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MSU I. An Affirmative Action/Equal Opportunity Institution

Emma-9.1

 

TELEVISION SEGMENTATION: WILL BRAZIL
FOLLOW THE AMERICAN MODEL?

BY

Luiz Guilherme Duarte

A THESIS

Submitted to
. Michigan State University
1n partial fulfillment of the requirements
for the degree of

MASTER OF ARTS

Department of Telecommunications

1992

ABSTRACT

TELEVISION SEGMENTATION: WILL BRAZIL
FOLLOW THE AMERICAN MODEL?

BY

Luiz Guilherme Duarte

This study traced the related evolution of American and
Brazilian television marketing strategies, from mass-oriented
to segment-focused, in order to assess the context in which
the new Brazilian channels are being created. This is
estimated through industry professionals' recollection of
facts either in personal interviews or quoted in the press.
The Analysis was based on theoretical framework provided by
economist Philip Kotler and advertising men Al Ries and Jack
Trout.

The major findings are that Brazilian companies are
adOpting technologies such as UHF, STV, MMDS and DBS to
import foreign television signals to a reduced elite
audience. The recent American trend toward international co-
PIOductions and a future stability in the Brazilian economy
represent, however, a possible increase of subscription base

a .
“d more national program production.

 

Copyright by
LUI Z GUILHERME DUARTE
1992

 

A man, and his work for such matter, is the sum of his
experiences. This work is dedicated to my wife and family,
who gave me some of my most significant experiences.

 

ACKNOWLEDGEMENTS

All those who so friendly gave of their wisdom and
attention, with special appreciation to professors: Joseph
Straubhaar, Thomas Baldwin, Gilbert Williams, José Marques de

Melo, and Sebastiao Squirra.

 

TABLE OF CONTENTS

Page
PREFACE 1
CHAPTER 1 TELEVISION SEGMENTATION 5
1.1 Will Brazil follow the American example? 21
CHAPTER 2 THE ORIGINAL ENVIRONMENT 26
2.1 The beginning of the end 38
CHAPTER 3 THE BROADCASTING NETWORKS ENVIRONMENT 48
3.1 Segmentation the Latin American Way 54
3.2 Brazilian network segmentation 62
CHAPTER 4 DISTRIBUTION TECHNOLOGY SEGMENTATION 74
4.1 The ultra high expectations toward UHF 78
4.1.1 The democratization of the spectrum 83
4.1.2 The UHF handicap 88
CHALLENGE 1: Higher Operational Costs 93
CHALLENGE 2: Poorer Signal Reception 95
CHALLENGE 3: Tuning Difficulties 100
CHALLENGE 4: Bad Programming 104
CHALLENGE 5: Measurability 106
4.1.3 UHF Today 108
4.2 STV, MDS, MMDS and the like 112
4.2.1 Higher frequencies, more television 119
4.2.2 Will pay-TV work in Brazil? 121
4.3 Cable's competitive edge 128
4.3.1 Cable's legal battles in Brazil 137
4.4 Satellites: a future reflected in the skies 151
4.4.1 From TVRO to SMATV and 088 162
CHAPTER 5 PROGRAMMING SEGMENTATION 167
5.1 The new channels 179
5.2 The niche channels 183
5.2.1 Yes, We Have MTV! 184
5.2.2 Jovem Pan — Is the dream over? 200
5.2.3 Luqui — May play someday 208
5.3 The pay-TV channels 211
5.3.1 Canal+-— A troubled beginning 213
5.3.2 Yes, we also have TVA 218

5.3.3 GloboSat — Competition comes from
the sky 230

5.3.4 PluralSat-— Television's European
accent
5.3.5 TV Alpha - Bring me your elite...
CHAPTER 6 AUDIENCE SEGMENTATION
CHAPTER 7 CONCLUSION

APPENDIX
Currency Exchange

REFERENCES

vfi

Page
240
240
243
264

269
270

271

CHAPTER

TABLE

TABLE

1

2

CHAPTER

TABLE

1

CHAPTER

TABLE

TABLE

TABLE

1
2
3

CHAPTER

TABLE

TABLE

TABLE

TABLE

TABLE

TABLE

TABLE

TABLE

TABLE

TABLE

TABLE

10

11

LIST OF TABLES

The 20 largest American cable networks

American cable audience is upscale

Growth of TV sets sales in Brazil

TV stations licensed per year in Brazil

Advertising investment shares in Brazil

Patterns of Brazilian media use by social class

Systems implementation costs in America

Channel distribution for retransmission
in Brazil

Basic plan of VHF/UHF channel distribution
in Brazil

1952 channel assignment in America

U.S. TV sets versus UHF/VHF stations
(1958-1990)

Brazilian IBOPE People Meter ratings of MTV
American cable penetration increase

Cable concessions in Brazil

Satellite developments

What is seen through a parabolic antenna
in Brazil

How American dish owners cope with scrambling

vfii

Page

12

15

29

56

6O

63

77

85

86

89

102

108

129

130

154

159

161

Page
CHAPTER 5

TABLE 1 Total broadcasting hours added by new channels 168

TABLE 2 Programming evolution in Brazil and

United States 173
TABLE 3 Abril Group - Profits per area 1991 186
TABLE 4 TV Abril's equipment 187
TABLE 5 MTV in other countries 189
TABLE 6 MTV-Abril programming of all times 192
TABLE 7 MTV channels in Brazil 194
TABLE 8 Prices of TVA packages 227
TABLE 9 GloboSat subscriptions 234
TABLE 10 GloboSat's tiering 235
CHAPTER 6
TABLE 1 American cable networks per variable 244
TABLE 2 Selected statistics 246
TABLE 3 Brazilian networks' revenues - 1989 253
TABLE 4 IBOPE survey 256
TABLE 5 Marplan survey of STV audience in Brazil 259

ix

LIST OF FIGURES

CHAPTER 1
FIGURE 1 American broadcasting networks lose audience 13

FIGURE 2 American cable channels conquered 24%
of audience 13

FIGURE 3 American cable revenues rose 20 times in a

decade 14
CHAPTER 3
FIGURE 1 SBT's vice leadership ad 67
CHAPTER 4
FIGURE 1 Brazilian spectrum map 76
FIGURE 2 Signal relay through UHF in Brazil 79
CHAPTER 6
FIGURE 1 Population of Brazilian regions in 1990 247

FIGURE 2 Brazilian TV consumption per
demographic groups 250

Preface

What is the single most important marketing trend in the
television business in the last decade? Most of the dozens of
professionals interviewed for this study seem to agree that
segmentation is the keyword for any study on the television
scenario. The purpose of this study is to review the
development of television segmentation in the United States
and its influence in the Brazilian industry, which is only
recently going through a segmentation process. Many Business
Administration researchers have long identified a general
tendency of companies to move the focus of their operations
from inside themselves toward their customers. In the past,
production and selling techniques allied with product
innovations were the key to success, but the long-term
satisfaction of customers has become more important nowadays.
It is the so-called ”Marketing Concept" that works for
television just as well as it does for any other industry.
The concept's premise is that the organization that
identifies the needs/wants of a target segment of the total
consumer population and satisfies that segment more
efficiently than its competitors is more likely to succeed.
One of the world's leading authorities on marketing, American
economist Philip Kotler, laid the theoretical basis for this
trend in the 19803. He describes how ”mass marketing" has
been replaced by a more efficient "target marketing," in

which the companies segment the total set of consumers to

l

2

better attend to a specific group of them. Kotler's work can
be considered a benchmark to which most studies on market
segmentation relate, and it is repeatedly quoted throughout
this study as a source of enlightenment to the business data
presented.

Building on Kotler's theories, advertising men Al Ries and
Jack Trout have proposed some practical tactics to conquer a
position in the marketplace, which are applied to the
American and Brazilian television industries in Chapter 1. As
this study will try to indicate, these industries have gone
through the same evolutionary process just described,
starting with a mass audience and focusing their efforts on
target segments of the public, as competition increased, as
publics changed and as new signal distribution technologies
were made available. In Chapter 2, the original mass medium
is revisited, highlighting the close resemblance of the two
industries. The brief historical review of television's early
days is based on the perspective of the marketing studies
conducted by Brazilian scholar César Bolafio and is summarized
only to provide a better understanding of present
developments. Since the Brazilian environment (in social,
economic and business terms) is significantly different from
the American one, a tendency to follow the American example
has apparently been balanced with adaptations to Brazilian
laws, policies, and reduced audience acquisitive power. In
'the 19805, the regular broadcasting networks had their mass

market swept away and started to segment the market among

3

themselves. Chapter' 3 describes how new networks have
appeared in both countries with successful marketing
strategies that target smaller — but high consumption —
groups, which are very attractive to advertisers.

Most of the present relevance of this television
segmentation study comes from the creation, in the late
19803, of new channels in Brazil, based on a variety of
signal distribution technologies, including open ultra-high
frequency (UHF) channels, subscription TV (STV), multipoint
multichannel distribution systems (MMDS), direct broadcast
satellite (DB8) and cable. The UHF seems to be Brazil's
priority and, as the initial focus of this study, deserved a
more detailed analysis. The subject of Chapter 4 is the
introduction of these systems in Brazil and United States,
indicating the problems and pitfalls the American
entrepreneurs have found, which may serve as guidelines for
the Brazilian experiences. After all, access to and the use
of a certain technology constitute a form of segmenting the
market as well. Another form of television segmentation is
based on programming variations, and Chapter 5 describes the
profile of the new Brazilian companies and their programming
lineups, most of them imported.

The global flow of programs has changed a lot in the last
‘decade, however, and the imported schedules may be replaced
in the future by more international co-productions. For the
jpresent Brazilian audience of the new channels, on the other

luand, the production effort may not be necessary. As Chapter

4

6 discusses, these new channels are mostly reaching the upper
classes, which demand more internationalized programming and
are probably happy with the present imported programming.
Moreover, such elitism denotes an audience segmentation based
on social class, rather than on taste or important
demographics, as it happens in the united States. Overall,
this study‘ documents an important transition phase in
Brazilian television. It concludes that Brazilian television
has followed the American industry in the past and now has
the chance to made up for the delay in adopting new
technologies and segmentation marketing. Despite the
significant economic difficulties faced by the Brazilian
entrepreneurs, the prospective profits are high, and the new
systems are likely to increase their base to include the

middle classes and more local productions.

