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International -- Int'l Business: BRAZIL
BRAZIL'S ABRIL: FROM INKY PRESSES TO OUTER SPACE (int'l edition)
As publisher Abril leaps into satellite TV, it takes on broadcast giant Globo
Roberto Civita is the king of magazines in Brazil. Among the 200 titles published by his Grupo Abril, a conglomerate that had sales of $1.2 billion last year, are 9 of Brazil's 10 best-selling periodicals. Flagship newsweekly Veja, with a circulation of 1.2 million, is No.4 in the world. Only the three major U.S. newsweeklies are larger.
In electronic media, however, Grupo Abril is a relative newcomer. But it is hoping to get a lot bigger very fast. In a battle for Latin America's latest media frontier, direct-to-home satellite TV, Civita is squaring off against Organizacoes Globo, the giant that has dominated Brazilian broadcast TV for a long time. Abril and Globo are the Brazilian anchors for satellite-TV programming beamed by rivals Hughes Electronics and Rupert Murdoch's News Corp., respectively. Brazil's 160 million people, its vast geography, and its expanding economy make it a potential bonanza for satellite TV. "If you don't start thinking big, you'll get left behind here," says Civita.
"WAY AHEAD." For Civita, 59, getting more into satellite TV will mean straddling two worlds. His roots are in print media, where he has spent a career building up the publishing house that he inherited (table). He is deeply involved in every issue of Veja, which is read by the country's business and political leaders and its expanding middle class. But during a weekly meeting in his Sao Paulo office, the talkative executive led his corporate vice-presidents through a freewheeling discussion ranging from CD-ROM production to holistic management.
Still, Civita sees publishing as giving him a crucial advantage in the direct-TV sweepstakes. His magazines' 4.4 million subscribers include many of the same customers he is targeting for direct TV. "In knowing your subscriber base, which is crucial in pay TV, Abril is way ahead of Globo," says Douglas Oaten, a Sao Paulo cable-TV consultant.
Civita has already had an opening skirmish with Globo in cable TV. Both groups launched networks in the major cities, starting in Sao Paulo in 1991. When Abril ran short of cash because it underestimated startup costs, Chase Manhattan Corp. put up fresh money in 1994 and took a stake, now 9%, in the group's cable subsidiary, TVAbril (TVA). Last year, Chase helped bring in Capital Cities/ABC Inc. and other minority partners. Analysts estimate that TVA has about 40% and Globo close to 60% of Brazil's fast-growing market of 1.2 million cable- and pay-TV subscribers. Both are adding new systems throughout Brazil.
The satellite-TV contest is the big prize, though. On May 22, Galaxy Latin America (GLA), the Hughes-led satellite consortium, will start beaming 72 video channels with laser-disk picture quality and 30 audio channels to Brazil and the rest of the region. Abril owns 10% of GLA and 75% of GLA's Brazilian operating subsidiary. Hughes' other Latin American partners are Venezuela's Cisneros Group and Mexico's Multivision. GLA has the jump on the News Corp. consortium, whose satellite launch aborted when the Chinese rocket carrying it crashed in February. While the News Corp. group plans to start transmitting in August with a backup satellite, analysts doubt it will be able to match GLA in the number of channels and in quality until next year.
Abril expects to sell 170,000 subscriptions this year and 1 million by the end of the decade. The prices--around $700 for a pizza-size antenna plus $40 per month--are pretty steep for an emerging market. But Brazil's economic reforms have unleashed a lot of buying power in the past two years. "The [TV] industry is just scratching the surface," says Oaten. "Brazil has a 40-year pent-up demand."
INDEPENDENT COVERAGE. The rivalry between Abril and Globo goes beyond angling for the TV market. It's also a contest between tycoons with sharply contrasting views of the role of the media. The legendary political clout wielded by Globo founder Roberto Marinho, 91, and his three sons has earned Marinho a reputation as Brazil's Citizen Kane. Globo's partisan coverage of the 1990 election campaign was widely believed to have won the presidency for Fernando Collor de Mello, who later was impeached in a corruption scandal. Globo also lobbied in Brasilia, the federal capital, to delay the opening of the pay-TV market.
By contrast, Veja's independent news coverage won Civita no friends in Brasilia during the long military dictatorship from 1964 to 1985, a period when Abril was unable to get TV or radio licenses. "Globo is run like a cult," says a media analyst. "Abril operates more like a traditional business." That approach may fit better now in Brazil's increasingly open society and competitive economy.
Civita, born in Italy, came to Brazil as a 13-year-old with his parents, who emigrated first to the U.S. and then to Brazil. His father founded publisher Editora Abril with the rights to publish Donald Duck comic books. Civita studied economics and journalism at the University of Pennsylvania and worked for a year in editorial and business jobs at Time Inc. That experience was "my real graduate school," he says.
Despite the electronic ventures, Civita is still a print editor at heart. Former Abril executive Alberto Pecegueiro, a Civita admirer, says that during business presentations, Civita would sometimes complain about typefaces or page titles on visual material Pecegueiro was using. "He was editing my presentation even during a business discussion," says Pecegueiro, now CEO of Globo's satellite network programming arm.
Indeed, if Civita didn't find an intellectual challenge in his plunge into electronic media, he would be happy sticking to print. Abril's stable of publications ranges from Exame, a twice-monthly business publication, to a Brazilian version of Playboy.
As owner of 90% of Abril's stock, Civita has editorial free rein, and he wants to keep it that way. He shuns outside investors as a threat to his independence. "I don't have the plague of quarterly dividends or Wall Street analysts," he says. To keep control, he brings partners into subsidiary ventures rather than selling shares in Grupo Abril.
The cash cow that's financing the electronic ventures is print publisher Editora Abril, with revenue of $800 million last year. Civita expects that Abril's magazine business, which mushroomed from 100 million copies sold annually to 200 million in the past two years, will double again in the next five years as the economy expands. TVAbril already produces programming such as HBO Brasil and ESPN Brasil for its cable networks. For the satellite consortium, it plans, so far, to produce a news channel, a business channel in a joint venture with CNBC of the U.S., and Brazilian versions of U.S. cultural and country music channels. With total group revenue up 255% since 1990, Civita says: "I have the best market in the world right here."
Increasingly, though, it's an electronic market. So Civita will push into cyberspace next month with the launching of a commercial online service, Brasil OnLine. It will offer not only articles from Abril's print magazines but also a new magazine for computer programmers, TecView, available only online.
The next phase of Brazil's media wars will be on high-tech battle field. And Civita is well-armed.By Ian Katz in Sao PauloReturn to top