Weak signal

Digital shows promise, but cable creeps along

MIAMI — These are trying times for pay TV programmers in Latin America. The most heavily cabled market, Argentina, is struggling with an-ongoing recession while overall pay TV penetration in the region remains low at an estimated 18 million homes. The region’s largest country, Brazil, only had about 3.2 million homes at the end of 2000.

Cable operators have been slow to migrate to premium services and are putting increasing pressure on affiliate fees. Piracy remains a major problem. And despite their reach to high-income consumers, the programmers don’t feel advertisers are giving them their due.

But cable operators are looking to digital and value-added services like telephony and Internet to increase revenue per subscriber.

“The big groups — led by United GlobalCom and (Hicks, Muse, Tate & Furst) — are investing in new technologies,” notes Luis Silberwasser, title of Discovery Networks Latin America.

Cablevision (51% owned by Televisa) is investing $200 million over several years to digitize its Mexico City cable operation.

Argentina’s Cablevision, backed by Hicks, Muse and Liberty Media, is spending millions to upgrade its system. (Hicks, Muse has cable holdings in several South American markets.)

Programmers also have hopes for new technologies, which will give them new ways to present content and reach viewers while hopefully easing financial pressures for cable operators.

“There have been continuing cuts in affiliate fees, and I think everyone has been affected by that, not just us,” says Mary Ann Halford, exec VP of Fox Intl. Entertainment Channels.

And the cable operators, many of which are highly leveraged and strapped for cash, are dealing with high levels of churn that depress growth.

“For the last several years, outside of DirecTV and Sky, there has been no growth in the overall market, and that continues to be the case,” Halford says. (Sky, backed by News Corp., has a direct-to-home exclusive with the Fox channels).

Brazil has bounced back more strongly from its economic recession, and will be a boon, once it takes off.

“People have been saying that for the past five years,” acknowledges Gustavo Rabinsky, director of sales and satellite distribution at Argentine programmer Pramer, which is controlled by Liberty Media. “But you need to be there for when it does.”


Cable operators are betting that the digital and value-added services will also give them a leg-up on the satcasters, which are making in-roads.

At the end of 2000, DirecTV Latin America had over 1.3 million subs in 27 countries throughout the region. Grupo Clarin, which had been DirecTV’s partner only in the Argentine operation, is taking a 5% stake in the panregional platform.

Rival Sky — backed by News Corp., Liberty Media, Televisa and Globo — had million in just Mexico, Brazil, Colombia, Chile and Argentina, where it finally bowed in November.

Though Rupert Murdoch News Corp. is in talks with Hughes Electronics regarding a global merger between DirecTV and Sky, the outlook in Latin America is less clear.

In the two most important territories — Mexico and Brazil — the local Sky platform is majority owned and operated by Televisa and Globo, respectively, and each has its own pay TV strategy.


Signal theft is a major headache for the programmers, who lose out on affiliate income, ratings and ad revenue as a result. The Television Assn. of Programmers (TAP) Latin America, whose members include the channels of Turner, Fox, Discovery, Cisneros TV Group as well as ESPN and Pan-American Sports Network (PSN), among others, is trying some new tactics.

It just announced the Colombian Pay-TV Defense Alliance, bringing together local industry orgs, individual cablers and satcasters with programmers to address piracy and other common concerns.

“Our members believe in the potential of Colombia,” says exec VP Sean Spencer, who joined TAP last year from the Motion Picture Assn.

“Our goal is to turn poachers into payers.”

TAP wants to create similar alliances in Argentina, Mexico, and Brazil, and develop closer ties with local groups such as Canitec in Mexico and ACTV in Argentina (CK). In addition, it envisions creating a panregional org that would bring together the different pay TV players with the goal of bettering the industry overall.

“Our business cannot grow unless cable operators’ business grows,” Spencer observes. “We feel we need to make a more inclusive organization especially when doing local policy work.”

He is planning anti-piracy campaigns tailored for the individual markets of Argentina, Brazil and Mexico, plus educational initiatives and another campaign that will seek to convey the value of cable TV. In some countries, operators are doing that on their own.

Peru’s leading cable TV company, Telefonica-backed Cable Magico, has launched TV, radio and print ads that use the image of the devil to tell people “not to get burned” by illegal connections.

Cable Magico general manager Michael Duncan believes that nearly 10% of the 330,00 cable connections in Lima are illegal. To date, 240 people have been charged with installing or possessing illegal cable connections, and five have been sentenced.

New frontiers

Despite all the problems, new channels keep coming on. Last year, new entries ranged from fast-moving sports net PSN, owned by Hicks, Muse; National Geographic; Pramer’s lifestyle channel ElGourmet.com; and the long-delayed Disney Channel, which bowed in July in Spanish markets only and will launch in Brazil in April as premium only.

With a DTH exclusive with DirecTV, Walt Disney Latin America’s managing director, Diego Lerner, maintains that the Disney brand will help drive premium services.

At the other end of the spectrum, adult channels are also helping the push into premium. Earlier this year, Pramer bowed two channels, Private Blue and Private Gold.

With virtually no growth opportunities in Argentina, Pramer is increasingly focused on the Latino market at large, devising channels with broader appeal and

And the U.S. may be the next frontier, with U.S. Hispanic auds targeted by the likes of Pramer and PSN.

Peter Hudson in Buenos Aires, Lucien Chauvin in Lima and Marcelo Cajueiro contributed to this report.

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