Latin America-directed paybox programmers converging on NATPE this week say they’re prepared to listen to their devaluation struck Mexican clients – but caution that operators should not take a drop in rates for granted.
Following the recent devaluation of the peso, Mexican operators face a 30% to 40% price hike for dollar-denominated U.S. channels like HBO Ole, Fox and TeleUno, backed by Spelling Entertainment . While they’re making no promises, most Yank programmers are acknowledging “we’re all in this together.”
“All of our negotiations are based on mutual business goals and objectives,” said Carlos Diaz, president of Turner Intl.’s Latin American division, which markets TNT, the Cartoon Network and CNN Intl.
“This is a long-term business. Our affiliates are our partners and we’ll work with them as much as we can,” echoed Dawn McCall, general manager for the Discovery Channel in Latin America.
But Jose Manuel Pagani, executive VP of HBO Ole, warned that devaluation is a risk that comes with the business. “Mexico’s economy is still strong. We cannot change a whole long-term philosophy because of something that happened in the last 30 days,” he added.
As operators see it, however, the choice is very simple: either payments to programmers are reduced or industry growth comes to a standstill. Programmers, operators and the nation’s 1.7 mil subscribers should take the hit, they say.
“If we increase our prices to subscribers by the amount of our cost increases, the industry will stop growing. Each of us should take a part of the loss,” says Genaro Rionda, corporate director of new business for Mexico City’s Multivision, the country’s largest system.
“If we now have to pay HBO Ole at 5.50 pesos to the dollar, we’ll be collecting less from our subscribers than we have to pay to HBO,” adds Gordon Kahn of Telecable Mexicano, a provincial MSO now sealing a joint venture with Denver-based investors United Intl. Holdings.
Kahn says that PCTV, the purchasing cooperative that supplies programming to most regional operators, has won a two-month reprieve from most U.S. programmers, with prices to stay at the old peso rate until the end of February. Representing about two-thirds of Mexican subscribers, PCTV aims to negotiate long-term price reductions at NATPE.
Privately, however, one industry insider speculated that the established networks may hold off lowering prices, forcing younger or marginal ones to drop their rates or face being cut by operators.
Indeed, the newer nets are talking a more open line. “We’ll consider short-term relief for some clients, which could be a special rate for a period of time or extending a contract term,” says John Helmrich, VP for international development at the E! network.
English-language channels such as E! and the Nostalgia Channel, which own international rights to their programming, may benefit from the current turmoil, as U.S. domestic signals become yet more expensive.
The Big Three U.S. nets and six superstations (WWOR, WGN, KTLA, WSPK, WPIX, and A&E) are currently available via the MPAA’s anti-piracy Quitclaim program, which allows Mexican operators to “legally pirate” from U.S. satellites in exchange for per-subscriber fees. As the program enters its second stage of phase-out, those fees are set to rise by as much as 500% on Feb. 1 – on top of any devaluation-related increase.
MPAA officials told Variety that they will “listen to the concerns” of operators at NATPE, but “see no reason to renegotiate agreements.”
Kahn says MPAA intransigence will generate a wave of piracy throughout Mexico, as fans of “Seinfeld” and “Late Show With David Letterman” buy parabolic antennae and less scrupulous operators revert to signal piracy, banking on government inertia. “The MPAA has become very arrogant – there’ll be a reversal of what’s been corrected,” Kahn complains.
Multivision, Televisa-owned Cablevision and PCTV are hoping to reach a unanimous negotiating position before the MPA in time for NATPE, says PCTV president Alejandro Alvarez.