Sky Latin America: a deep-pocket venture.

Sky Latin America, a strategic alliance between Rupert Murdoch's News Corp. and three other major media groups, was established to provide direct-to-home satellite television throughout Latin America and the Caribbean basin. The Sky consortium has reportedly invested more than $650 million in the venture so far. These types of bold moves are obviously best made by those with deep pockets and the stomach to endure the inevitable hitches on the path to success.

The other partners in Sky are Brazil's Globo, Mexico's Televisa and the U.S.' TCI. Thus Sky Entertainment Service, as the service is officially known, can draw on the resources of four of the world's leading entertainment production, media and communication companies. The, companies have announced that PanAmSat, Intelsat and News Datacom will be among the companies providing satellite carriage for the service. Of special interest to viewers should be Sky's ability to obtain rights to major events. To date the venture has secured exclusive DTH broadcast rights to highly anticipated sports events as well as a performance by opera singer Luciano Pavarotti.

Latin America is considered a fertile market for satellite television. There are an estimated 80 million television households in the region. David Evans, a former Sky executive, was quoted as saying that Sky expects to have six million to seven million subscribers by the year 2005, or 60 to 70 percent of the estimated 10 million households expected to be uplinked by then.

However, not everyone shares this bullish view. According to Simon Murray, research director at the U.K's Baskerville Communications, Sky will have only approximately 3.1 million subscribers in Latin America by the year 2000 and only some 5.3 million by 2005. What concerns some experts is the absence of a large middle class in Latin America and the lack of knowledge about the depth of the region's appetite for satellite television. Of particular concern is the cost of a satellite dish and decoder box - being sold by DirecTV for $450 in Mexico and for $900 in Brazil. Furthermore, Sky is subcontracting the distribution of equipment out to other companies' panregional networks, none of which are thought to have enough retail outlets to saturate the region. This means that distribution will be piecemeal in places and will require special handling.

The Sky venture operates as three partnerships in three separate geographical regions. The goal is to develop a strong brand identity for the Skys by tailoring them to each local market.

In Brazil, Sky's operating platform is NetSat, headed by CEO Adalberto Vianna. A full 54 percent of NetSat is owned by Globo, 36 percent is owned by News Corp. and 10 percent is owned by TCI. Globo TV provides NetSat with all the GloboSat channels, including SporTV and Globo News. Sky subscribers will be able to experience sporting events via SporTV and Fox Sports as well as through pay-per-view broadcasts.

In Mexico, the Sky partnership operates through INNOVA, of which 60 percent is owned by Televisa, 30 percent is owned by News Corp. and 10 percent is owned by TCI. Jorge Alvarez is the CEO of the Mexican operation. The service will feature 24 hours of entertainment a day, including movies, sports, news, pay-per-view, local programming and children's programming. The service is expected to have the ability to offer 62 video and 34 audio channels. INNOVA will carry all of the Televisa networks and other broadcast networks based in Mexico City, as well as Televisa's local stations from Guadalajara and Monterrey.

No one entity dominates the business in the other parts of Latin America; rather, the four partners have an agreement to jointly operate DTH service throughout the rest of the region.

America LLC, headquartered in Miami, Florida, is the company that coordinates activities across all the area; it coordinates technology, specialty programming. branding issues concerning the Sky name. pay-per-view and DOD services and the development of future Sky activities. Programming decisions in Brazil and Mexico are made by committees in the respective countries. Programming decisions for the rest of the region are made jointly. The Miami office handles all panregional acquisitions; John Duff, vp of Programming, is in charge of acquisitions made from this office. Local programming is acquired on a joint basis with the local operating partner. According to Mark Goldman, senior vp and general manager, this programming is supplied in large part by the partnership in Mexico and Brazil. "The important thing is that all the partners are providing their programming on an exclusive basis for satellite distribution," Goldman said. He then underlined the significance of local programming to the venture: "We know that we have to localize the service as quickly as possible to secure the participation of key broadcasters. Our immediate goal is to get a number of more countries up and launched."

Goldman also noted that the broadcast facility in Miami picks up regular TV signals and broadcasts them to the different regions of Latin America. The Miami facility also generates a near-video-on-demand movie service. Goldman explained that on-air promotion for Sky is produced in a Florida facility which is currently being expanded due to the growing demand for its services. Sky broadcast facilities in Mexico and Brazil supply on-air promotion for the local services.

Unfortunately, there are no independent figures verifying Sky LatinAmerica's subscriber rates. However, according to internal estimates, INNOVA has more than 50,000 subscribers in Mexico, and in July NetSat reported more than 38,000 subscribers in Brazil.