Chapter 1

Television Segmentation

In the communication jungle
out there, the only hope to
score big is to be selective,
to concentrate on narrow
targets, to practice
segmentation. In a word,
"positioning" (Ries & Trout,
1981, p.6).

Broadcasting. As the name suggests, television was, once,
defined simply a medium designed to readh a broad or wide
audience by casting its message in all directions. In
America, as well as in Brazil — the two countries analyzed in
this study -the costs were paid by advertisers, and every TV
set owner within a station's coverage area could freely
receive the signals. In fact, as Browne reminds us:

As advertising costs are passed along to the consumer in
the price of the product or service, obviously the
audience does pay. But presumably not all of the
audience pays equally, and certainly the audience is
less aware of paying for broadcasting in this way than

it is with annual license fees or individual
contributions (Browne, 1989, p.18).

Under this perspective, it has been said that television's
product for sale is not its programs, but its viewers.
Broadcasters sell their ability to reach the audiences to the
advertisers, who pay the production of programming that will
attract the public. To ensure that their money is well spent,

advertisers want to reach as many viewers as possible. Or,

6

using the advertising jargon, they want to have the lowest
CPM (cost per thousand) viewer in every spot aired. Adopting
Philip Kotler's terminology, it was the “mass marketing" era.
Author of PrincipleufJarketing, one of the bibles of
business administration, Kotler characterizes this seller as
a “mass-producer, mass distributor, and mass-promoter of one
product to all buyers" (Kotler, 1986). In other words,
broadcasters filled their schedules with very few program
formulas distributed in a network basis to one mass of
audience (the real product). Usually, individual consumers
become masses when there is an excess demand and, in this
case, the audience wanted television as much as the
advertisers wanted the audience. Both market demands (for
television and for audience) are further identified along
this study, according to Kotler's parameters:

Market demand for a product is the total volume that

would be bought by a defined customer group in a defined

geographical area in a defined time period in a defined

marketing environment under a defined marketing program
(Kotler, 1986, p.247).

Television programming and its respective audiences in the
Unites States and Brazil are analyzed with special attention
to the demographic, economic, technological, political and
cultural environment in which the companies develop their
strategies. For now, it is sufficient to say that the
dropping prices of mass-produced TV sets and the novelty of a
”radio with images" attracted an excess of public and

advertising demand in the early days of television (503 and

7
608). Companies would advertise anything, even specialty
products of very restricted interest, while viewers would
tolerate long sequences of commercials. Without recognizing
the similarity to early American TV, a Businesslfleek article
of 1967 comments:

The advertisers are pleased with the Brazilian
audience tolerance for long parades of commercials and
announce everything, including even heavy machineries
...; audience acceptance of programming - any

programming — is so whole—hearted that there appears to
be little need to strive for perfection (1967).

In both countries, television was born with a private
nature and supported by the dual demand of advertisers and
audience. In this early phase, entire programs could be
purchased, with the sponsor playing a major part in the
mechanics of production. And, since viewers were not very
critical about TV, little concern was placed on knowing the
audience demands. With a few years of experience, however,
the audience learned to be more selective, and broadcasters'
competition soon brought to an end the so-called “anything-
goes" years that lasted until the early and late 19605 in
America and Brazil, respectively. The decline of non-critical
viewership and the rising expectations of audiences were
first identified by the Bower Report, which compared studies
(nonducted in 1960 and 1970. The report's conclusions
.indicated that, even though people were watching and enjoying
Imare TV, their enthusiasm for it had vanished. It had become

Imore socially desirable to be against television, and survey

8

respondents' answers showed that they would rather criticize
the low-brow programming than confess their viewership.
Illustratively, 70 percent of the 1970 respondents agreed
that there were too many commercials, compared to 75 percent
that in 1960 agreed commercials were a fair price to pay for
entertainment. At that point, the successful programming
formulas of the past were copied by new entrants — the me—too
companies — but new programming formulas also caught on,
diversifying viewers. The Bower Report specifically mentions
that “TV had ceased to be primarily an entertainment center
and had become a major force in journalism as well" (Bower,
1973).

A “product-differentiated marketing" — a typical business
concept that implies a range of operational tactics,
according to the various lines of products — was introduced.
And television became not only a source of entertainment, but
also of information and education, attracting more and
different viewers. Audience tuning started to be more
carefully surveyed and differentiated according to
programming preferences. Still in search of the largest
possible share of the market, the regular surveys started to
dictate the success of progranuning in terms of prices for
advertisements — ”spots." And, even though new programming
formulas were adopted to offer variety, television broadcasts
were still trying to be everything for everyone. For the old

pioneers of this industry, like American NBC or Brazilian

9

Globo, megalomania (I would call it ”Churchill's Testfl‘) may

even be harmless. But new players, who still have to win the

competition to prove their own right for existence, certainly
cannot afford it. In the words of Ries and Trout:

Today the everybody trap may keep you afloat if you

... already own a substantial share of market. But it's

deadly if you want to build a position from nowhere
(Ries & Trout, 1981, p.76).

Ries and Trout's theory is that the media battle for the
audience's attention (mind) has reached a saturation point.
There are so many messages “bombarding" the individuals in
the viewing audience that they are not capable of
assimilating most of the messages made available today.
Individuals are bombarded not only from television, but from
newspapers, magazines, radio, billboards, conversations, etc.
The assimilation screening process, they say, tends to select
oversimplified messages informing about things one knows
nothing about (first impression) or confirming things already
known (familiar). Thus, since the screening process is so
dramatic, they defend that one should “concentrate on the
perceptions of the prospect (audience). Not the reality of
the product." Translating the theory to the television
industry, programmers should concentrate their efforts on
that small fraction of messages that is assimilated by a
specific group of the audience instead of offering all kinds

of programming for all groups within the audience. Indeed,

 

* The test is to prove whether Churchill's famous phrase—“You can fool

some for a while, but not all for all the time"—was right or wrong.

10

MTV's revolutionary programming (the first impression) or
AMC's old movies (the familiar) are examples of successful
strategies to win out in the audience's screening process.

In the early 19803, when these two advertising men
infuriated their colleagues with their no-nonsense ideas
about the new marketing challenges, television had become a
much more complex industry than it was in the early days.
Television broadcasting revealed itself as limited in its
initial concept. The narrow frequency band assigned in the
over-the-air radio spectrum restricted the number of
stations, the few programming schedules did not attend to all
public demands; hence, those too distant from a station were
simply deprived of television. Using new kinds of signal
distribution technologies, the development of other concepts
of television gradually solved most of these problems in
America. More bands of the spectrum were transferred to
television services, increasing coverage and allowing for the
creation of paid channels watched by subscribers only.

Cable systems ended the finite spectrum discourse offering
more than thirty channels of varied programming and satellite
relays put everyone at the reach of television. Today, all of
these new technologies allow, for example, the coexistence of
seven VHF (very high frequency) and eight UHF (ultra high
frequency) stations in New York City, besides 17 basic cable
channels and seven premium. services. The :multitude of
options, however, makes Churchill's Test practically

unbeatable. It is still possible to attract some viewers,

ll
some time, but not everyone all the time. Competition is much
harder when the audience has to choose among four dozen
channels. Ries and Trout explain that:
We have become an overcommunicated society Our
extravagant use of communication to solve a host of
business and social problems has so jammed our channels
that only a tiny fraction of all messages actually get

through. And not the most important ones either (Ries &
Trout, 1981, p.11).

Ries and Trout's “positioning" concept matches Kotler's
suggestion that “today's companies are moving away from mass
marketing and product-differentiated marketing toward target
marketing" in which the “seller distinguishes between market
segments, selects one or more and develops programs and
marketing mixes tailored to each one." As he puts it:

Organizations recognize that they cannot appeal to all
buyers in the markets, or at least not to all buyers in
the same way. The buyers are too numerous, widely
scattered, and varied in requirements and buying
[viewing] practices. Instead of scattering their
marketing effort ('shotgun' approach), they can focus it

on. buyers ‘who have the greatest. purchase interest
('rifle' approach) (Kotler, 1986, p.262).

Thus, while the broadcasting networks lose audiences for
their mass appeal programs, the new cable networks have been
carving out a significant corner of the market by tailoring
programs to specific segments of the nerket (See Table 1).
About 90 million households watched the American networks in
the beginning of the 19803. After only ten years, this number

fell to 64 million, a loss of 29 percent of the market (See

17

Table 1 - The 20 largest American cable networks

 

 

Network Focus Subscribers (000)
1. ESPN Sports 54,000
2. CNN News 53,200
3. Nickelodeon Children 50,000
4. MTV Music (12-34 years) 49,900
5. Nashville Country Music 49,000
6. Discovery Education 46,800
7. Lifetime Women 46,000
8. The Weather Channel Temperature, weather 41,000
9. Headline News News 40,400
10.A&E Arts, shows 36,000
11.VH-1 Music (25-45 years) 35,900
12.Financial News Economy, business 32,000
13.Black Entertainment Music, black culture 26,000
14.Learning Channel Education 18,000
15.Travel Channel Travel information 15,000
16.Consumer News(CNBC) Shopping, economy 14,000
17.Sports America Sports 8,500
18.Nostalgia Over 45 years old 8,000
19.The Comedy Channel Comedy 6,000
20.Galavision Latin public 2,000

 

Source: Cable_TV_Eact3_90 - By Cabletelevision Advertising
Bureau, Inc.

Figure 1) (1991t). Most of the lost audience was lured away
by cable television, which conquered 24 percent of the market
in the same period (See Figure 2). And, with the audience
shift, the revenues also shifted from one system to another.
Cable consultant Paul Kagan estimates that the revenues of
‘the American cable industry increased almost twenty times in

-the last decade (See Figure 3).

Total Households (millions)

90
80 90\

 

 

 

 

77 73 , 71
7'0 x
60 64
Primetime Audience
50

 

 

 

0 I I I
1 978-1979 j 1 934-1935 I 1933-1 939
1 982-1 933 1 986-1 987

Figure 1 - American broadcasting networks lose audience

Source: W - By Cabletelevision Advertising
Bureau. Inc.

