Puerto Rico Economic Sector Profiles
Even though the advertising business in Puerto Rico is in transition, it still plays an important role in the communications world. Commercial ads are still the primary source of revenues for production and transmission.
Media investment in Puerto Rico has experienced significant reductions since the $756 million level of the election year 2004. Afterwards, the trend had been declining at 5%. During 2010, the total media market was $672 million, with a 16% increase. The latest estimate developed by Medianet for 2011 is $653 million, for a 3% reduction. Medianet projection for 2012 is $728 million, an 11% increase, taking into consideration political campaigns and media investments typical of election years. The media mix is expected to remain in line with recent years where Newspapers have 42% share, followed by Regular local TV with 25%, Radio 12%, Outdoor 7% and Cable TV 5%. Even though Internet has become very popular, it has not found yet the way to cross over the commercial structures.
The Newspaper industry seems to have experienced adaptation problems with the advent and development of the Internet, in terms of finding both an adequate and profitable business model. From a conceptual standpoint, newspapers jumped into the internet bandwagon, developing digital versions of their regular print products and entering the real time news business. The hurdles have been in transferring their traditional high margin business model to profitable cyber business ventures. This has been a global concern, and it is expected that some reasonable solution will flourish shortly.
There are four daily newspapers on the island, three in Spanish and one in English. “El Nuevo Día” and “Primera Hora” are the two Spanish entries of the Ferré - Rangel Group, while “El Vocero” is published by El Vocero de Puerto Rico. The Puerto Rico Daily Sun (formerly known as the San Juan Star) is the only newspaper in English, although it appears to have been substituted in the market by a similar publication with the San Juan Star name.
An important factor in the printed media picture is the presence of the regional newspapers. Most of the Island’s regions and municipalities have a weekly newspaper of their own. There are thirteen regional, high-quality, free, weekly publications that are home delivered, with substantial circulation. About 40% of all Puerto Rican households receive at least one regional newspaper. The most important of these – which circulate in the municipalities of Bayamón, Carolina, Ponce, and Mayagüez– have circulations of close to 100,000 per week. They have become a major advertising channel due to low rates and the capacity to penetrate local markets effectively. A new format is the free newspaper of which three are circulating : Vocero, Metro and Índice.
The regular television sector in Puerto Rico consists of five private Very High Frequency (VHF) stations and several Ultra High Frequency (UHF) channels around the island. The Government of Puerto Rico owns a Public Broadcasting Station (PBS), a private university operates another PBS and different groups have religious channels that are regulated by the Federal Communications Commission (FCC) public services broadcasting mandates.
Total revenues for regular television during 2011 were at par with previous year at $175 million level. Current television revenues have been stable during the last two years, but way below recent historical levels of $200+ million. Medianet projection for 2012 is $185 million (6% increase over 2011), mainly attributable to political campaigns.
Since television revenues are a function of audience levels, the actual measurement of viewers is a critical issue. In Puerto Rico, the TV industry uses the house meter method to measure audience. Given that television is probably the media most affected by Internet and lately by the mobile devices, the audience measurement subject becomes very relevant vis a vis the mobile viewer who watch TV in the computer, in the mobile smart phone or simply away from home in a sports bar. Up to now the measurement method used is the viewer meter in which a device is placed in certain houses around the island in order to measure when the TV set is on with people in the room. Some media measurement researchers estimate that currently 20% to 25% of TV viewers could be left out of the counting process because they are in the mobile world previously described. A local group has presented the option of using a modified version of the diary system previously used in the market. For the television industry, there is a large volume of business at stake.
Another issue regarding TV has to do with the type and quality of local programming as compared to syndicated programs or programs produced elsewhere and sold “canned” to Puerto Rico stations.
Cable and Satellite Television
The Cable and Satellite Television Service, commonly known as Paid TV, presents interesting developments in recent years. While the Cable TV total base of subscribers has come down from a top 360,102 in 2001 to 271,542 in September, 2012, the number of households with Satellite TV seems to have maintained the already higher base of users. Research conducted by Estudios Tecnicos, Inc. indicates that Paid TV household incidence in Puerto Rico is around 51%. Therefore, out of 1.377 million households on the island, total Satellite share is around 430,000 households. The exact information for Cable TV users is published by the Telecommunications Regulatory Board, while the Satellite information is estimated by market studies, since Satellite TV providers do not report their number of subscribers.
