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Blurb slump squeezes Argentina

A four-month advertising slump is rocking the Argentine TV industry, prompting budget cuts, walk-outs by stars, program suspensions and talk of debt crises among broadcasters.

Year-to-date, the Buenos Aires stations – which are not configured as networks but reap 80% of TV ad spend – have seen a 20% average drop in revenue. The cash squeeze is forcing them to rethink production budgets long viewed as too costly for a developing nation.

Matters came to a head early this month, with execs announcing efficiency drives, just as Economy Minister Domingo Cavallo finally admitted that the country was in a recession.

The World Bank now fore-casts zero growth in Argentina this year, and ad agencies doubt spending will return to normal until 1996. Chiefly to blame is the Mexican “tequila effect,” which has caused U.S. investors to dump shares throughout Latin America and prompted sky-high interest rates.

But there are other factors, says Dylan Williams, deputy regional director of Bates Latin America. Growing interest in “below-the-line” advertising (promotions, etc.) and an industrial “mini-revolution” – with local companies upgrading plant and new foreign entrants getting up to speed – also have hurt mass-media spending.

No. 2 broadcaster Artear, aka Canal 13, has felt a 20% drop in ad revenue, says programming director Hugo Di Guglielmo. “This month we began paying on average 20% less to our stars,” he says.

“Our goal is that our novelas don’t cost us more than $30,000 per one-hour episode (down from $40,000), and for drama series and sitcoms no more than $75,000 (down from $95,000),” Di Guglielmo adds.

Sebastian Mocorrea, corporate affairs manager with leading broadcaster Telefe, says the channel has suffered a lesser ad income drop than its competitors but admits salaries have been cut by around 10% and costly productions postponed.

One of these, the drama “El Fantasma de la Opera,” was budgeted at an almost unheard-of $140,000 per hour.

Two top stars at Canal 13 rejected pay cuts and have been written out of their shows, Di Guglielmo says. B.A.’s three minor-league broadcasters have also cut soaps and dramas, and several stations are now introducing low-budget Oprah-style talkshows.

While Telefe has grown its ratings lead this year, the consensus is that it’s paying too dearly for its success. Variety and gameshow hosts Susana Gimenez and Marcelo Tinelli, whose “Hola, Susana” and “Show de Videomatch” rank first and second in national ratings, reportedly receive a European-style $200,000-plus monthly.

The most-cited case of over-spending is the gameshow “Jugate con Todo,” hosted by Cris Morena – who is the wife of Telefe programming head Gustavo Yankelevich. Sunday nights the show gives away $140,000 in cars, home appliances and cash, but its ratings have failed to impress.

Yankelevich’s spending habits reportedly have led to infighting at the station, and his contract may not be renewed at year’s end.

“Telefe has had credit problems since last year,” says an industry executive who asked not to be named. Sources say Telefe is at least $45 million in debt and that shareholders are reluctant to inject new capital.

Mocorrea counters that Telefe’s debt situation is no different from that of his competitors: “We don’t have overdue debts,” he says.

Negative cash flow is typical of any first semester in Argentina, he adds, since this is always a time of low ad spending but high costs, with shooting starting on major series for the high-revenue July-December season. Indeed, another industry exec reports that third-ranked channel Libertad ran a deficit of $4 million in April alone.

Mocorrea disputes claims that Telefe has fallen behind with salary payments. And he terms “absolutely ridiculous” a recent story in top-selling news magazine “Noticias,” claiming that show host Tinelli, with two wealthy partners, is looking to buy up to a 50% stake.

According to Mocorrea, Telefe is often subject to biased reporting due to journalists’ disdain for the channel’s programming, which is more low-brow than at Canal 13.

Still, there’s speculation in the pay TV sector that Telefe may soon sell its Fincable subsid, Argentina’s fourth-largest MSO, to help ease the channel’s financial situation.

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