Ann: Appendix 3B - Conversion of 70,000 Con Notes, page-110

@mutulong and @taow The service pricing is something I have been wondering about as well.

With a 12% unemployment in Brazil and a minimum wage of about AU$370 a month (the average wage per family is AU$825/month) a AU$27/month cost is a significant expense. Netflix Brazil has a penetration of 67% and pricing starts at AU$5.85/month (BRL14.99 converted on Oanda), but Pay TV is a different game (e.g. live broadcasts, news, sports, etc.) and is more expensive than Netflix. CCS TV for example offers a 72 channels package for BRL125 (AU$56.5). The price drops if bundled with fibre-based internet, the starting price (depending on internet speed) is BRL189 (AU$73), a saving of BRL45 (AU$17.5) compared to what they would have paid for the internet service and TV package separately. The difference of course is that you are getting these channels on a large TV screen shared with family and often even friends and neighbours during special events. You can't compare that price with that of an individual watching on a phone or tablet screen!

Another factor to consider. If you read some recent reports, subscriptions to Pay TV in Brazil are falling, due mainly to their cost and the economical crisis, with a net loss of almost 1 million subscriber in 2017 (Pay TV penetration 47% in 2015, 48% in 2016, 46% in 2017). This drop is not compensated by an increase in mobile offering as subscriptions to basic mobile services are dropping as well.

If $27/month is a relatively serious expense in Rio or Sao Paolo, it is huge in the poorer north east where TV2U is launching.

I wonder therefore if TV2U did any serious market research about pricing.

This being said, if you read the research report I posted earlier, you can easily figure out that TV2U will be a niche player in Brazil, definitely not a major player. Being a niche player is not a bad thing if you have the right product but it sets up a higher bar for success. Launching the service in December created expectations, disrupting it the way they did since then can only generate negative sentiments in the market. The more the service is delayed or degraded the less people would be interested in subscribing. Competitors are also ramping up fast and time is a critical factor, with the FIFA World Cup due to start in June. Globo, Brazil’s largest media company, acquired the exclusive distribution rights over cable, satellite, terrestrial, mobile and broadband internet transmission across the country (http://www.fifaworldcuplives.com/2017/05/watch-fifa-world-cup-live-stream-on.html). If TV2U misses that boat, i.e. the rights to distribute Globo, the proverbial fat lady would have well and truly finished singing. Globo in the meantime is launching a new streaming service later this year, a major enhancement of its Globo Play (http://nextvnews.com/62478-2/) and they seem to be targeting the lower income subscribers.

Unless TV2U's offer an absolutely outstanding and price competitive service soon, I have a hard time imagining any significant number of subscribers. The part of the country where they decided to launch being one of poorest regions in Brazil will also have an effect on the number of subscribers. There are also cultural considerations to be factored in, for example people like to gather to watch sports events, preferably on a wide screen, rather than watch them individually on a phone. Unless they start serving areas like Brazilia, Rio and Sao Paulo, the number of subscriptions will remain modest. There are other considerations that will affect distribution in other regions and states and they better start addressing these soon if they have any hope of expanding beyond the north east.

Other than that, she'll be right mate