         
 

Ca ble Netwo r k3

Netwo rk Stations

//

I ndepende nts g
20 96

  

liates
19 %

Percentage of total TV Households

Figure 2 — American cable channels conquered 24% of audience

Source: CablsLTILEact-rw - By Cabletelevision Advertising
Bureau, Inc.

l4

$ millions
30m)

 

 

 

HID

 

 

Figure 3 - American cable revenues rose 20 times in a decade

Source: Paul Kagan Associates, Inc. in Cable_TV_Eacts_90 - By
Cabletelevision Advertising Bureau, Inc.

Comparatively, cable advertising is still a fraction of
broadcasters' and subscriber fees remain the main financial
source of the industry. In 1990, advertisers invested about
$1.4 million on cable, against $9.4 billion on the broadcast
networks (Monush, 1992). Nevertheless, companies are
increasingly attracted by the highly qualified cable TV
audience, which presents a higher education and income, being
more likely to consume in quantity and better (See Table 2).
To understand the value of a qualified audience to
advertising supported media, it is interesting to see how a

media expert in an advertising agency works.

15

Table 2 - American cable audience is upscale

 

 

USA Cable Big Three
Annual Family Income
Above $60,000 100 125 96
$40,000 — $60,000 100 115 99
$20,000 - $40,000 100 104 101
Below $20,000 100 72 101
Education
College Graduate 100 113 102
Attended College 100 114 97
HS Graduate 100 103 102
Not HS Graduate 100 78 99
Occupation
Executive 100 130 99
Professional 100 108 98
Other employed 100 99 96
Unemployed 100 87 102

 

Source: Cable_T!_Eacts_90 - By Cabletelevision Advertising
Bureau, Inc.

Usually, when faced with the task of selecting the best
medium or group of media to carry the client's message, the
advertising professional asks two simple questions: Who is
the consumer of the product? What media are more likely to
reach this consumer with the minimum waste? Thus, instead of
television, a financial newspaper like The__WalL_S_treet
Journal is probably a better medium for the advertising of a
new, complex financial calculator. Among the hundreds or
millions of television viewers, only a few would be
interested or could afford the calculator and the investment
would be dispersed. On the other hand, most of the Wall

Street readers constitute prospective consumers of this

16

product and the focusing pays off. If the product were mainly
consumed by housewives, like a liquid detergent, the
situation is reversed. Matching the product's consumer
profile to the media's audience characteristics may look like
a simple exercise of common sense, but there are various
theories behind it. Overall, the theories indicate that
advertising is more effective when targeted at individuals
whose problems or needs can be solved by the product. In the
book ConsumeLBehavior, Schiffman and Kanuk explain that:
Marketers do not create needs, though in some
instances they make consumers more keenly aware of
unfelt needs. Successful marketers define their markets
[and their media] in terms of the needs they are trying

to satisfy, rather than in terms of the products they
sell (Schiffman & Kanuk, 1991, p.68).

In the past, each and every medium was a mass medium. There
were fewer important newspapers, magazines, radio and
television stations competing in the market, and all of them
enjoyed large readership/viewership. So the media
professionals would choose the medium for an advertising
campaign according to its intrinsic characteristics and the
demands of the product: radio favored services and other
conceptual products instead of visual ones, television was
better able to demonstrate the use of the product, and the
printed medium's advantage was its permanent character;
details could be listed that consumers could consult whenever
desired. But as advertisement waste became a concern, each

medium was subdivided according to identifiable market

17

segments. Today, there are hundreds of magazines segmented by
readers' interest (cars, computers, sailing, etc.),
newspapers segmented by geographical focus (local, state,
national), and FM radio stations segmented by music genres
(rock, classic, country, etc.). Television followed this
trend more recently, with ethnic channels and, later, cable
networks focused on cartoons, movies, news, music, etc. The
segmentation has allowed advertisers to reduce wasting
efforts by reaching more people than the ones that may
actually consume the products. Segmentation was the key to
the coexistence of many more players in the market, a fact
that is only possible because they do not necessarily compete
for the same theoretical consumer/audience.

Instead of going after a small share of a large market,
which would hardly be enough to support their expensive
operations, the American cable networks pursued a large share
of a small market. According to Kotler, they practice
“concentrated marketing." Their greater knowledge of the
segment's needs bring economies of specialization in
production, distribution and promotion. Hence, while
Nickelodeon cable network may be the best choice to advertise
products for children, ESPN is more suitable to sports
merchandise, and so on. The risks, warns Kotler, are the
entrance of strong competitors or the possibility that
segment may turn ”sour." The Comedy Channel and Ra, for

example, competed in the comedy segment until the market

18

proved to be too small for two companies, and they were
forced to merge.

The avoidance or reduction of risks requires a careful
segmentation analysis that takes into consideration the size
and profitability of the market (substantiality) — assuming
they can be measured (measurability) — to design programs
(actionability) to reach these people (accessibility). The
segments are then defined by combining geographic,
demographic, psychographic and behavioristic variables. In
the United States, age (demographic) variables, for instance,
can be recognized as one of the most important variables in
marketing segmentation. Researchers have identified that
consumers between 18 and 40 years old, followed by teenagers,
are the ones with the most money and willingness to consume.
In the television industry, this explains why advertisers pay
more for shows that have this audience, even though the
ratings may be lower (Zoglin, 1990). ‘

Today, the advertising demand is for a quality audience,
not quantity anymore. A show once had to attract about 30
percent of the total viewers to be considered a success. But
as the audience got more fragmented, a program can stay alive
if it is watched by as little as 21 percent of the audience
(Sanoff, 1985). And this fight for quality audience instead
of mass audience is not restricted to segmented channels. The
broadcasting networks were once said to have lost the
qualified audience to the new technologies, keeping only the

masses who cannot afford other systems and who are

l9

uninteresting to the advertisers. Nevertheless, broadcasting
networks too have looked for the audience that can bring more
advertising dollars. The new Fox broadcasting network has
conquered audience and advertisers, programming exactly for
the economically attractive younger public.

As cable television reached 60.3 percent of American TV
homes in 1991, the broadcasting networks remain the only
option for many people, but significant changes have been
undergone in the Big Three -- NBC, CBS, and ABC (Monush,
1992). Still operating in several segments of the market, the
Big Three have designed separate programming offers for each
segment, “hoping for greater repeat viewership because the
offer matches the demand rather than the other way around."
The practice of Kotler's “differentiated marketing" can
strengthen viewers' overall identification of the channel
with the programming, the most important element in
conquering the audience. A 1983 article at Atlantic magazine
explained “why the networks will survive cable":

The way the programs reach the audience or the
quantity of signals reaching it is not as important as
the quality of the programming. Without different ideas
for programming to fill the new channels, even the new
technologies will be in trouble. And if the programming

on the paid systems is not really different from the
free TV, the networks win (Mink, 1983).

The strategy, however, brings an inevitable increase in the
cost of doing business (more production, administration and
promotion expenses), which the broadcasters have coped with

in many different ways. At first, the networks tried to

20

combat cable by offering similar programming, especially
movies. In 1985, a record 110 original made-for-TV movies
were scheduled by the networks (Sanoff, 1985). The expenses
were high and the results were very poor until the networks
realized ‘that. cable's ‘weakness ‘was actually ‘their high

reliance on movies. The same Atlantic article explains:

There are not enough good movies to be shown and they
are forced to repeat the same movie many times. Even
different channels play the same movies around the same
period. Subscribers are frustrated and cancel the pay
channels To distinguish from one another, pay
channels are producing movie-like programs, cheaper than
theatrical features, but more expensive than made-for-
TV. But the more unknown productions they add, the
harder it is for the viewer to differentiate them from
the free programs produced by the networks (Mink, 1983).

Another adaptation has been to look for ways to reduce
programming costs. One of the most praised programs recently
created is “America's Funniest Videos," which portrays
viewers' amateur video productions with little or no cost to
the network. Reality shows, like “Cops” and co-productions
with overseas broadcasters are also examples of cheaper
productions. More commonly, networks are airing more live
programming and series that air more than once a week
(Zoglin, 1990). However, while management is still trying to
invent ways of reducing the cost of what they are doing, a
sharp distinction between the networks is still hardly
discernible. Except by Fox's strategy to go after the baby-
boomers, this author's foreign eyes fail to recognize a more

elaborate segmentation among the broadcasting networks. In

21

sports, for example, they have had difficulties competing for
programming with cable's deep pockets. The 1992 Olympic Games
transmission on a Triplecast pay-per-view basis by NBC may be
considered a sign that the network acknowledges the higher
profitability of cable systems. If asked, most Americans
would probably identify the networks in terms of their local
newscast or situation comedies (sitcoms), and a scholar could
as well define the networks' market niche in terms of these

program formulas.

1.1 will Brazil follow the American example?

“We may assume from the start that no two broadcast systems
are absolutely alike," said Browne in the introduction of his
book, comparing broadcast systems (Browne, 1989). But it is
precisely from the similarities to the American experiences
that this study tries to extract some benchmarks for the
analysis of the present segmentation trend in Brazilian
television. Only eight years separate the initial commercial
operations of television stations in the United States and
Brazil. Since then, the South American country has closely
followed the development of the North American television
industry. Most of Brazil's equipment and programming have
been imported from the United States and an agreement with
Time-Life even brought to Brazil the American management

system.

22

The developmental phases are also comparable. Most scholars
in both countries recognize how television, born an elite's
toy, quickly conquered the masses, technologically expanding
to trespass national borders. In mm_Perfil_da_TV_Brasileira,
Sergio Mattos describes four phases in the Brazilian
television: the elitist (between 1950 and 1964), the populist
phase (1964-1975), the technological development phase (1975-
1985) and the transition and international expansion phase
(1985-1990) (Mattos, 1990). Following the marketing analysis
proposed before, this study suggests that after the elitist
phase, in which only the elite had TV sets, came a mass
marketing phase, in which Globo TV imported the American
strategies and adapted them to a national version until the
end of the military regime in the late 19703.

