Economic downturn erodes country's cost advantage
Argentina’s TV producers are taking steps to ensure profits in the face of rising costs and limited domestic carriage opportunities, with bets on international output deals, new media and spinoff businesses.
After five years of more than 8% annual expansion, the economy is expected to slow to less than 6.5% growth this year and 2.5% in 2009. Inflation is running at 25%-30% annually, among the highest in Latin America.
This is eroding a cost advantage the country has had since a 70% devaluation of its currency in 2002, which sparked a production surge that helped transform Buenos Aires into a busy hub for Latin America. Endemol outsourced “Fear Factor” production. Sony Entertainment Television tapped a local to adapt “Desperate Housewives” for markets in Latin America. Others were hired to remake their own series for other territories.
There is debate as to how to deal with the changing economic climate, with some advocating keeping prices low to retain production, and others suggesting a focus on quality.
Victor Gonzalez, a partner at RGB Entertainment, producer of such hits as “Rebelde way” (The Rebels), says, “Argentina is no longer cheap for production.”
Such international sales and production services account for 40%-50% of local producers’ revs.
If the economy worsens, “we can go and produce in another country” that may have lower costs, like Colombia, Peru and Venezuela, says Michal Nashiv, prexy and CEO of Dori Media Contenidos in Argentina, a unit of Tel Aviv-based Dori Media Group that is behind hit series like comedy “Lalola.”
To hold onto business, Argentina must compete more for quality than price, says Hugo Di Guglielmo, an international media consultant.
“Even with the higher costs, the quality of production and the creativity in Argentina are very high, and this is keeping it an attractive provider,” he says. “The problem is that other countries like Colombia and Chile are aspiring to become production hubs.”
Argentina’s talent has attracted Televisa, with the Mexican media giant inking separate partnerships with production houses Ideas del Sur, Pol-ka and Cris Morena Group-RGB, and investing much-needed production coin and taking on international sales duties.
Jose Baston, Televisa’s corporate vice prexy of television, says his company’s strategy involves capitalizing on Argentina’s talent for series Televisa doesn’t have at home, like teen telenovela “Casi angeles” (Teen Angels).
The slowing economy, too, is pushing Argentinean producers to look for ways to milk more out of each production.
Ideas del Sur is developing “Atraccion X 4,” a telenovela aimed at children and teens it hopes will repeat the runaway success of “Patito feo” (Ugly Duckling).
“‘Patito feo’ has generated a huge number of ancillary businesses, from music to merchandising and the Internet,” Ideas artistic director Alejandro Stoessel says.
The series, now in its second season on broadcaster Artear-Canal 13, has sold in tape and format version throughout Latin America and to territories like Belgium and France. A band that emerged from the program has played nearly 100 live shows.
: Stoessel says that for shows like “Patito feo” or “Atraccion X 4” to be successful, ancillary biz like sales of DVDs and formats are a necessity. Broadcasters are paying an average of $15,000 an hour for fiction series — less than half the $40,000 an hour it cost to make a skein that meets export standards.
Sebastian Vibes, RGB’s head of international development, further notes that ancillary such as live shows and spinoffs help boost revenue in the face of rising piracy and intellectual property theft.
New media also is gaining attention.
Three fiction series are in development in Argentina that will air on cell phones and the Internet. One of them, Cris Morena-RGB and Televisa’s “Atrapados,” is a suspense thriller that consists of 80 two-minute webisodes.
Gonzalez expects mobile operators to order original productions as promotional tools. He expects the webisodes to do well in Europe, Israel and Mexico, particularly with younger users.
“There is a trend of individual and personalized entertainment and we don’t want to miss out on this,” Gonzalez says, adding that six more productions are under consideration.
But Televisa’s Baston says the challenge is that there’s no model for the business.
“What is certain is that we have to bet on new media. We are in the process of looking into how to distribute the content. It is a learning process that will take a couple of years or so,” he says.
Dori Media is taking combination approach, producing “Amando O,” a telenovela starring Natalia Oreiro (“You Are the One”) and Luciano Castro (“Lalola”) that will roll out on multiple platforms, with 325 90-second episodes for cell phones, 65 nine-minute episodes for the Internet and 26 hourlong episodesfor TV.
Broadcasters, too, are branching out.
Product placement, revenue-sharing deals on contest-generated toll calls and interests in spinoff businesses like legit productions of popular telenovelas are helping boost revenue for networks.
“The revenue of the broadcasters no longer is only centered on advertising,” Di Guglielmo says.