Alberto Pecegueiro

This interview originally appeared in the MIPCOM 2010 issue of World Screen.

 

When Globosat launched in 1991, it changed the television landscape in Brazil with its offering of pay-TV channels. At first, pay TV was a service only the more affluent households could afford, and that was a small percentage of the population. But in recent years, a growing middle class has opened up the pay-TV market. Globosat’s CEO, Alberto Pecegueiro, explains how.

 

WS: The Brazilian economy has been doing better than many of the economies in the U.S. or Europe. Has that helped Globosat grow its business?

PECEGUEIRO: It’s impossible to untangle one thing from the other and the improvement in the pay-TV market is twofold. First, the economic environment has helped cable and satellite operators invest even more in content and services to attract new subscribers than they would have [invested] in a stable economy or in a recession. Just to give you an example, when Sky and DIRECTV merged, almost everyone thought the new entity would constitute a monopoly in the DTH market. After the two most powerful players in pay TV got together, no one in his right mind would have ever predicted that someone else would try to compete with them. And yet, five years later, we find ourselves with four other competitors in the DTH market, all of them heavyweights capable of bringing in investment regardless of the economic environment. The fact that the Brazilian economy is healthy has helped and has motivated the investments [in the] industry.

 

The cable market has also benefitted from the high demand for broadband. So the climate and the atmosphere for the business has never been so favorable.

 

Besides seeing an increase in subscribers, we have also seen a similar increase in advertising sales. We are not the new kids on the block any longer, the Internet is, and it has surpassed cable as the fastest-growing medium, but we’re right behind it.

 

WS: With the improved economy, are you seeing an increase in subscribers among the growing middle class?

PECEGUEIRO: Definitely. There is high pay-TV penetration in the A-class market in Brazil, not so much in the B-class and it used to be very low in the C-class. Two things have converged to increase penetration. First, as we have gained critical mass, the market has created conditions for a product offering at a lower price, and [at the same time], the growth of the Brazilian economy has increased the discretionary income at the top of the C-class. So on one hand, people have more money to spend on products like leisure, culture and entertainment. On the other hand, cable and DTH operators are going after that market by offering lower-priced packages. And the combination of these two factors has resulted in the fact that 70 percent of the new subscribers [who] have entered the market in the last 15 months in Brazil come from the lower B-class and the upper C-class segments.

 

WS: Which of Globosat’s offerings are the most popular?

PECEGUEIRO: First, I would like to point something out. Globosat has to go head-to-head with the largest media companies in the world, like News Corporation, HBO, Time Warner, Viacom, you name it, they are all here. They can benefit from their global scale to amortize the cost of their primary acquisitions. And we have to pay our bills with revenues we earn just from the Brazilian market. In addition, we have to deal with the fact that Portuguese is spoken only in five countries in the world. Even our original productions don’t have much of a market outside of Brazil, so [we] have to make our living within the Brazilian market and we have to face the big gorillas of the global content business.

 

Nevertheless, we’re doing fine. Overall, among the top 20 channels, nine are Globosat channels. If you consider that among the top 20, five are children’s channels, which is a segment [we don’t cater to], and if you take out the kids’ channels, in an average month, of the 15 most-watched channels, nine are from Globosat and six are international channels. Brazil is the only market in Latin America where this happens. The international channels dominate all other markets from the Río Grande to Tierra del Fuego—even in Mexico, where the broadcast business is big and healthy and solid with Televisa.

 

In May of this year we launched a channel called Viva, which targets women 40-plus, most of them in charge of households and the family. Viva is already one of the top 20 channels in Brazil. We were able to develop and create Viva because, for the first time TV Globo, the broadcast network, accepted the idea of repurposing its library. So for the first time novelas, mini-series, specials and fiction productions that are highly recognized in the Brazilian market have found exposure on a pay-TV channel, and that’s one of the reasons Viva is doing so well. Viva gets 60 percent of its product from TV Globo, 30 percent from other Globosat channels and 20 percent from acquisitions.

 

Of course, we cannot talk about why pay TV is so successful in Brazil without mentioning soccer. Last year, between SporTV and our pay-per-view product, we aired more than 3,000 live events—an average of ten per day.