With government support, the national telecommunications
networks were strongly developed in this phase, and Globo's
virtual monopoly allowed for the creation of a powerful
national production center that now exports to more than a
hundred countries around the world. The new Brazilian civil
republic marked a third phase, one in which television's role
as the regime's banner was softened by the creation of new
networks and the appearance of some incipient alternative
distribution systems. It is the present phase of market
segmentation, where most networks positioned themselves
around the programming strengths of the dominant network, TV
Globo, using unconventional time slots to reach specific

audience niches.

23

New players also entered the market, offering focused
programming through additional advertising supported UHF
(ultra high frequency) channels or pay—TV systems, like
subscription television (STV), cable systems, multichannel
multipoint distribution systems (MMDS) and direct satellite
broadcasting (DBS). Several different factors are leading
Brazilian television toward target marketing. First, among
the new entrants in the industry are old communication
conglomerates, barred from television by the government, due
to their traditional opposition standpoint. These groups have
not only contributed with significant new capital, but have
put their lobbying power to accelerate and concentrate a
political basis for the regulation of new television
services.

Comparatively, the new Brazilian TV entrants have been
doing what cable operators did for American television,
imposing the demands of the market over a government wary
about multiplying media for opposing message makers. When
comparing the United States with a Third World country, the
economic inferiority of the latter is usually a major
concern. But the delay of almost one decade for new signal
distribution systems was more certainly caused by a
government policy than by real economic difficulties. The
approximate $1.4 billion that TV advertisements made in
Brazil in 1989 — about 70 percent of the national advertising
investment — makes Brazil the tenth largest advertising

market in the world (1990h).

24

This number is surpassed only by USA, Japan, United
Kingdom, Italy, Spain, France, Germany, Australia and Canada.
The Brazilian television profits are twice that of Colombia,
which is ranked second in Latin America. And Brazilian
profits are higher than the sum of profits in Portugal,
Belgium, Greece and Netherlands (Hoineff, 1991). Moreover, if
the economy were to be blamed for the delayed introduction of
cabLe and other pay-TV systems, how would one explain the
paradox that the recent debut of these systems have occurred
amidst one of the worst recessions that ever hit the country?

Second, the TV production technology available today in the
international market has evolved to provide quality video at
cheaper' costs. The ‘technologyy as Chapter' Four further
argues, made it easier for Brazilian companies to produce
their own programming or to buy them from local independent
producers, which turns the fulfillment of more channels into
a feasible and less expensive task. American television could
not count on the same cheap and improved technology in the
beginning of its segmentation drive, but the larger size of
the U.S. market and their well developed cinema industry
compensated for it. Many of the American segmented (cable)
channels have invested in the creation of new programming and
networks, which presently provide the bulk of the schedule
for the new Brazilian channels that await the amortization of
the initial investments to increase or start national

production.

25

Third and most important, Brazilian advertisers have grown
more interested in narrowing the target of commercials as the
percentage of the population with significant acquisitive
power has been consistently reduced in the last years due to
the severe economic recession in the country. Thus, once
again, Brazilian television seems to follow the trends of its
American counterpart.

The similarities and differences between the two
experiences are going to be studied in the next chapters.
Some elements are already expected to be revealed. The uneven
distribution of the wealth in Brazil is likely to impede a
significant absorption of expensive distribution technologies
(pay—TV) by the society; at least at comparable levels. The
network segmentation process also happens in an industry that
is still practically monopolized by TV Globo, a nimble
company capable of buying out any competitor's successful
programming. The smaller size of the other television
companies makes it difficult for them to produce quality
programming' and, if ‘the 'target. market. is focused, the
audience share may not initially pay off, requiring deep
pockets or imported alternatives. Therefore, some of the
questions to which this study will try to respond are whether
there is a market to sustain cable, STV and DBS in Brazil;
how the networks are positioning themselves; and how the new
niche channels have imported or produced programs to attend

to their specific audiences.

Chapter 2

The Original Environment

The end of the product era
came with an avalanche of me-
too products that descended on
the market (Ries & Trout,
1981, p.27).

Experimental operations of television stations in the
United States date back to 1928, but the challenges to take
television from the laboratories to the market were first
faced by the initial ten commercial stations legally
authorized to start operations on May 1942 (Yuster, 1992). In
general marketing terms, the new-born industry followed its
broadcasting predecessor — the radio — to implement
strategies to increase consumers/advertisers' demand and to
cope with the marketing environment. A new breed of
professionals had to be recruited; since the TV device was
new, additional accessory equipment had to be developed;
while programs had to be created and produced to conquer
audiences and advertisers. Along the years, broadcasters also
had their business either restricted or boosted by government
policies concerned with the value of the medium as a
political tool and with a rather fuzzy "consumer interest,
convenience and necessity."

The Westinghouse company and other television manufacturers
produced programs as a service to attract consumers. The

objective, Hoineff says, was to sell receivers 1x) the

26

27

audience and not the audience to the advertisers, which
generated the concept of free programming (Hoineff, 1991).

Nevertheless, television's marketing efforts to grow from
an elite's toy to a real consumer product and a mass medium
only gained impulse after 1952. Just six of the initial ten
stations continued operations throughout World War II and, in
1948, new’ concessions were frozen due to the obvious
incapacity of the very high frequency (VHF) waves to cover
the whole country. There were about 108 stations in America
then and, until the government decided upon new engineering
standards and channel assignments, the industry was too
fragile to pursue any long-term coherent marketing strategy.
Thus, without disregarding the importance of these early
experiences, it may be interesting to note that the Brazilian
television industry has a business history almost as old as
America's.

When newspaper entrepreneur Assis Chateaubriand opened the
first station in Sao Paulo on September 18, 1950, he
initiated an industry whose development across the years has
closely resembled the American one. Similarly, both
industries started with a private commercial nature a long
time before any regulation had been conceived to determine
their operation parameters. The first year of the pioneer TV
station Tupi-Difusora was illustratively financed by four
advertisers: Sul America (Insurance), Antarctica (Beverages),
Iaminagao Pignatari (Metallurgy) and Moinho Santista (Food)

(Mattos, 1990).

28

Until approximately the mid—19503, however, most Brazilian
scholars (such as Caparelli and Mattos) seem to agree that
television lived an experimental elitist phase as had
happened in America before the war. According to Sérgio
Mattos, the main problem was difficult access to TV sets:
“television was a luxury toy in its first two years. A TV set
cost three times more than the most sophisticated radio
available and just a little bit less than a car." (See Table
1) In the beginning, he says, there were fewer than 200 TV
sets in the country, and Chateaubriand installed some sets in
public parks to allow the general public to watch the
programs. As depicted in the movie “Bye Bye Brasil," this
practice remains common in some of the most distant and poor
communities of the Northeast region of Brazil.

But the marketing environments were different and the
Brazilian growth occurred in an accelerated time frame. In
1951 the production of TV sets in Brazil started with the
Invictus brand, allowing a significant reception of the first
soap opera in that same year (”Sua vida me pertence," by
Walter Foster, from 12/21/51 to 2/15/52) (Fernandes, 1982).
Instead of the depression of war that was experienced by the
first American TV stations, Brazilians were living in a
prosperous period, as the coffee farmers of Sao Paulo
promoted industrialization and urbanism with their excellent
revenues and the help of well-trained labor, represented by

European immigrants.

29
Table 1 — Growth of TV sets sales in Brazil

 

 

Year B&W Sold Color Sold B&W+Color in Use
1951 3,500 - 3,500
1952 7,500 - 11,000
1953 10,000 - 21,000
1954 13,000 - 34,000
1955 40,000 - 74,000
1956 67,000 - 141,000
1957 81,000 — 222,000
1958 122,000 - 344,000
1959 90,000 - 434,000
1960 164,000 - 598,000
1961 200,000 - 763,000
1962 269,000 - 1,056,000
1965 370,000 — 1,993,000
1970 816,000 - 4,584,000
1972 1,109,000 68,000 6,250,000
1975 1,184,000 532,000 10,127,000
1979 1,591,000 1,074,000 16,737,000
1980 - - 18,300,000
1986 - - 26,500,000
1989 - - 28,000,000

 

Source: Abinee (Associagao Brasileira das Empresas de Eletro-
EletrOnica). Reproduced from Bolafio, César. Mercado
BrasileirsLneJelexisao. Sergipe, UFS, 1988.

A middle-class consumer market was in formation and the
many American companies in Brazil knew, from their previous
experiences in the United States, the value of television for
advertising to this group. Through their advertising
agencies, advertisers (especially in“; large nmltinational
corporations) supported the production of programs for the
mass audiences, besides the importation of American shows to
fulfill schedules. A study of the Brazilian television market

by Cesar Bolafio indicates that in 1952 TV Tupi/Difusora

30

already surpassed the revenues of any radio station in 350
Paulo State and, in 1956, the total of television stations in
Sao Paulo had revenues as high as the 13 largest radio
stations in the State (Bolafio, 1988).

By the end of the 19503, there were ten stations already in
operation in Brazil and Chateaubriand's Diarios Associados
Group was the leader of the small oligopolistic industry. But
while American TV drew most of its expertise from the
powerful cinema industry, which also came to guarantee a
steady provision of programming, Brazilian TV had to
establish its own production centers. As the national cinema
industry was dying under the American distributors'
aggressive strategies, TV in Brazil grew under the influence
of an already established radio industry, absorbing its
structure, programming' and even. its professionals. The
present consequences of this initial developmental difference
will be commented upon in Chapter 5. Throughout the 19503 and
19603, high production costs put American and Brazilian
broadcasters in the hands of the advertisers, who determined
the programs to be produced and transmitted, besides directly
hiring artists and producers. Characteristically, the
programs were identified by the sponsor's name, such as the
famous “Repérter Esso," a news bulletin created in 1952 by
Tupi/Rio station following the mode of another successful
radio bulletin (Nogueira, 1988).

