The Empire Strikes Again.Globo increases its media dominance by forging alliances with industry titans.
ORGANIZACOES GLOBO, BRAZIL'S LEADING MEDIA COMPANY for the past 30 years, can't rely on its old ways of doing business anymore. Gone are the days when unwritten pacts were made with military dictators to leapfrog the competition.
By the time patriarch Roberto Marinho Roberto Pisani Marinho (December 3, 1904 – August 6, 2003). Born in Rio de Janeiro, Brazil, Marinho was the president and founder of the biggest Brazilian TV channel, Globo. He came under criticism in the documentary Beyond Citizen Kane for his role at Globo. handed over control to his three sons in the mid-1990s, he had created the world's fourth-largest television network (behind NBC NBC
in full National Broadcasting Co.
Major U.S. commercial broadcasting company. It was formed in 1926 by RCA Corp., General Electric Co. (GE), and Westinghouse and was the first U.S. company to operate a broadcast network. , CBS (Cell Broadcast Service) See cell broadcast. and ABC ABC
in full American Broadcasting Co.
Major U.S. television network. It began when the expanding national radio network NBC split into the separate Red and Blue networks in 1928. ), Brazil's major radio network (Radio Globo), a leading Rio de Janeiro Rio de Janeiro, city, Brazil
Rio de Janeiro (rē`ō də zhänā`rō, Port. rē` thĭ zhənĕē`r newspaper (O Globo O Globo is a Brazilian newspaper based in Rio de Janeiro, Brazil. O Globo is the most prominent print publication in the Marinho family's Brazilian media conglomerate. Official Site
The Globo empire emerged after Marinho agreed not to criticize the policies or iron-fisted methods of the ruling military regimes (1964-1985). Now, Marinho's sons must maintain dominant market share in an era when democracy offers increasing alternatives, new technologies like the Internet are bypassing traditional foreign-investment restrictions and the battle for Brazil's media is no longer a domestic affair.
"Ten years ago, Globo was the only big fish in a very small pond," says Chris Taylor Chris Taylor or Christopher Taylor may refer to:
New York, Middle Atlantic state of the United States. It is bordered by Vermont, Massachusetts, Connecticut, and the Atlantic Ocean (E), New Jersey and Pennsylvania (S), Lakes Erie and Ontario and the Canadian province of . "Today, Globo is a much larger fish in a much bigger pond."
To maintain its grip, the fat-cat Platinum Venus, as Globo is known, is allying with strong international partners to contend with industry behemoths, such as America Online-Time Warner and ABC-Disney, which have entered Brazil in recent years. The Marinho brothers--Roberto Irineu, 52, Joao Roberto, 45, and Jose Roberto, 44--ended Globo's traditional business culture of steadfastly refusing business partnerships, starting with cable television. The trend has intensified with cellular phones and home satellite television and is breaking wide open with the World Wide Web. "Given the capital investments needed these days to build an infrastructure, one can no longer own 100% of everything," Roberto Irineu said in a past interview.
"Because media is a capital and technology-intensive sector as well as a rapidly changing one, it is now partnership-driven," adds ING Baring's Taylor.
Cable TV slugfest. When Jose Sarney, the first civilian president in 21 years, assumed the presidency in 1985, an elated Roberto Civita made his move. The president of Abril S.A., the nation's leading publishing house, immediately asked the government for a cable television concession. "It was the first time in 20 years that we had an opportunity to get in," Civita recalled in a past interview. "The military didn't want people who were critical and we had been very critical."
After a series of legal challenges, Abril's TVA TVA: see Tennessee Valley Authority. venture opened for business in 1991. Five months later, Globo launched its NET cable television operation in tandem Adv. 1. in tandem - one behind the other; "ride tandem on a bicycle built for two"; "riding horses down the path in tandem"
tandem with two local media companies called RBS RBS Royal Bank of Scotland
RBS Role Based Security
RBS Rollback Segment
RBS Rare Book School (University of Virginia)
RBS Rural Business Cooperative Service
RBS Ribosome Binding Site (genetics) and Multicanal. NET eventually captured 70% of the market.
In 1994, Globo passed up an opportunity to join Hughes Communications Hughes Communications is a publicly traded company under the stock symbol of NASDAQ: HUGH since September 2006.
Hughes Communications is wholly owned by Apollo Management.
