Jumping on a Crowded Cable Bandwagon

The promise of the world’s fastest-growing pay television market has attracted most U.S. cable channels to Latin America in the last five years, and judging by the turnout at the region’s largest cable show held here last week, the competition is intensifying.

Cable 97 was the largest in the convention’s eight-year history, attracting a crowd estimated by organizers at close to 20,000.

Sex and noise seemed to be the two ways to attract customers on the convention floor. While models in nurse uniforms passed out brochures for the medical channel Cable Salud, others in gold dresses and matching pumps and nail polish walked the floor pushing the new movie channel MGM Gold. A troupe of dancers in red vinyl leotards did an elaborate dance routine for E! Entertainment.

This “is a more sensual market than many other television trade shows,” said Jon Helmrich, vice president for international at E! Entertainment.

The attraction for U.S. companies is one of the world’s largest markets unified by just two languages, Spanish and Portuguese. A growing economic and political stability in many of the region’s countries has allowed a middle class to emerge--meaning more money to spend on entertainment.

There are about 15 million households with access to pay TV in Latin America--primarily Mexico, Brazil and Argentina--and in the coming decade the market is expected to grow faster than in Asia, Europe or the U.S., according to a survey by the Television Assn. of Programmers Latin America, a group backed by the major U.S. channels in the region.

In Brazil, the region’s fastest-growing country for pay TV, penetration jumped more than tenfold between 1995 and 1996, from 0.8% to 9.1%.

There are more than 120 cable channels now offered in Latin America. Cable operators in Buenos Aires, the region’s most sophisticated market with 63% pay TV penetration, offer about 65.

“There are more channels here than almost anywhere else in the world. How many can the audience here sustain?” asked Charlotte Leonard, senior vice president and general manager of Turner Entertainment’s Latin American networks. “There are something like 12 channels doing movies and series, seven children’s channels and nine news channels. If you want to bring a new channel down here, you had better be ultra-unique.”

Finding a gap in the market was crucial to Nickelodeon, a competitor to Turner’s Cartoon Network, when it launched in December.

“When we first looked at the region, we thought there was too much competition in the children’s area,” said Taran Swan, general manager of Nickelodeon Latin America. “Then we started to look at the channels on offer and the way they were scheduled, and we realized all the other channels were 100% animation and people wanted other things.”

In seven months Nickelodeon has built up 3.7 million subscribers, compared with Cartoon Networks’ 6.7 million.

Getting into the market early gave networks such as Discovery a financial leg up, according to Dawn McCall, general manager and senior vice president of Discovery Networks Latin America: “To launch a channel now if you are coming in cold to this market, it would cost you $30 [million] to 50 million minimum, and it will likely take seven to 10 years to break even. If you were in the early launches, you were closer to [breaking even in four to six years].”

One of the advantages of Latin America is that one network can be launched for a region of 78 million households. Yet attracting advertisers to buy spots for more than one country is still a tough sell.

“You don’t come into this market and find a bundle of gold,” said Rafael Pastor, president at USA Networks International. “In the short term, pan-regional advertising will be the third source of revenue, after subscription revenues and local advertising sales.”

The other difficulty for new channels in the region is scarcity of product, as companies that used to sell programming launch their own channels. Spelling Entertainment launched one of the leading networks, TeleUno, in 1993 to exploit its library of “Melrose Place” and other TV series. Also pushing series and movies are Turner’s TNT, MCA Universal and Paramount’s USA Networks and HBO Ole, which, with its partners Sony Corp., Time Warner Inc. and Walt Disney Co., offers a range of channels.

The news business is also crowded and already there has been some shakeout. Current offerings include CNN International and BBC World, with Spanish-language versions of Bloomberg Television, CBS TeleNoticias and CNN en Espanol. NBC launched Canal de Noticias in 1993 but pulled the plug on the channel earlier this year because of poor performance; it is considering launching MSNBC in the region.

Among the growing pains is the lack of reliable ratings research--which is one of the reasons Television Assn. of Programmers was formed. Advertisers are still scrutinizing TAP’s first ratings for Buenos Aires and Mexico City, released in June.

Another challenge is piracy, particularly in Central America, where cable operators can receive U.S. satellite signals and feed channels to their customers without paying. Cable operators, who pay for channels on a per-subscriber rate, commonly underreport the number of subscribers, some channel executives say.

Turner’s Leonard suggests that new entrants tread carefully. “Everyone came down here and jumped into the market, which has changed things so completely. There has been a ‘gold rush’ of sorts, but for new channels entering the region it is tough.

“You know, the gold isn’t always there every time you dig,” Leonard said, “and the vein can also run out.”