Mexican Pay TV Growing Despite Peso Devaluation

Mexico’s pay TV industry, facing higher costs following a massive peso devaluation, will still see 20% growth in 1995, says cable association president Alejandro Alvarez Guerrero.

Mexican paybox operators and international programmers are succeeding in finding a middle ground, so both sides will bear the burden of the peso’s fall, Alvarez says.

Alvarez is president of cable association PCTV (Productoray Comercializadora de Television), which buys channels such as MTV Latino, Fox and Gems and distributes them to Mexico’s 140 provincial systems.

Some 60 new cable concessions are expected to start operating this year, fueling subscriber growth. The country’s 1.2 million subscriber count – of which PCTV represents nearly 1 million – should reach at least 4 million by the year 2000, Alvarez adds.

Another 450,000 Mexican households subscribe to MMDS (wireless cable) systems, which are also expected to see sturdy growth.

Dampened prospects

Prospects for pay TV in Mexico – which already has drawn investment from Falcon Cable, United Intl. Holdings and Princeton-based C-TEC – were initially dampened by the peso plunge, which threatened to make dollar-denominated channels 40% costlier.

But, says Alvarez, of the 35 signals PCTV buys, 19 owners have agreed to contracts set at 4.25 pesos to the dollar for the rest of the year – even though the peso is currently trading at around 6.0 and is expected to settle near 5.0.

Alvarez is confident he’ll reach accords with most other channels, but expects two will probably hold out: “It will be better to drop them than submit to their higher prices.”

Sources say programmers are wary of being dropped by operators because a growing subscriber base is crucial for attracting advertisers. Many programmers are thus agreeing to discounts in exchange for subscriber-growth guarantees or other contract revisions.

Ad percentage

“Some contracts originally promised the operators a percentage of ad revenues, but because cable advertising has major growth potential they want to cut that part out,” says a U.S. channel executive who asked not to be named.

“PCTV is a very tough negotiator,” adds the exec.

Meanwhile, to lessen its dependence on imports, PCTV is planning to add three in-house signals to the three it already produces for regional operators. Two will be joint ventures – with the French and Spanish branches of Canal Plus and with the U.S. Nostalgia network.

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