Carriage-Rate Tussle Heats Up in Brazil

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Brazilian cable operators have placed some firm proposals
on the table as they prepare to renegotiate carriage contracts in light of the
country's sinking currency, said programmers attending the Mexican Canitec trade show
earlier this month.

Carriage contracts in Brazil, like in most of the world,
are written in dollars, with networks paid in greenbacks.

But since Brazil's currency, the real, was allowed to
float in January, it has tumbled more than 50 percent, and the country's cable
operators are clamoring to renegotiate rates.

One option suggested by operators was to fix a floor for
the real against the dollar, while another was to establish discounts based on the value
of the real versus the dollar, said Willie Hernandez, director of affiliate relations,
Latin America for CBS TeleNoticias.

One programming source said an operator had gone as far as
to request that programming be paid for at an exchange rate of 1.21 reals to the dollar --
the rate before Brazil's currency began its slide.

"Cable operators can't expect programmers to take
responsibility for the full [devaluation] hit," the source said.

At press time, the exchange rate was 1.88 reals to the
dollar. However, in the past two months it has exceeded two reals per dollar, or a fall in
value of more than 60 percent from the 1.21 rate.

Like most programmers, CBS TeleNoticias had not yet come to
any firm agreement on renegotiating its programming rates in Brazil at press time.

The industry faces tougher conditions today than it did in
1994, when the Mexican peso nose-dived against the dollar.

At the time, Mexico did not represent as big a part of
programmers' Latino business as Brazil does today. One programmer, for example,
reported that Brazil provides 40 percent of its entire panregional income.

What's more, the panregional subscriber base was
growing rapidly in the mid-1990s, while it is expected to be flat at best this year.

Consequently, not all programmers are motivated to make
sacrifices without compensation.

Henry Martinez, vice president of affiliate sales for
Discovery Communications Inc. Latin America/Iberia, suggested that the company could seek
to link any negotiations to greater commitments from operators, such as longer-term
contracts, wider channel distribution, guaranteed price increases and local marketing
support.

Sources also said about 50 employees were let go from
Brazilian cabler Globocabo's Rio de Janeiro offices, with further layoffs occurring
at its other operations throughout the country.

Sources attributed the layoffs to the financial
difficulties triggered by Brazil's recession, but the company attributed them to a
wider sales-force-restructuring process.

Marcelo Cajueiro contributed to this article.

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