The principal business of Hughes Communications, Inc. in its Latin American launch of DirecTV or home satellite television. After all, Globo was pummeling TVA in pay TV and apparently didn't need to invest in such a capital-intense business. The wily Civita, however, accepted the Hughes invitation in a partnership with Venezuela's Cisneros Group The Cisneros Group of Companies is one of the largest, privately held media, entertainment, telecommunications and consumer products organizations in the world. The Group owns or holds interests in companies ranging from broadcast television, networks and pay television businesses and Mexico's MVS (Multiple Virtual Storage) Introduced in 1974, the primary operating system used with IBM mainframes (the others are VM and DOS/VSE). MVS is a batch processing-oriented operating system that manages large amounts of memory and disk space. Multivision and also hammered out a $150 million alliance for TVA with Falcon Cable, Hearst Television and ABC/Capital Cities, the latter of which had only recently been purchased by Disney. The flamboyant Abril CEO (1) (Chief Executive Officer) The highest individual in command of an organization. Typically the president of the company, the CEO reports to the Chairman of the Board. announced the Disney deal at a conference for Latin American advertisers in Sao Paulo by unbuttoning his tie and shirt to reveal a T-shirt emblazoned with the image of a smiling Mickey Mouse Mickey Mouse
Famous character of Walt Disney's animated cartoons. He was introduced in Steamboat Willie (1928), the first animated cartoon with sound. Mickey was created by Disney, who also provided his high-pitched voice, and was usually drawn by the studio's head animator, .
Suddenly, the rules had changed for the once-omnipotent Globo. A wobbling wobbling Vox populi Ataxia, see there opponent was no longer on the ropes. Instead, it had two multinational superpowers behind it, forcing Globo to find its own heavy hitter heavy hitter
One that is predominant, as in influence or power: "Especially when a candidate is a challenger, appearances with heavy hitters from the party lend an air of credibility" or lose out.
Nine months later, it found one of the biggest: Rupert Murdoch and his News Corp. Globo joined forces with the Australian magnate's Latin American satellite television venture, Sky Latin America SKY Latin America refers to two closely related pay-TV providers, one based in Mexico, the other in Brazil.
The Mexican company was founded in mid-1996, a joint venture between British Sky Broadcasting (BSkyB), News Corporation, Liberty Media and Grupo Televisa. , with partners including Mexico's version of Globo, Televisa. Murdoch, who built his Fox Network into a model of established media in the United States United States, officially United States of America, republic (2005 est. pop. 295,734,000), 3,539,227 sq mi (9,166,598 sq km), North America. The United States is the world's third largest country in population and the fourth largest country in area. , was a perfect partner, possessing deep pockets and state-of-the-art technology in satellite television. It was Globo's first corporate partnership since an alliance with Time-Life three decades earlier.
Late last year, Civita conceded defeat by selling his 10% stake in the pan-regional satellite business to Hughes Communications and Venezuela's Cisneros Group for $400 million and writing an "I surrender" article in his own bimonthly bi·month·ly
1. Happening every two months.
2. Happening twice a month; semimonthly.
1. Once every two months.
2. Twice a month; semimonthly.
n. pl. business magazine, Exame. "After four years, we came to the conclusion that ... we couldn't afford the capital costs that a [direct television] venture like this demands," he wrote.
Globo dominance. With satellite television under control, the Marinho brothers sought to extend their media empire in other new technology areas. In 1997, they had been poised to win the lucrative Sao Paulo city cellular concession as part of a $1.5 billion consortium with partners Bradesco (Brazil's largest private bank) and AT&T. But they suffered a crushing defeat after BellSouth won with a bid of nearly $2.5 billion.
The consortium struck out again when it lost the next-most-lucrative cellular phone market--Rio de Janeiro. Globo would later have to settle for a 12.6% stake in the more modest markets of Minas Gerais Minas Gerais (mē`nəs zhərīs`) [Port.,=various mines], state (1996 pop. 16,660,691), 226,707 sq mi (587,171 sq km), E Brazil. The capital is Belo Horizonte. Minas Gerais continues to produce more than half of Brazil's mineral wealth. and Bahia states in a partnership with Bradesco, Telecom Italia Telecom Italia is formerly a partially state-owned Italian telco. It was once known as SIP, and it has the largest user base in Italy.
