It's another busy afternoon at the Manila headquarters of ABS-CBN, the largest media company in the Philippines. At the studios of AM-DZMN, the country's most popular talk-radio station, calls are lighting up the switchboards. In nine TV studios nearby, actors, directors, set designers, and others are churning out the sitcoms and soaps that have made ABS-CBN the dominant force in local television. And out in the parking lot, construction workers are putting up a $100 million, 15-story building that will house new cable, music, movie, and merchandising operations.
You wouldn't know from all this bustle that ABS-CBN Broadcasting Corp., like plenty of other Philippine companies, has been rocked by the currency turmoil in Southeast Asia. Jittery investors have driven the stock down 27% in a matter of weeks on fears that a recession will cut into ad revenues and dent plans for expansion. President Eugenio "Gabby" Lopez III has talked about the need for "belt-tightening" at the company to weather the rough times ahead. But Lopez, 45, a Harvard B-school graduate and son of company Chairman Eugenio M. Lopez Jr., still thinks he can pull off one of the biggest transformations in Philippine business: taking his family's steady business in soaps and sitcoms and building a media empire with thriving operations in TV, movies, music, and telecommunications.
The idea is to create a Disneylike media machine to spin out products for Filipinos both at home and overseas. Lopez wants to make movies, show them on his TV stations, sell the soundtracks through his music company, and control the merchandise spin-offs, too. "When you are in all of the businesses, it takes a lot of the risk out," he says.
One factor that could diminish the risk is the immense wealth--estimated at $1 billion--of the Lopez clan, which also controls Benpres Holdings, one of the biggest conglomerates in the Philippines. The family, which started the TV company in 1946, lost control of it for 14 years when Ferdinand Marcos nationalized it in 1972 after declaring martial law. The Lopez family got it back in 1986, and since then the station's shows have enjoyed ratings higher than Manila's six other stations combined. "They have the masses down pat," says Gerald Baldavia, an analyst with Peregrine Securities in Manila. Its mix of the biggest stars, funniest sitcoms, and flashiest variety shows has appealed to the public more than programs on the other stations.
ABS-CBN's loyal viewers will be a valuable asset in a downturn. Advertisers interested in reaching the greatest number of people will scale back in other areas but still want to advertise on ABS-CBN, says Venus Navalta, assistant vice-president of ad shop McCann-Erickson Philippines. Plus, ABS-CBN's popularity means it can charge more. A 30-second ad during Home Along the Rails, the most popular sitcom in the Philippines, costs $3,000, 40% more than average. Last year, several major advertisers including San Miguel Corp. and Procter & Gamble Philippines protested a 22% increase in rates, but the protest quickly fizzled. "It's still a seller's market for ABS-CBN," Navalta says. "There's a long queue for their programs."
A HOME RUN? Lopez is also counting on some of his new ventures to keep his promise to investors that earnings--$21 million in the first half of the year on revenues of $74 million--will grow by more than 20% this year. He plans to expand in the U.S., particularly in California, where there is a large Filipino-American community. Lopez also wants Filipinos to use phone cards sold by subsidiary ABS International when they call home from the U.S. and elsewhere. And they do call, more than 300 million minutes a year to the Philippines. Right now, ABS gets only 7 million minutes of that market, but Lopez is counting on it to grow as he expands phone card sales in Europe and the Middle East. "We are using entertainment to get in the door," he says. "The home run for us is telecom."
Market watchers favor Lopez' plans, noting that the company's shares have taken less of a beating than the Manila market, which is down 36% this year. Lopez is looking forward to next month, when shooting starts on a movie starring Baywatch hunk David Hasselhoff, part of a planned trilogy on Philippine-American relations. With some hard economic times ahead, Gabby Lopez is betting that Filipinos will be in the mood for entertainment.