BUENOS AIRES — Feevees are up in arms after Argentina’s broadcasting regulator said it would ban commercial breaks during movies on pay TV as of April 1.
This could force channel operators in Latin America’s most-cabled market to cut content spending as ad revenue takes a huge hit.
Operators fear the change could stall the recovery from Argentina’s worst crisis ever and even push it back into decline.
The regulator, known as Comfer, said it was responding to “a large number of complaints of excessive advertising breaks during films” on cable TV.
On average, programmers slot three ad breaks an hour during movies, each with three to six ads.
The economic crash at the end of 2001 caused cable subscriptions to plummet by 20% as consumers slashed spending in the face of depressed wages, rising unemployment and 45% inflation. With retail sales declining, companies axed their marketing budgets, causing ad spending on feevees like I-Sat, MTV and Sony Entertainment Television to plunge by 23% in 2002 from a year earlier.
Things started improving this year. In the first nine months of 2003, ad spending on Cartoon Network, Cinecanal, the Film Zone and other nets shot up 70% from a year earlier, according to the Bureau of Cable & Internet Advertising (BPCI), which represents 90% of cable nets.
The new ad restriction could thwart this turnaround, says Javier Asensio, president of BPCI and head of advertising sales at Liberty Media Intl.-owned Pramer, the top pay TV distributor/programmer in Latin America.
Programmers have been relying on advertising as a main source of revenue since a currency devaluation in 2002 cut carriage revenue.
Unable to jack up prices for fear of losing subs, cable and satellite operators negotiated lower carriage fees with programmers and changed them from dollars into pesos. So in dollar terms, carriage revenue has plummeted with the 65% slump in the peso.
By prohibiting ads during films, Asensio estimates that ad revenue for movie channels, which pull in about a quarter of cable viewers, will drop by 30% to 40%.
And that, he said, will cause a “domino effect.” With less ad revenue, programmers of movie channels will raise prices for cablers, who then will be forced to pass on the higher cost to subscribers, slowing sub growth or causing cancellations.
Dominant cablers Cablevision (owned by Liberty Media and Hicks, Muse, Tate & Furst) and Multicanal (Grupo Clarin) are losing money and are in default on a combined $1.3 billion of debt, leaving them little room to pay more for channels.
If they don’t raise carriage fees, programmers will be forced to reduce content purchases and boost repeats to remain profitable, Asensio said. Yet a decline in programming quality would lead to a decline in audience, hurting ad sales.
In a bid to block the ban, BPCI has requested a meeting with broadcasting regulator Julio Barbaro, an outspoken critic of commercial breaks during movies.
“We don’t think he knows the full impact or the seriousness of the ban,” Asensio says.