The reduction of the price of TV sets increased the

penetration of television and the flow of advertising,

3]

allowing for the introduction of what many studies indicate
as the first real mass-targeted service. TV Excelsior entered
the market in 1960 with capital from Simonsen Group, which
was connected to coffee exportation; it had the concession
for Paranagua Port and owned Panair Brasil. Excelsior imposed
an aggressive strategy, stressing modern equipment and hiring
the best professionals in the market with high salaries. Its
programming strategy was based on two lines: the shows
produced in Rio de Janeiro would attract the audience, and
the soaps produced in Sao Paulo would retain that audience.
Excelsior was also innovative by nerketing its programming
and artists as a differentiated product. In Rio_e_Exoelsiori
Projeroa_fixacassados, Alcir Henrique ck: Costa states that
Globo's programming and much of the present national
programming formulas were first elaborated by Excelsior
(Costa, 1986, p.123-66). Its parent company, however, faced
difficulties under the post-1964 regime, and Excelsior lost
financial support, closing in 1970.

Brazilian expansion in this phase was more geographical
than economical or corporative. The barriers to entry the
industry were limited to the possibility of obtaining a
concession to install a station, and at least one company in
most major urban areas was granted a permit by the end of the
19603. Significant difficulties to enter the television
industry would only come later with Globo's virtual monopoly.

As Litman explains:

32

The greater the difficulty of new firms in entering an
industry as significant competitive forces, the higher
are the “barriers," and the greater the tendency for
current firms to maintain high profit-maximizing prices
with accompanying excess profits and nusallocation of
society's scarce resources (Litman, 1991, p.11).

Technological advancements and new legislation also favored
the definitive establishment of mass television in Brazil.
The Brazilian Telecommunications Code (CBT), approved by the
National Congress on August 27, 1962, gave more guarantees to
the stations and diminished prohibitions. It was an advance
in the juridical definition of the concessions, keeping pace
with technology developments, but it still reserved to the
Executive the power to decide about the concessions. And in
1963, live television was regulated, while TV Rio and many
other small stations had their survival assisted by the
arrival. of ‘videotape technology, which facilitated the
acquisition of more economical foreign productions, whose
production costs had already been amortized in the original
country (Vampré, 1979). The whole industry, however, had a
regional character, with a commercialization structure and
programming strategies that did not attend to the needs of
advertisers, who wanted a national audience. As Browne says:

Large nations might be expected to favor the
development of regional and/or local services,
particularly if there is an uneven distribution of the
population. The Unite States, Canada, Australia and
Brazil all seemed fairly indifferent to the development
of national systems during the early years of
broadcasting in their countries, although by late 19203

the United States had developed a clear channel system
of frequency allocation that would bring at least a few

 

 

33

stations to even the most geographically isolated
listeners during nighttime (Browne, 1989, p.4).

The marketing environment in which the Brazilian networks
were created started to be defined, though, only after 1964.
Without the creation of a national telecommunication
infrastructure and the deep economical changes promoted by
the military regime instituted in that year, mass television
would probably have remained restricted to very few cities.
Browne comments:

The more uneven the distribution, the harder for a
large country to furnish a universal broadcast service,
unless there is a commitment to some form of national
service, as United States, Canada, Australia and, much

later, Brazil, all eventually realized (Browne, 1989,
p.6).

The drive to implement a national communication
infrastructure would only be supported by a governmental
policy more concerned about the integration of the country
and ideologies than with commercial reasons. In terms of a
consumer market, the advertisers would be expected to only
target the audience that can participate in the consumption
proposed by the mass media and advertising industries. Since
expansion and investment is not necessarily compensated by a
larger or more affluent audience, the coverage of areas away
from the large urban centers would probably be economically
negative to broadcasters. In ideological and institutional
terms, on the other hand, a general mass audience would make

more sense, and the military governments assumed the task of

*r

34

building the National Telecommunication System and a Mass
Cultural Industry.

In 1968, Embratel (Empresa Brasileira de Telefonia) — a.
mixed capital company created three years before to control
the long-distance telecommunications — premiered the National
Microwave iNetwork; and. the satellite ‘transmissions that
brought to Brazil the image of the man on the moon. On
September 1, 1969, “Jornal Nacional," the first program
transmdtted in national simulcast chain, marked the beginning
of network television in Brazil, followed in 1972 by the
first color broadcasting. After 15 years of existence, the
original TV stations in Sao Paulo and Rio de Janeiro became
production centers, distributing their programming to other
stations across the country.

New regulatory agencies, like the Ministry of
Communications created in 1967, reduced the interference of
private organizations and reinforced the official influence
on the Brazilian media in general. Decree 236, of February
28, 1967, changed CBT, excluding foreign control of
telecommunication companies and limiting to ten (five VHF and
five UHF) the number of stations one could own in the country
(Melo, 1985). In many aspects, the Brazilian military adopted
most of the American legislation. Likewise, a concession
period of ten years for radio and 15 years for television
(could be renewed for equal successive periods, as long as the

.lieensees “complied with all legal and contractual duties,

1|:

35

maintaining the same technical, financial and moral
characteristics."

Contrastingly, the President would give concessions after
hearing the National Telecommunications Council and would
also play the role of censor, defining the messages that
could be transmitted. Until the 1988 Constitution, no major
change was made in such laws, except for the restrictions
that were imposed with Institutional Act 5, between 1968 and
1979. During the government of Emilio Garrastazu Medici
(1969-1974), a National Security Law allowed the Executive
the right to censor and stimulate auto-censorship to avoid
prosecution. The existing concessions were threatened with
cancelation and the new ones were restricted to groups that
supported the government (Melo, 1985).

But the heavy State influence on Brazilian TV has actually
extrapolated the legal and technical grounds. Its direct and
indirect participation in the advertising revenues has also
been significant. Even in 1982, LEDA (Levantamentos
EconOmicos de Dados de Anunciantes) data indicated that the
federal government was responsible for more than half of the
advertising investments in television, which totaled 5.7
percent of the Cr$ 34.7 billion invested in advertising in
that year (LEDA, 1983). Mattos further indicates that the
close relationship between banks and government made
broadcasters' financing strategies subject to political
control. And since they also depend on government licenses

and subsidies to import equipment, says Mattos, most

36

companies have aligned their interests to that of the State
(Mattos, 1990).

Indirectly, the promotion after 1964 of a quick
industrialization process centered in large cities benefited
television. In contrast to the American drive to the suburbs,
which greatly enticed the development of alternative
distribution systems like cable TV, the Brazilian mass
audience was getting more and more concentrated in a few
large metropolitan areas. This increased the penetration of
electronic media, while at the same time artificially
allowing the capital accumulation necessary to make the
audience more upscale.

With the establishment of direct credit to the consumers in
1968, this audience was allowed to consume more, including
more TV sets, whose sales increased 48 percent in comparison
to the previous year (Sodré, 1981). Advertisers, advertising
agencies and broadcasters were quick to turn the advantages
into profits, putting Brazilian TV in fourth place (after
USA, Japan and England) in percent participation of total
advertising investment. The establishment of the national
networks put broadcasters in a better position to negotiate.
The time slots had their value raised and advertisers lost
-their control of the whole program. Since TV penetration was
also higher, advertisers, on the other hand, enjoyed a
reduced cost per thousand viewers. Large multinationals in
ther sectors of luxury products, commerce and banks were the

nmnat attracted to television. According to Veja magazine, in

37

1969 about 16 of the 24 soaps produced had the sponsorship of
multinational companies like Gessy—Lever, Colgate-Palmolive
and Kolynos-Van Ess (1969a). The advertising agencies, as
their token, had a 20 percent commission of broadcasting
charges guaranteed in 1966 by decree number 57.690. According
to Bolafio, the Brazilian market has grown in interest by the
international agencies:

The 703 were years of many changes in the advertising
industry, including the lowest participation of the
large multinational agencies since the 503, their
golden age in the country. In the 803, this trend is
reverted in favor of the national agencies, indicating

that the barriers to entry previously established were
very weak (Bolafio, 1988, p.41).

Taking full advantage of this favorable environment, TV
Globo (another creation of the 1964 military movement)
revolutionized the market, exerting in many perspectives a
practical monopoly. With the financial and technical support
of the American Time/Life Group, Globo transferred and
adapted American know-how in the areas of administration,
production and programming. It introduced new conunercial
practices — sponsorships, vignettes, breaks, etc. - that
developed the market from a radio-like one (Furtado, 1988).
Herbert Fifiza, member of the first Globo crew, declared:
"Globo was inspired in an Indianapolis station, WFBM. And the
engineer from that station was the one that installed it all,
because we didn't know anything" (Filho, 1976)]. Between 1965
and 1970, the barriers to entry created by the stations of

the first phase were gradually destroyed by Globo, which

38

started to adopt a strategy of consolidation of its own
barriers after 1970. According to Litman, "structural
barriers may take many forms: economies of scale, absolute
costs, product differentiation, barriers to exit and
government rules, regulations and favors" (Litman, 1991,
p.11); and Globo took advantage of all of them.

In the 19703, the stability of the television market and
the economic growth of the country allowed the survival of
the smaller channels, aimed at audiences with lower
acquisitive power, and whose programming included all the
low-brow programs Globo discarded in the process of defining
its quality standard. In the 19803, the competition pattern
changed again and it was possible to see the beginning of the
end for the mass marketing environment and the total

dominance of Globo (Bolafio, 1988).

2.1 The beginning of the end

Before the second half of the 19503, says Nelson Hoineff,
the network system had already been consolidated in the
‘United States, being' copied. by (other countries, while
independent stations were disappearing (Hoineff, 1991). The
JJLULrBroadcastingrlearonk reported aux 18.1 percent gross
profit before taxes for the typical VHF station. And almost
40 percent of the total income went to the Big Three
brruadcasting networks (NBC, CBS and ABC). About 15

advertisers provided one third of this income, and the

39

concentration of products of general, rather than specific
interest, encouraged TV to have the broad, widest possible
audience appeal (Schramm & Alexander, 1973).

Until 1976/77, however, there were only two TV networks in
Brazil: Globo and the pioneer Tupi. The giants of previous
years — Excelsior and Record — posed no threat anymore. The
first was closed in 1970, and Record lost its network, being
restricted to a regional group of three stations in Sao Paulo
State (Bolafio, 1988). TV Bandeirantes had appeared in 350
Paulo in 1967, appealing to an elite audience, but a fire in
its studios two years later forced it to use cheap foreign
films to stay in business. In 1977, Bandeirantes opened
another station in Rio de Janeiro — TV Guanabara — initiating
a third network.

