International -- Int'l Business: TELEVISION
SATELLITE TV IN LATIN AMERICA: STILL FUZZY (int'l edition)
Two rivals are battling for a distant payoff
Dec. 8 was a red-letter day in the battle for the Latin satellite-TV market. In Miami Lakes, Fla., feather-bedecked showgirls shimmied to the samba, Mexico's Thalia crooned hit tunes, and News Corp. Chairman Rupert Murdoch raised a champagne glass. The gala celebrated the opening of a $140 million broadcast center by Sky Latin America, a group that includes Murdoch's News Corp. and three other heavyweights. Just 320 kilometers away in Cape Canaveral, Galaxy Latin America, a rival consortium led by Hughes Electronics Corp. subsidiary DirectTV, also did some celebrating. It had just launched its second satellite to beam programs to Latin America.
The two groups are betting $1 billion apiece to capture what they see as a huge potential audience in a region with 82 million TV households. When they launched their satellite services last year, they projected as many as 7 million users by 2000. Although that target now looks over-optimistic, "we are introducing a product of the future," says Jose Antonio Rios, president of Galaxy Latin America. "It hasn't been easy, and we didn't expect it to be."
Indeed, the battle for the Latin market promises to be a slugfest: The rivals used their parties to trade barbs. Referring to DirectTV's technology, Murdoch said technology wasn't what customers were buying. "They're buying programming, and we have the advantage," he boasted. But Roberto Civita, CEO of Galaxy's Brazilian partner, Grupo Abril, said its satellite would let Galaxy broadcast more than 300 channels and gain an edge in providing services such as Internet access. "We are killing them, of course," he said, referring to Sky's service in Brazil.
Both sides have formidable resources. News Corp.'s partners in Sky Latin America are Brazil's Organizac centses Globo, Mexico's Grupo Televisa, and Tele-Communications International Inc. in Englewood, Colo. Galaxy Latin America's lineup includes Venezuela's Cisneros Group and Mexico's MVS Multivision besides Abril and DirectTV.
They'll need deep pockets: The payoff, in this poor region, may be years away. In Brazil, the biggest market, for example, per capita income is less than $5,000 a year. That puts monthly fees of $38 to $40 a month out of reach of all but a handful. By the end of this year, Hugo H. Beltran at consultants Paul Kagan Associates Inc. estimates that the rival services will have a total of just 425,000 subscribers in the region. For the year 2000, he projects a total of 2.2 million, and 4.6 million by 2005.
BULLFIGHTS. So far, Sky has operations only in Brazil and Mexico, while Galaxy is selling its service in those countries and nine others. For both groups, the monthly fees, on top of an up-front cost of up to $400 for equipment and installation in Brazil, are a big deterrent to subscribers. For Sky, one disadvantage is its system of selling equipment through dealers: Galaxy sells through its own stores in Mexico and by direct marketing in Brazil. To stay competitive, Sky pays a subsidy of $300 per box in Brazil, estimates analyst Karim Samii at SBC Warburg Dillon Read and $150 in Mexico.
Few would argue with Murdoch's claim that Sky has an advantage in programming. The group clearly has a potent edge in sports, for example, with soccer championships supplied by Brazilian partner Globo and bullfights from Mexico through Televisa. To offset such exclusive offerings, Galaxy is counting on more local programming supplied by joint-venture partners in individual countries, as the service expands to a planned 22 countries by the end of 1998.
The importance of programming is confirmed by subscribers such as Claudia Perez Vega. The 30-year-old Mexico City acupuncturist recently bought Sky's full package of 83 channels. While the monthly fee of $56 is higher than the wireless service she had before, she figures it's worth it to get triple the number of channels, including English-language programs--so her daughter can practice. "They have German and Japanese channels and the best films," she says. If Sky and Galaxy can find enough Claudia Perez Vegas, there will be even more and bigger celebrations.By Gail DeGeorge in Miami, with Elisabeth Malkin in Mexico City Latin AmericaReturn to top