Telecom Italia also owns shares in Telecom Argentina and Telecom Personal, fixed and cellular networks in Argentina. and the Vicunha industrial group.
In 1998, Globo bought out its cable TV partners, Multicanal and RBS. It then launched Epoca magazine to challenge the nation's long-standing most popular newsmagazine, Abril's Veja. After reducing newsstand and subscription rates by 26% and 15% respectively lower than Veja's, Epoca catapulted into second place with 870,000 monthly readers compared with Veja's 1.2 million and traditionally second-place IstoE's 520,000 readers. Epoca, which accounts for some 50% of Editora Globo revenues, is already turning a modest profit, while Veja has been forced to lower its subscription rates.
Last year, Globo announced that it would create a nationwide financial daily in a joint venture with the Folha media group to challenge the dominance of Gazeta Mercantil, Brazil's largest business daily with a 90% market share. The new daily, to be called Valor valor
a rodenticide no longer marketed because of toxicity in horses causing dehydration, abdominal pain, hindlimb weakness, inappetence, fishy smell in urine. Called also N-3-pyridyl methyl N1-p-nitrophenyl urea. , is expected to begin operation in April 2000 and will include a syndicated news page from a major financial daily rumored to be the Financial Times much like The Wall Street Journal produces for Gazeta.
Juan Ocerin, a financial director of Globo's print media operations, says Globo's new publications are a result of President Fernando Henrique Cardoso's economic stabilization plan, which ended chronic double-digit inflation in 1994, boosting purchasing power Purchasing Power
1. The value of a currency expressed in terms of the amount of goods or services that one unit of money can buy. Purchasing power is important because, all else being equal, inflation decreases the amount of goods or services you'd be able to purchase.
2. , revenues and circulation rates. "Until the mid-1990s, print media was by and large a money-losing operation because of low advertising revenues," Ocerin says.
Moreover, TV Globo continues to dominate the free television market with a 57% audience share. It has used big bucks to woo away the most popular entertainers from upstart channels that have won viewers and advertisers in recent months with a steady diet of racy rac·y
adj. rac·i·er, rac·i·est
1. Having a distinctive and characteristic quality or taste.
2. Strong and sharp in flavor or odor; piquant or pungent.
3. Risqué; ribald.
4. soaps, and variety shows featuring a dominatrix quiz-show hostess and victims of physical deformities or unimaginable brutality.
In 1999, Globo signed late-night host Jo Soares, Brazil's David Letterman, from main rival SBT SBT Symplastin bleeding time with a reported salary of $137,000 a month. It pays some $82,000 a month to ex-TV Record personality Ana Maria Braga, who now hosts a program on women's fashion, cooking tips and personal advice. Luciano Huck, who created the popular dominatrix for the Bandeirantes channel, now earns an estimated $55,000 a month hosting a variety show for teen-agers. And Sergio Groisman, another ex-SBT personality, reportedly earns $55,000 a month hosting a Globo talk show for teen-agers.
In addition to these new faces, Globo's three slick nightly soap operas still account for 30% to 35% of all television revenues and $32 million annually in sales to 52 nations, including the United States. In 1995, Globo invested $120 million to build a state-of-the-art television production center just outside Rio that includes four studios with set-building and costume-making factories, a fire department, a bank and a restaurant that serves 3,000 meals daily.
Can Abril hold Internet lead? In cyberspace, curiously enough, Globo is slow off the mark again. It's now chasing Abril--who else?--and its partner Folha for a slice of the lucrative Internet business. In 1996, Globo's two media rivals created Universo Online (UOL UOL Universo Online (Brazilian internet provider)
UoL University of London
UOL Ultima on Line (multiplayer role-playing game)
UOL Unit of Learning
UOL Upper Operating Limit
UOL Underwater Object Locator ), the nation's most popular Internet provider and the world's largest non-English-language website. UOL currently has 600,000 subscribers or roughly one third of Brazil's Internet market.
But if recent history is any indication, Globo will surpass Abril once again. Last August. the Marinhos allied with industry titan Microsoft by selling it 11% of their cable-TV unit. The U.S. software giant paid $126 million for the right to offer Globocabo's one million subscribers high-speed Internet service and online video images. Microsoft will also provide the technology for e-commerce and interactive television, the latter allowing viewers to vote on how to end TV Globo's popular soap operas or receive the latest statistics on a favorite soccer player while watching a game. As a result, Forbes magazine has described Globocabo as one of the world's 20 smallest companies with the most growth potential in the 21st century.