On July 14, 1980, Tupi's stations were dispossessed by the
government, in payment of the company's debts, and the
concession was canceled. Two days later, president Joao
Figueiredo closed seven of Tupi's stations and on July 23,
opened the former Tupi licenses for applications for two new
networks (a total of nine stations were distributed,
including two other ones). SBT (Sistema Brasileiro de
Televisao), which started in 1974 with TV Studios of Rio de
Janeiro and had already acquired some of Record's stations,
was one of the winners, initiating operations in the same
year. The old, traditional Bloch Publishing Group initiated

TV Manchete in 1983.

40

Thus, the Brazilian market entered 1991 with 229 stations
grouped in four national private networks - Globo (78), SBT
(45), Manchete (38) and Bandeirantes (32) — two regional
networks (Record/SP in“! Brasil Sul/RS), the State network
Educativa (21), and 15 independent stations (Melo, 1992). In
1992, the popularesque OM network, the first to start outside
the Rio-Sao Paulo circuit initiated operations with 10
stations. Based on low-brow programming such as theatre—like
shows and Latin soap Operas, the network of the Martinez
family, who has been accused of receiving government funds in
return for the support of Collor presidency campaign, reaches
the whole country with signals generated from Curitiba
(Parana state). In his book Mercado_Brasileiro_de_Teleyisao,
César Bolafio reviews the marketing history of the four large

national networks, which are briefly summarized here:

Globo

The negotiations between Roberto Marinho, owner of Q_GlQhQ
newspaper in Rio de Janeiro and the American Time/Life Group
(now Time/Warner), started in 1962, but the first station
only came up in 1965 in Rio, followed by another in Sao Paulo
in the next year. The importance of this contract was the
flow of capital necessary to implement a competitive system -
around $5 million — and also the technical orientation. A
Brazilian Congressional investigation determined that

Time/Life not only technically assisted Globo, but actually

4|

managed and controlled all its assets, which was illegal. A
nationalization process was demanded in 1969 and, two years
later, Globo was declared to have paid all its debt to the
American partner. According to Bolafio's interpretation, Globo
succeeded because, besides Time/Life, there was national
capital to be invested in this area and the political
conditions were favorable. There was no interest by the
government in treating Globo the same way as Excelsior.
Globo's barriers to entry after 1970 were based on the
adoption of a high standard of quality (the so called Globo
Quality Standard), national network programming and a new
commercialization system.

Due to the legal ownership limit of five stations in
Brazil, Globo expanded with the inclusion of several
affiliates. The affiliation contracts determined that Globo
would furnish the programing for free, requiring only the
maintenance of its quality standard. The national slots'
revenues would be equally shared and the local ones were
exclusive to the affiliates. In 1975, Globo's revenues were
estimated at $230 million, or 0.35 percent of the Brazilian
gross national product. About 85 percent of the revenues came
from the commercialization of primetime slots, which enjoyed
a captive audience around the evening soap operas. The high
quality standard and the general appeal of the soaps allowed
an impressive external expansion. The first Globo production
to reach the international market was the soap ”0 Bem Amado"

of 1976, which was sold to 17 countries in Latin America. In

42

1977 “Gabriela” was exported to Portugal and to the
Portuguese-speaking African countries. Throughout the 19803,
the number of countries buying Brazilian productions doubled

from 50 to more than 100 (Melo, 1988).

SBT

Until 1974, Silvio Santos was the host of a popular variety
show aired by Globo, mixing ”The Wheel of Fortune" and other
American game shows with singer presentations and other
typically Brazilian radio-type shows. In that year, he
managed to open TV Studios station in Rio de Janeiro, while
at the same time transferring ”The Silvio Santos Show" to the
competitor Tupi Network. In the following year, he acquired
some of Record's stations and Santos' show started to be
illegally aired in Sao Paulo simultaneously by Tupi and
Record. Initially, his Sunday show was the only valuable
programming of the incipient group of stations and there was
not a strong effort to compete. Repetition of the same movie
at different times of the day was done to create the tuning
habit. In 1977, the production of the show was expanded to
other genres, like soap operas, which also started to be sold
to stations in other states. Working as a producer—
syndicator-broadcaster, much as Fox has been doing more
recently in the United States (Head & Sterling, 1990), Silvio
Santos Group even resold American movies purchased with

nationwide exhibition rights (Bolafio, 1988).

43

In this manner, the new affiliated stations were not buying
the packaged programming of a leader station, but individual
programs. And instead of adopting Globo's strategy of
exchanging programming for advertising slots, TVS worked as a
distributor, receiving payments in cash. When the government
finally licensed Silvio Santos to operate some of the Tupi
stations and launch the Sistema Brasileiro de Televisao
(SBT), he had already operated for six months an informal
network based on a central and independent production unit
and the commercial representation of the affiliates to the
national advertisers located in Rio and Sao Paulo. The
network quickly became the second in the ratings and, in
August 1982, it surpassed Globo in Sao Paulo during the
afternoons — something that had never occurred before. Since
then, SBT has introduced romantic, traditional Mexican style
soaps, importing many of them and producing others at low
cost. Using low-brow, poorly produced programs aimed at the
lower classes, SBT had a good performance in the early 19803,
even though the buying power of the lower classes had been
drastically reduced. Indeed, the ratings success of SBT was
not followed by an advertising success, since the audience
had a lower buying power and the hideous character of the
programs was incompatible with the advertisers' public image.

In Bolafio's interpretation, SBT's success can be attributed
to their use of a leading product, ”The Silvio Santos Show,"
and to a vertical integration of the Group's companies that

cross-subsidized the network by advertising to prospective

44

consumers, whose profile coincided with the network's
audience. In 1983, SBT initiated some changes to convince the
advertisers that its target audience also consumed. The
argument was that the socio-economic segmentation did not
consider the people with little education (an aspect over-
emphasized by ABA/ABIPEME), but high acquisitive power. New
programming was added, like journalism and sports, and the
old formulas of the shows suffered significant changes. In
1985, the illegal situation in 350 Paulo was settled with the
sale of Record's shares to the newspaper Jornal_dQ_Brasil of

Rio de Janeiro.

Bandeirantes

As a participant in the elaboration of the Excelsior
network, the founder of Bandeirantes, Joao Saad, always
aspired to carry on its magnificent project. London BBC
served as a model of infrastructure for Bandeirantes and the
most modern concepts of television were studied in different
parts of the world. But after the fire in 1969, the Sao Paulo
station that had opened two years before became a simple
exhibitor of imported movies and other cheap programs. There
was no prospect of competing for audiences, but Bandeirantes
enjoyed a positive public image in the 19703 as an
alternative TV station programmed to nesculine audiences of
the upper classes at night. At that time, the movie

programming was enhanced by music shows and a more analytic

45

journalism than Globo's. Press companies like Jornal do
Brasil, Abril, and Gazeta Mercantil produced programs for
Bandeirantes under" operational. agreements. Inn 1977, the
opening of TV Guanabara in Rio de Janeiro marked the
beginning of the creation of a national network that would
compete with Globo. However, instead of going after programs
and audiences discarded by Globo, as SBT did, Bandeirantes
tried to directly compete with the giant.

The impossible strategy was never fully implemented and the
network lost its identity. In the beginning of the 19803,
Bandeirantes started losing audience to the low-brow
programming of SBT and adopted a popularesque line of
programming, contracting many important show hosts. The
decadence continued and in January 1981, Bandeirantes hired
Walter Clark, considered by many as the guru behind Globo's
success. Clark emphasized ”regional productions, independent
productions, upscale journalism for upscale audiences,” but
even though the ratings climbed among the elites as he
intended, the Saad family dismissed him. Due to excess change
in programming, unsuccessful experiences, and changes in the
time of soaps, the total audience was significantly reduced
during his administration.

Thus, Bandeirantes had three distinctive perspectives in
regard to its audience: a large national network, competing
with Globo; a large national alternative network with popular
programming, competing with SBT; and an alternative network

with high-brow programming, later competing with Manchete. It

46

was only after 1983, with the success of the sports
programming provided by independent producer Luciano do Vale,
that Bandeirantes started to recover, repositioning itself as

the sports channel (Xavier Filho, 1991).

Manchete

On June 5, 1983, about two years after it was licensed —
the maximum period for station implementation — TV Manchete
of Rio de Janeiro premiered with promises to beat Globo's
quality programs. Bloch Publishing Group, whose publications
(including Manchete magazine) were in decline, invested $50
million to enter the market. About $27 million were consumed
in sophisticated equipment that, for the first time, would
put a network in a position to compete technologically with
Globo (Meio_a_Mensagem magazine, February 1983). Even though
the initial broadcasting was still limited to seven hours a
day, in tflua first year Manchete took audiences away from
Globo, SBT and, mainly, Bandeirantes, besides incorporating
five percent of new TV sets in Sao Paulo and ten percent in
Rio de Janeiro. The lower rating in Sao Paulo was explained
by the regionalist character of the network and by tougher
competition for upper class public, which was also targeted
by the local stations Cultura and Gazeta.

Surveys indicated that 52 percent of Manchete's audience

was from classes A and Bi, and 23 percent had college degrees

 

* The social classes in Brazil are traditionally divided in a scale from

A to E.

47
(MeiQJJenaagem, May 1984). Manchete's news bulletin was

rated second in the country. To attract new viewers, it
presented extensive news and recent Hollywood movies, but the
success was ephemeral, since Globo counterattacked with even
more expensive movies and small adaptations in its schedule.
Manchete only became a real threat to Globo between 1984 and
1985, when it started to produce mini-series and soaps- The
evening soap “Pantanal” conquered in 1990 many viewers for
Manchete's ten o'clock schedule, and forced Globo to
recognize one of the first real threats in the soaps segment,
which Globo mastered a long time ago.

Without a long-term marketing structure, however, Manchete
has not been able to profit from such successes. In 1990, it
made $100 million just to spend almost the same amount,
accumulating chronic debts and a tragic history of
mismanagement. Every now and then, the press reports a new
attempt by 82-year-old Adolpho Bloch, owner of Manchete
Group, to sell the network for the best offer. While the sale
never happens, a debt of $50 million and scarce ratings
successes doom the network that once promised to debunk

(Slobo's market leadership (1991p).

