Recession Brings a Tear to Argentine Pay TV

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Buenos Aires, Argentina -- Suppliers of programming and
equipment to Argentina's cable industry are facing a tougher business environment
that has only been compounded by the country's recession.

That was the message to emerge last month from
Argentina's annual pay TV bash, Cable '99. And the event suffered a recession of
its own, with attendance down visibly from last year.

Lower attendance at Cable '99, also known as Jornadas,
prompted some attendees to talk of scrapping exhibition booths and holding the event at a
hotel, among other alternatives.

On the programming side, Argentina's MSOs appear to
have swayed little from their aim to further reduce content costs. There has been downward
pressure on carriage fees over the last two years, and now Multicanal, one of
Argentina's top two MSOs, is asking programmers for an across-the-board, 12 percent
cut in licensing fees, according to a high-level programming source.

There is also talk of linking programming payments to
ratings. At least that is the plan under consideration at Argentina's other top MSO,
CableVisión/TCI2. Its CEO, Emilio Rodiño, is examining how to calculate each
channel's performance on a cost-per-rating-point basis.

"We'll be taking [cost per rating point] into
account [in license-fee negotiations], but we have not yet defined how," he said.

Some networks with strong existing or potential advertising
revenue may even be asked to pay for carriage, a practice until now unheard of in Latin
America, Rodiño hinted.

But programmers noted that Argentina's $100
million-plus cable-TV advertising market isn't likely to grow much in the near term
because of the recession.

Programmers are not embracing the latest price-fixing
suggestions from Argentina's top two MSOs, which between them control some 3 million
subscribers, or about two-thirds of the entire market.

Henry Martinez, senior vice president and general manager
of Discovery Communications Latin America/Iberia, argued that Argentine
ratings-measurement tools are still too limited to be the sole criteria on which to base
programming fees.

"It's not appropriate to measure Argentina on the
basis of Buenos Aires, Rosario and Córdoba," he said, referring to the
country's three biggest cities. "Audience satisfaction also has to be factored
in."

Equipment suppliers are also grappling with sticky
financial issues in Argentina.

"It's almost impossible to do some kind of deal
without some kind of financing. [In the past] we might have done some kind of
deferred-payment plan for a fairly short period of time," said Piero Falci, director
of marketing and sales support, Latin America, General Instrument Corp. Today, GI is
recommending third-party finance companies to cable operators as they negotiate with
vendors.

The issue is particularly relevant in Argentina, where
operators this year began in earnest to roll out addressable set-top boxes to bow premium
and pay-per-view services. CableVisión is investing in advanced analog boxes, while
Multicanal CEO Eugenio Zucchi said he is pushing to get addressable decoders installed in
30 percent to 40 percent of the MSO's homes.

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