"We form partnerships when it makes sense to do so," says Globocabo CEO Moyses Pluciennik, "And we do so not to get into a business, but to be No. 1 in that business."
The Microsoft/Globo partnership is expected to create a joint portal. While Microsoft provides technology, Hotmail (the largest free e-mail service in the world), search engines and e-commerce, Globo will furnish local news, video interviews, repackaged newspaper stories, sports, and an entertainment site with chat rooms featuring its popular soap opera stars. "UOL still has the upper hand but we have content that no one else has," says Pedro Rosa, CEO for Globo.com.
UOL CEO Cab Tulio Costa, however, sees it another way. "While Globo must always be seen as a serious competitor, UOL's advantage is that it's a universe of information, whereas Globo.com is still just a [web] site," he says.
Globo's ambitious calling. Globo has one of the largest installed networks of fiber-optic cable in Brazil that is appropriately designed for telephone service, if and when the company is allowed to offer other communications services.
In 2002, when the federal government is scheduled to give all comers the opportunity to provide telephone service, Globo is expected to form an alliance with a telecommunications giant that will introduce into Brazil such 21st-century technology as images that allow a caller to see the person with whom they are talking. There is speculation that preliminary negotiations have already begun with Embratel, Brazil's long-distance carrier owned by MCI (1) (Media Control Interface) A high-level programming interface from Microsoft and IBM for controlling multimedia devices. It provides commands and functions to open, play and close the device.
(2) (Microwave Communications Inc. WorldCom.
In an era of greater competition and choice, Globo is thriving by forging alliances with foreign and domestic corporations rather than by political muscle and going it alone. While Globo used to control a limited number of areas such as television and radio, it now has a presence in many more businesses--albeit without full control.
"The Brazilian [media] market is so huge and needs so much capital that there is room for many players," Civita said in a past interview. "This is the beginning of the age of diversity."
IS THE FORCE WITH TOLEDO?
JUST WHEN IT SEEMED THAT THE MARINHO FAMILY AND ORGANIZACOES Globo had Roberto Civita right where they wanted him, the head of Abril, Latin America's largest publishing house, has changed the game.
In February, Civita named Ophir Toledo as chief executive officer of Abril. The former president of the North American operations North American operation Surgical oncology Radical surgery of a 'frozen pelvis', consisting of radical en bloc resection of the uterus and urinary bladder. See 'Frozen pelvis.'. Cf 'All-American' and 'South American' operations. of Philips Components and Motorola in Brazil will almost undoubtedly seek to energize en·er·gize
v. en·er·gized, en·er·giz·ing, en·er·giz·es
1. To give energy to; activate or invigorate: "His childhood the more than US$1 billion (sales) publishing house's Internet strategy.
In recent years, Globo has caught Abril from behind in the pay TV business, satellite television and is now pursuing closely on the World Wide Web with partner Microsoft.
Coming straight from Philips' offices in Silicon Valley to Sao Paulo, Toledo will be keen to accelerate Abril's Internet ventures. Veja, Exame and the group's other leading titles have a presence online, but the magazine websites are not run as separate businesses and lack any e-commerce component.
The obvious vehicle for doing digital business, Universo Online (UOL), Abril's 50-50 joint venture with newspaper Folha de Sao Paulo to provide Internet service, has begun to show signs of fraying. In addition to facing growing competition from free Internet services in Brazil, UOL lost the exclusive digital content rights to Folha, which recently agreed to sell its newspaper articles to Spain's Terra Networks too.
Forming a new venture with the digital rights to Abril's publications would allow Toledo to launch a series of websites with robust content as well as to raise funds to develop the online business. To cash in on Wall Street's current love affair with Latin American Internet companies, Toledo would have to add a Spanish-language element and move very quickly.
That may sound like a tall order given that large publishing houses around the world have not been hugely successful on the Internet nor known to move quickly. As a board member of Abril, Toledo, though, has been planning his first moves as CEO since at least November 1999.
Toledo is not a novice when it comes to running a large operation. At Philips, his division had 4,000 employees and annual sales of US$1.5 billion.
With Globo bearing down on Abril, though, Toledo will need all the experience he can muster.