Gustavo Cisneros

January 2008

As chairman and CEO of the Cisneros Group of Companies (CGC), Gustavo Cisneros sits atop a conglomerate whose businesses encompass media, entertainment, telecommunications and consumer products, reaching some 550 million Spanish- and Portuguese-speaking consumers in the Americas and Europe. CGC’s media holdings include interests in Venevisión, the leading television network in Venezuela; Venevision International, a global Spanish-language entertainment company; Venevision Productions, a supplier of telenovelas; and Claxson Interactive Group. CGC continues to build its businesses despite the turmoil in the media market in Venezuela, where president Hugo Chávez shut down the broadcaster RCTV last year because the government considered its news coverage biased. In this exclusive interview, Cisneros talks about plans for his company.

WS: Where do you currently have production operations?

CISNEROS: We maintain fully staffed studios in Miami, Florida, as well as in Caracas, Venezuela. These include 65,000 square feet of fully equipped, state-of-the-art digital studios (29,000 square feet in Florida alone), all with access to fiber-optic and satellite connections. But we should stress that our production staff has a proven capacity for setting up operations in a speedy fashion according to specific projects or market opportunities in an era when either financial advantages or the story itself demand a specific location. We produce frequently in countries such as Peru, Dominican Republic, Panama and others. We pride ourselves on being flexible and dynamic. We are currently considering further expansion in Miami and other countries. We hope to have more details in the very near future.

WS: Will you begin producing in languages other than Spanish?

CISNEROS: As you know, we are already a leader in the production of telenovelas. Because of the broad international appeal of this phenomenon and the fact that our content travels so well, we have distributed our telenovelas for a long time in several languages, including Chinese, Hindi and Russian. Based on the interest of local players in the genre and our expertise and resources, we are at this time planning production and co-production projects in those countries.

WS: What plans do you have for producing in China and in India?

CISNEROS: Both of these markets are attractive to us because they have already proven to be enthusiastic consumers of telenovelas. It is probably safe to say that both countries have an insatiable appetite for entertainment programming. They are particularly hungry for programming that caters to and takes into account their unique cultural needs.

In China we are working with CCTV, co-producing a documentary on the Yangtze River and the Three Gorges Dam, the most ambitious engineering project in history. This co-production is already being offered to the market, and is a wonderful documentary in terms of technical achievement, the beauty of the photography, and the story of the river and its impact in China. We also have close relationships with the major regional players, and we are evaluating with them opportunities both inside and outside China.

In India, we are establishing partnerships with local companies, based on our knowledge, telenovela catalogue and familiarity with their industry. We have long-established relationships in India, having already sold scripts and finished product, and we are evaluating projects for co-production in this country, probably one of the most developed in the television and entertainment industry in general.

WS: What other markets are important for the future growth of CGC?

CISNEROS: Of course the U.S. remains a prime target for us. We are already the largest Hispanic independent TV producer in the U.S., and we plan to keep on expanding our role there. Eastern Europe also shows great potential, and we of course continue to focus on Spain.

The success of our core product is such that we look for growth in Asia, Africa and other markets, be it in the form of finished content (dubbed or subtitled), scripts from our library or the formats we own.

WS: Why did Claxson sell a group of its channels to Turner Broadcasting?

CISNEROS: This was a deal that seemed to work well for everyone. Turner was anxious to expand the depth and breadth of its programming in Latin America and they made Claxson a very attractive offer for some very attractive media properties.

WS: You have VeneMovies in the U.S. and Venevisión Continental, the international pay-TV channel. How are these services doing?

CISNEROS: Both VeneMovies and Venevisión Continental are performing well ahead of our original expectations and have justified our enthusiasm for the concepts. We see VeneMovies as the definitive Spanish-language film channel and viewers apparently agree with us. There really isn’t any comparable service offering a full menu of current and classic Spanish-language films. We also offer English-language subtitles, which are attractive to film buffs.

VeneMovies is another part of the revolution taking place in American culture and business reflecting the growing importance of the U.S. Hispanic market, which contains more than 45 million consumers. This is the fastest-growing U.S. consumer market and it loves movies. Hispanics watch more movies, DVDs and rental movies per year than any other segment of the U.S. population, and we in Venevision International have the largest film catalogue, with the possibility of exploiting them across many windows.

WS: What are your plans for Venemobile?

CISNEROS: This business has enormous potential as the world, including Spanish speakers, becomes increasingly mobile. Today people want to take their entertainment with them. Venemobile provides Spanish-language entertainment to mobile-phone users in the world.

As you can see, this is a natural extension of our business where the TV screen and the popularity of our programming, content and talent act on the initial demand side, creating a new source of revenue. Once the brand is established, the possibility of distributing content, either adapted to or specifically produced for the mobile environment, is huge.

WS: What kind of content does Venemobile provide, and what support are you getting from advertisers?

CISNEROS: We provide film clips, photographs, telenovela clips [and] ring tones, among other forms of content for fast download. We also produced the first telenovela for the mobile environment in Spanish, Querido profe.

We have had some interest from advertisers looking for synergies with their products. We are still in negotiations with some of them.

WS: Besides being a major provider of content for Univision until 2017, would you envision engaging in new ventures with the leading U.S. Hispanic broadcaster?

CISNEROS: We continue to maintain a dialogue with Univision’s new owners to determine areas of mutual interest. Univision was a great accomplishment and we are proud to have been involved in its creation. But we are never satisfied to rest on our laurels, and are actively seeking to push the boundaries of our unique ability to serve the media, communications and entertainment needs of the Univision audience.

WS: Do you plan to produce in English?

CISNEROS: We are often approached by U.S. broadcasters who want to adapt the telenovela format for the English-speaking market. As you know, their attempts to produce this kind of programming on their own have not been too successful. We are taking a thoughtful approach to this subject, but basically we believe there is potential for English-speaking versions of telenovelas that are carefully modified to appeal to unique U.S. and European tastes.

WS: Venevisión’s broadcast license was supposed to be renewed for 25 years and instead it was renewed for only five years.

CISNEROS: Venevisión followed the letter of the law and all the regulatory procedures set forth by the government in applying for a broadcast license. That is why Venevisión received a license. It is also a fact that Venevisión did not receive the 25-year license it applied for, but a five-year license instead.

WS: Who are the beneficiaries of RCTV’s shutdown?

CISNEROS: It turns out that advertisers on Venezuelan television are the biggest beneficiaries of RCTV’s shutdown, since they now get far more for their money when they buy advertising.

WS: What is the situation of the TV advertising market since the shutdown?

CISNEROS: The supply of advertising space is now severely limited due to the large amount of presold space, which is the most common way to sell advertising in Venezuela. At the same time, advertisers have been cautious about redistributing their advertising, waiting for greater stability in the TV audience and the advertising market in general. This tends to moderate the potential for big price increases.

WS: How will the remaining stations absorb RCTV’s commercial inventory, and will they be able to raise their prices?

CISNEROS: According to data we get from Nielsen, they project big increases in market share for Globovisión (up 70 percent), and Televen (up 83 percent). A smaller 33 percent increase is predicted for Venevisión.

As I mentioned, the real gain turns out to be for advertisers. That is because the closure of RCTV has had an immediate positive impact on the effectiveness of advertising at all three major independent broadcasters. This is measured by a decrease in the cost per rating point (CPRP), which optimizes advertising investments, reducing the time and money required to achieve advertising objectives.