Brazilian Pay TV Operators Demand Real-ism

1/24/1999 7:00 PM Eastern

Something of a snowball effect has been created by the
recent devaluation of the real, as Brazil's pay TV operators scramble to renegotiate
carriage fees with programmers.

Brazil's No. 2 pay TV company, TVA, said it is seeking
to review its programming rates after the country's currency, the real, lost 23
percent of its value in one week earlier this month.

"There is no alternative. We must renegotiate"
programming fees, said Alexandre Annenberg, general director of TVA Network, a unit of

Brazilian carriage contracts are written in dollars, and
Annenberg said he wants to see them real-denominated.

"Programmers investing in Brazil should assume the
risks of the market together with local operators. They should think in local
currency," he said.

An early round of negotiating could take place at the
National Association of Television Programming Executives' trade show in New Orleans
this week, which is always heavily attended by Latino programmers.

Globocabo, TVA's rival and Brazil's biggest pay
TV company, has also indicated that it wants to peg programming costs to the real.

Other Brazilian cable operators favor the idea of linking
programming contacts to the local currency, Annenberg said. "There is no difference
between us and the newcomers," he added, referring to new companies that are entering
the market through the current licensing process.

The last time that there was an across-the-board push by
cable operators within Latin America to renegotiate programming rates was in Mexico in
1995. A devaluation of the Mexican peso in late 1994 caused the currency to lose one-half
of its value virtually overnight. In response, cable operators negotiated programming
rates at a peso-dollar exchange rate that was more favorable than the official rate.

But Annenberg said TVA is not looking to set an
"artificial rate" similar to the Mexican model.

He argued that linking programming rates to the Brazilian
currency was the fairest arrangement, since "our [programming fees] are in dollars,
our revenues are in reals, and we give dollars back to our shareholders."

Like Globocabo, TVA chose not to chase bids in the first
round of the country's licensing process. Whether it will do so in the next round,
which is expected to begin in March, is still uncertain. Annenberg said this will heavily
depend on the availability of international financing, which essentially dried up with the
onset of Brazil's economic woes.

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