industry.”
Internet ad spending is also becoming a volume-oriented business, throwing premium content providers like Televisa into a scramble to keep prices high, a big obstacle going forward.
“We have to defend the premium-content segment, find ways to work with advertisers that want to pay for it, not programmed content that penalizes prices,” Carrete said. “Horizontal platforms like Yahoo or Terra can recycle content cheaply but we can’t, we have to invest and curate content people want to consume.”
Carrete said two out of three Mexicans visit Televisa’s networks. “This hasn’t happened through mass-content,” he boasted.
With an eye to the future, Televisa will focus on improving mobile engagement to boost traffic in Latin America, particularly in Mexico, Argentina, Chile and Colombia, where as much as 85 percent of audiences are expected to visit Web sites and apps in 2018 as opposed to 65 percent currently.
The team will work to devise more compelling offerings such as cosmoenespanol.com (Cosmpolitan magazine’s Spanish site), which Carrete said features the kind of enhanced user experience Televisa hopes to replicate across its franchise, targeting everyone from U.S. Hispanics to readers in Chile.
“We want to create exclusive content that is easy to digest” and generate loyalty through brand extensions like e-commerce and events for a particular audience profile, according to Carrete.
He said mobile-device penetration stands at 25 percent regionally and he expects it to grow by 50 percent annually.
Some Internet laggards may be running out of time. This is because despite relatively healthy projections, Mexican advertisers are slashing marketing budgets with research spending falling 10 percent in two years, Arano said.
“This is the first time in 25 years that this spending declines,” he said, adding that while digital investment remains high, other categories such as outdoor, radio and movie theater advertising are declining sharply.