Chapter 3
The Broadcasting Networks Environment
To succeed in our
overcommunicated society, a
company must create a position
in the prospect's mind. A
position that takes into
consideration not only a
company's own strengths and
weaknesses, but those of its

competitors as well (Ries &
Trout, 1981, p.29).

In the 19803, the first signs of a definitive market
segmentation started to be visible in Brazil and America. The
traditional television systems started facing strong
competition and were forced to adapt to the new times, when
industry entrants practice segmentation to establish their
own market positions. In the United States, the broadcasting
networks lost considerable percentages of their audiences to
the growing cable networks, while the new Fox station lured
away the younger audience niche. The so called Big Three
(NBC, CBS and ABC) had enjoyed, until then, the benefits of
EH1 early entrance into the television industry, exercising
Ininimum effort to keep their leading place in the market. In
time words of Ries and Tmout, "consumers are like chickens.
They are much more comfortable with a pecking order that
everybody knows about and accepts." The new cable networks,
on the other hand, had the entering company's responsibility
-to (detect alternative ways of doing business and of

attracting audiences. In (Marketing__of_War, Ries and Trout

48

49
applied military strategy terms to the entrant's task. They

argue that the market leaders are at the top of a hill and
that the entrants in the valley should not make a frontal
attack on them, but use guerrilla tactics to conquer the
flanks of the hill (or market). Translating, entrants should
choose a market segment (or flank) not strongly controlled by
the leaders and should carve their positioning step by step
(Ries & Trout, 1987).

That was exactly what the cable networks did by focusing
their program schedules and audiences into specific niches
that they detected as large and profitable enough to sustain
their operations. Instead of going after a mass audience,
which the advertisers associated in their minds to the Big
Three, the entrants sought new leading positions in the sub-
markets of music-lovers, news-followers, weather-watchers,
etc. In each of the new sub-markets, each network was a
leader and, even though their shares were not as big, the
quality of their audiences attracted quality advertisers.
Continuing the war comparison, the entrants had conquered a
flank the size of Monte Carlo and, while the enemy could
still control the rest of the hill, they had one of the best
pieces of the territory.

The competition to the Big Three came not only from the new
signal distribution technologies, but also from within the
regular broadcasting industry. In 1980, for example, while
the networks' audience share declined four percent,

independent stations enjoyed an equivalent rise in primetime

50

audience, bringing an increase in advertising revenues of 17
percent, compared to only 11 percent of the networks. The
success of these stations could be attributed to strategic
programming, like placing entertainment against news and vice
versa, but it was also a reflex of laws limiting the network
programming on affiliate stations, which turned them more
independent.

Each evening, the affiliates were forced to schedule their
own programming (either internally produced or acquired from
syndicators) in the half hour preceding the network primetime
lineup (1977). Protecting the producers and the stations,
laws like this actually turned out to be a problem for the
networks. Unlike the way it happens in Brazil, where the
networks are the sole national production center of
television programs (independent producers are only recently
growing), the American networks. could not count on the
strength of their programming as a business bargaining tool.
On the contrary, while the studios have greatly increased
their prices, when the networks tried to pay less to studios
and affiliates, the studios started to skip over the networks
and negotiate directly with the stations (Grover & Liberman,
1989).

In this environment, it should be no surprise that a studio
would enter the broadcasting business and control every step.
In October 1985, Australian—American publisher Robert Murdoch
announced the creation of Fox Broadcasting Company, which,

counted together with the extensive film library of 20th

51

Century-Fox Studios and six stations across the country,
reached about 20 percent of all U.S. TV households. Since the
19603, when United Network tried to enter the field and
failed in less than one month, Fox represented the first
competition for the other older networks, even though the
initial results were rather disappointing. With the weakest
stations in their markets as affiliates and an average
audience of two to six percent, the network lost about $80
million in its first year (Head & Sterling, 1990).
Nevertheless, Fox has been obtaining very positive results
with a lineup targeted at younger audiences, which were
revealed to be unattended to by the family programming
offered by the Big Three.

Interestingly, the younger audience is considered the most
attractive one by advertisers, who have detected youth's
higher willingness and acquisitive power to consume more.
Thus, while the Big Three continue to suffer losses with
their mass marketing, Murdoch's target marketing has proven
successful. And, since Fox does not own enough stations nor
cover most of the United States with all-day scheduling, it
was not considered to be a network like the others; thus it
escaped from many restrictive regulations that, for example,
impede networks from syndicating their shows or having any
profits from it. Of course, the Big Three have not passively
watched this loss of audience. Their main effort to
counteract the loss has been to call for a revision of these

restriction laws, called the Fin-Syn Rules.

52

About 22 years ago, the Financial Interest and Syndication
Rules (S 73.658-j) were included in Title 47 of the Code of
Federal Regulations, prohibiting the networks — defined as
offering 15 or more hours per week to at least 25 affiliated
stations in ten or more states - from having financial
interests or syndicating programs for non-network exhibition.
The rules applied to the domestic market and, except for
those programs produced solely by the networks, the
international market also. The principle behind this
prohibition was that the networks (the distribution industry)
should not be allowed to integrate themselves vertically with
the production industry and control the major stages of
television activities. A diversity of ideas would not be
offered in this manner, and the public interest, convenience
and necessity would not be attended to.

On April 9, 1991, the Federal Communications Commission
(FCC) approved a revision of the Fin-Syn Rules that, however,
did not completely satisfy any of the parties. The networks
continue to be precluded from selling shows in the domestic
first-run area. On the other hand, they now could sell in—
house and purchased-rights programs in the international
syndication market, and could produce programs for first-run,
which then had to be sold to a third-party syndicator for a
producer's fee. But the FCC put a cap that did not exist
before on the amount of in-house programming a network may
schedule in primetime — 40 percent. In addition, the FCC won

the right to seek a financial interest in, or domestic

53

syndication rights to, primetime programs produced by outside
producers (at least 20 percent participation).

The networks claim that their new rights have no value and
that the studios are still too protected. They say that few
in-house primetime programs last long enough to be syndicated
and that the producers will not sell foreign syndication
rights. The producers are not happy either. The made-for-
television movies and ndni—series are not protected against
the networks' extraction strategies, which can force the
affiliates to clear the first-run syndicated programming they
produce in-house. And the American producers can be facing
foreign competition, as the new definition of in-house
production allows joint ventures with foreign entities. The
only happy faces seem to be at Fox, which is now able to
expand its primetime schedule to 15 hours a week (indeed, it
now fills the primetime of every day of the week) without
being considered to be a network (Duarte, 1991).

There is still about ten percent of the market (TV
households minus homes passed by cable) that does not have —
and it might never have — cable television, and the free
programming offered by the broadcasting networks is watched
by a considerable mass audience (1992a, p.1-A). Fox
penetration has a significant slack to fill and the new Fin-
Syn Rules are likely to keep the Big Three healthy for years
to come, but not without further adaptations by affiliates.
Tom Jones, general manager of the ABC affiliate in Lansing

(MI), thinks that local stations should concentrate their

54

offers on one type of programming, avoiding competition
whenever there is a strong leader in a certain segment. His
station went through different programming lines in its two
years of existence, being forced to drop the local news
bulletin and finally finding a profitable and unoccupied
niche in daytime entertainment for middle-aged women. He
rationalizes: ”In the news segment, an older station had
already established a strong position, and our investments
could not convince the public to change channels. But in our
present niche, even if we are number two, we can make as much

as the number one" (Jones, 1992).

3.1 Segmentation the Latin American Way

The signal distribution technologies (and their
revolutionary concepts) that brought segmentation to the
American market started to fully arrive in Brazil only in the
second half of the 19803. Subscription Television was finally
regulated in 1988, Globo's Direct—broadcast Satellite system
took off in the following year, and cable experiments have
assumed greater proportions. Even the origination of
alternative programs through UHF stations, a phenomenon that.
took place during the 19503 in America, was initiated in
Brazil by MTV-Abril in 1988. But the preconditions for
Brazilian market segmentation had been developing for quite a
while before that. Since competition is one of the most

important elements in producing the market breakdown (it is

55

the entrants' responsibility to look for alternative ways of
doing business), the reduced monopolization of Brazilian
television by Globo Network can be taken as the first sign of
a segmentation era.

One of the most common versions proposed by scholars like
Caparelli and Mattos implies that the same government
willingness to let Globo pursue its dominance of the market
also allowed for the appearance of new competitors. The
government would have become afraid of the power accumulated
by Globo network and started to promote the competition that
was overlooked until the last decade (Caparelli, 1980). On
October 16, 1977, the director of the Department of
Telecommunications of the Communications Ministry, Colonel
Idalécio Nogueira, summarized the new position: “The
government is against monopoly in television, because it
reduces the quality of programming and, therefore, would
stimulate the concession of new channels to increase the
number of national networks in the country." In W
da_Eome (1982), Humberto Mesquita states that the creation of
two other channels — SBT and Manchete — was justified by the
existence of a virtual monopoly by Globo Network, which
supposedly did not practice monopolistic strategies, but
which still did not have any competitor (Mesquita, 1982).

Not by mere coincidence, the promotion of competition by
the Brazilian government gained impulse with the end of the
military regime. While the generals would be more worried

about keeping a unified message, restricting the

56

proliferation of message mekers, the civil governments seem
to be using television concessions as political bargaining
tools. The rapid expansion of the number of stations that was
begun during the government of Juscelino Kubitschek
intensified in the 19803 (See Table 1). In four years of
government, President Sarney gave away approximately 90
stations, compared to 136 distributed in two decades of
military regime. The 1988 Constitution established rules to
avoid the political tone of the concessions. Even though
conceding and renewing licenses remains an Executive task, it
now depends on the Congress's approval. Paragraph 5 of
article 220 in chapter" V of the Constitution further
prohibited the creation of monopoly/oligopoly in the media

industry (1988a).