There are three Cable TV providers in Puerto Rico: Onelink, servicing eight metro area municipalities (San Juan, Bayamón, Cataño, Carolina, Guaynabo, Toa Alta, Toa Baja and Trujillo Alto); Liberty, 37; and Choice Cable, 31. There are also two satellite providers covering the Island, Direct TV and Dish Network.
Cable television is targeted to higher income households and offers a variety of channels and programs much wider than regular television. It also carries highly specialized channels and programs, as well as multiple recording options for delayed viewing. The versatility of cable technology has been used aggressively by local providers by means of the triple concept: TV, Internet, and telephone service wrapped up in one. Other products include the video on demand service that allows clients to order movies/events and even video games at the click of a button.
Even though some Cable TV stations sell commercial ads, the monetary value of these efforts is limited as compared to regular television and even radio.
In spite of the different media alternatives developed, Radio has been preferred along the years for its versatility, unobtrusiveness and portability. There is one radio set on every automobile and three or four in every household on the island.
Puerto Rico has one of the highest numbers of radio stations per square mile in the world, with 126 radio stations operating throughout the island. Changes in federal regulations allow flexibility in terms of ownership of radio stations in a single market, and this has rapidly fostered a spree of consolidations. In this regard, the radio landscape in Puerto Rico has changed from many independent radio stations to chains or groups. An area of interest in the industry is the long awaited paid radio satellite system. Some experts have expressed the opinion that this option is not a real threat for the industry, due to the quality and quantity of offerings to which Puerto Ricans have access.
Total revenues for 2011 were around $75 million, with a projection of $86 million for 2012. To a certain extent, radio billings follow the same pattern of regular TV.
At the beginning of the new millennium, the number of fixed telephones began to diminish in favor of cellular phone. The Telecommunications Regulation Board (TRB) reports show that the total number of cell phones on the island is more than three times the number of residential and commercial landlines. As of October, 2012 there were 3,060,113 cellular phones (79.7%) versus 780,229 landlines (20.3%).
According to the President of the TRB, the numbers observed in Puerto Rico are in line with the global trends where wireless lines surpass the landlines. In year 2000, the ratio of fixed telephones and cell phones was 50-50, around 1.4 million in each segment, while in 2012 the ratio is 3 cell phones to 0.8 fixed phones. Experts believe that fixed lines will not disappear, but the current trends are very much in favor of wireless communication.
The Wireless Sector
The island’s wireless market is on the order of 3.1 million subscribers as of October 2012, according to the Telecommunication Regulatory Board. Recent trends point to industry consolidations. Companies are very competitive in prices, technology and customer services, but projected slow economic growth will almost certainly lead to consolidations.
Industry experts indicate that the most important aspect in determining the market position of telecoms is innovation and who gets to the market first with the newest technology. Wireless rates have fallen considerably, from 30 cents a minute in 1998, to less than five cents a minute today, and wireless technology players have been very aggressive.
A review of the wireless voice and data industry in Puerto Rico reflects an impressive array of products and services directed to provide quick and secure communication at speeds that allows business to gain competitive advantage and consumers to enjoy life with total mobility. Latest products in the consumer market provide fast and easy access to data, news, sports, weather, music, e-mail and wireless music downloads. For the business market, most providers offer custom mobility solutions in order to make any place a workplace.
The most significant issues related to the Internet have to do with the general access to the Web, regardless of economic conditions of countries or people. The Sales and Marketing Executives Association has sponsored in six different instances, a study directed at measuring Puerto Rico’s Internet penetration. The longitudinal study has been conducted by Estudios Técnicos, Inc. in 2005, 2006, 2008, 2010, 2011 and 2012 by means of a sample representative of total island population 12+, users and non users of Internet. Some of the findings of this study are:
In order to maintain the current growth rate of Internet incidence, it is necessary to coordinate efforts between private and public sectors, along the lines of the models implemented in the municipalities of Caguas and Manatí. These efforts are directed at promoting access, supporting educational and community institutions. Suggested approaches include providing tax incentives, promoting public policy initiatives, and the development of local wi-fi sites.
Outlook of the Sector
The Communications sector presents myriad possibilities, both from the social and commercial standpoints. Traditional media is facing major challenges such as media convergence brought about by the advent of new technologies and new channels of communications as the free dailies. It seems that the 21st century has changed the communication world as we knew it, with new rules of the game. The net outlook is that the communications sector will continue growing with the challenge of maintaining the balance between business profitability and social goals.