Table 1 - TV stations licensed per year in Brazil

 

 

 

 

 

 

 

Year Stations
1956-1964 W 14 ....
1964-1969 23
1969-1974 20
1974—1979 47

1979 07

1980 04

1981 11

1982 08

1983 04

1984 ,__ 12.. r _ l l
1985 22

1986 14

1987 12

1988 42

 

Source: Communications Ministry. Reproduced from Mattos, S.
Inn_Perfil_da_Ty_Brasileira. Salvador, ABAP,1990.

57
Moreover, the new legislation base allowed for the arrival
of new distribution systems, like cable and subscription
television, and UHF stations in the capitals, with strong
fragmentation impact. In the words of Barnouw:

Early network broadcasting (first radio, then
television) had been praised for its unifying influence:
it was said to have united the nation and even ‘brought
the family together'. The cable [and all other TV
systems for that matter] era obviously had a fragmenting
effect. With mmltiple channels serving multiple tastes
(and, in many homes, sets in various rooms) 'the'

audience had been replaced by a whole spectrum of
audiences large and small (Barnouw, 1990, p.495).

The technology behind these systems appeared in the last
two decades and plays a complex role in the market dynamics.
Barnouw recollects, for example, how television apparatus
like videotape was developed to overstep the large studios'
walls, creating the figure of the small independent producer,
who allied creativity and low costs to provide many of the
present successful TV programs. Thanks to Japanese
technology, videotape even reached households, where the
viewers time-shifted regular television programs and played
pre-recorded leased tapes that have become a major competitor
in the industry. In America, where video became popularized
by the end of the 19703, $10 billion were spent in 1990 on
*videotape leases, exactly double the amount spent at the box
«offices. For each $100 the movie industry makes in Brazil,
$80 come from the rent of videotapes and only $20 come from
tine theaters. In the first years of the 19803, the situation

was reversed, but in 1987' the two sources tied: $90 million.

.I-. :1 al.- |.- v x 1.: . x . .. A —

 

58
In 1991, the prospects were to get $490 million from tapes

and $125 million from the box offices (Nery, 1991).

In 1982, when domestic videotape recorder (VCR) fever took
the country, a set cost a third of the cost of the cheapest
car on the market. In 1991, almost a dozen sets were
necessary to equal that one-third—of-a—car-cost, and an
estimated 8 million VCRs were in Brazil. This means that
about 25 percent of the 30 million color TVs in the country
are connected to a VCR. It is the same percentage registered,
for example, in Italy. In this ranking, the leaders are
Japan, with 79 percent, and USA with 67 percent (Nery, 1991).
The rental stores have survived the instability of the
economy in Brazil. The anti-recessive measures adopted by the
government in 1986 caused an enormous multiplication of these
businesses: from 1,800 in 1985, they rose to 4,500 in 1987.
And the more recent recession led many of the suddenly
unemployed to open rental stores at home. Even though not all
of these inexperienced entrepreneurs are still in the market,
there are 8,000 of these stores in the country today,
receiving 500,000 new tapes every month (Nery, 1991). As an
alternative to the regular television programming, the video
industry greatly contributed to the fragmentation of the mass
audience as the first new television technology to take over
‘the Brazilian market.

Another version of the facts proposed by Caparelli
(Caparelli, 1982) and Mattos (Mattos, 1990) simply associates

the appearance of competition in the TV industry to the

59

development of national capitalism. The entrance of new
capital would be a normal consequence of the regular growth
of the industry within the general economy. In fact, however,
the economy was worse in the 19803 and the appearance of new
capital in a time when demand (advertising budget) was
tending to fall negatively affects all companies. Some have
even proclaimed: "There is not enough space for all the
networks in the country today. If nothing changes, the
remaining funds are not enough to maintain the other three
networks [SBT, Manchete, Bandeirantes]. There will be a
change in the network system and the failure of some nets are
possible" (Bolafio, 1988). Thus, while the entrants have
seemingly invested in spite of the economy, it is possible to
see a causal relationship between the economy and market
segmentation.

In the last decade, the low salaries, the reduced number of
jobs and the more restrictive credit to consumers prevented a
great portion of the mass audience from consuming most of the
products advertised on television. The companies that
advertised during the so-called ”miracle era," in which
Brazil's growing economy supported a mass consumption,
expected the market to become more sophisticated and to
consume more. Frustrated, many of them decided to use
alternative media with campaigns aimed at their specific
target, which had higher CPM (cost per thousand viewers
reached), but overall costs very reduced. The distribution of

advertising investments in the last few years are evidence of

60

this tendency (See Table 2). Following an international
tendency, the commercial sales sector, largest advertiser in
the country, elected the newspaper as its main medium to
carry its advertising (53 percent) in 1990. And from 1990 to
1991, Brazilian newspapers increased their advertising share
from 33 to 35 percent, while TV fell from 52 to 49 percent

(1992b).

Table 2 - Advertising Investment Shares in Brazil

 

 

Year TV Newspaper Magazine Radio
1991 49 35 10 05

1989 55.44 26.56 12.84 2.74
1987 60.8 13.2 16.3 6.2

1985 59.0 15.0 17.0 6.0
1983 60.6 13.3 12.2 10.5
1981 59.3 17.4 11.6 8.6
1980 57.8 16.2 14.0 8.1

1978 56.2 20.2 12.4 8.0
1976 51.9 21.1 13.7 9.8
1974 51.1 18.5 16.0 9.4
1972 46.1 21.8 16.3 9.4
1970 39.6 21.0 21.9 13.2
1968 44.5 15.8 20.2 14.6
1966 39.5 15.7 23.3 17.5
1964 36.0 16.4 19.5 23.4
1962 24.7 18.1 27.1 23.6

 

Source: Leda - Nielsen Servicos de Midia, and McCann-Erickson
Brasil

It is simple to understand why media segmentation — and now
television segmentation — has gained prestige among
advertisers. As chapter 6 further describes, the Brazilian
market is full of contrasts. Even though the wealth is

concentrated 511:1 handful of places and the profiles of the

61

consumers are restricted to a few categories, television
makes no differentiation among the 28 million TV households
counted in 1991 (19919). As the buying power of the majority
of the population declined, the broad audience reached by
television, which used to be its best selling point, is
becoming a waste. The target audience of the programs is seen
to become different from the target audience of the
advertising spots, and advertisers are starting to question
why they were paying extra for audience they could not use.
They have apparently realized that it is harder to convince
the few TV viewers with acquisitive power to consume more
than it is to convince the many qualified viewers of a
focused medium to buy enough. Since only potential buyers are
targeted by a fecused medium, there is virtually no waste,
whereas broadcasting, in addressing an audience composed of
many individuals who would not be interested in the sales
message of a certain advertising piece, is wasteful.
According to Schiffman and Kanuk: ”Marketers do not create
needs, though in some instances they may make consumers more
keenly aware of unfelt needs." Thus advertising only works
for those who have a previous need for the product or service
offered (Schiffman & Kanuk, 1991). Paying more to insert an
ad in primetime, because it airs to a larger audience (thus
the more indefinite one), may not be the best strategy for an
advertiser that targets only a specific, well-known, reduced

public.

62

3.2 Brazilian network segmentation

Appearing in the 19803, amidst the fragmenting environment
described before and facing the strong control of the market
by Globo, the new Brazilian networks had not much choice but
to adopt market segmentation strategies to conquer niches not
fully attended to by the leader. Noticeably, this is a
situation radically different from the American market, where
NBC, CBS and ABC share mass audiences without resorting to
segmentation strategies. Except for the incipient Fox, the
major networks were created before the 19403 and compose an
oligopoly with no continuous leadership. In this sense, the
Brazilian experience may be a better reference for other
countries presently promoting competition through the
addition of new networks.

The criterion for the division of the market has been the
viewers' social class, which supposedly indicates a
comprehensive: set. of consumption behavior' patterns and
programming tastes. In the last 19703, Globo was the most
upscale network, followed by Bandeirantes, which sometimes
surpassed it. When Manchete entered the market in 1981, it
replaced Bandeirantes, which precipitously abandoned the
qualified market already conquered, opting for a popularesque
(low brow) lineup. Without a clear positioning, Bandeirantes
lost its identity and could not compete with SBT for the
lower classes niche. It was only more recently that the

Association Luqui-Bandeirantes brought to the network a

63

strong foothold on the sports segment. Thus, it is possible

to draw the following segmentation chart:

Table 3 - Patterns of Brazilian media use by social class

 

 

 

 

 

 

Social Class TV Networks Radio Print Media
Elite (5-10%) Manchete, FM music Elite papers,
Globo News magazines
Middle (IS-20%) Globo FM music, Elite papers,
talk News magazines
Working Class Globo, SBT FM music, Popular
(lo-15%) AM music,talk newspapers
Poor (SO-60%) Globo, SBT AM music,talk
Marginal (10%) AM music,talk

 

Source: Duarte, L.G. & Straubhaar, J. & Stephens, J.
“Audiences, Policy and 'Cable' Technology". In ICA,Miami,1992.

A table like this seems to be in the heads of many
advertising professionals, those who are responsible for
allocating the advertisers' investments. According to Ries
and Trout: ”This ranking of people, objects and brands [and
why not networks] is not only a convenient method of
organizing things, but also an absolute necessity to keep
from being overwhelmed by the complexities of life" (Ries &
Trout, 1981, p.36). Just as viewers know which channel to
‘tune to for their favorite programs, advertisers keep in mind
at ladder (hierarchy) with the best media for their messages.
thing a Consumer Behavior concept, they have an “evoked set,"
a group of specific channels to consider in watching/

advertising (Schiffman &Kanuk, 1991). Other channels and

1

64

networks, like Record or Gazeta of 350 Paulo, among others
not included in the above chart, would compose the total set
of choices, but Globo, SBT and Manchete attract most of the
audience shares at any moment. Remarkably, while Manchete
reaches only ten percent of the population at most, and SBT
is watched by up to 75 percent, Globo manages to draw its
audience from practically all the class segments (considering
that the marginal ten percent do not participate in the
consumer market). To become the market leader, Ries and Trout
say “you just get there firstest with the mostest," and that
is exactly what Globo did.

In the 19703 — thus, before the creation of Manchete and
SBT — Globo consolidated its leadership in the market by
raising the quality standards of its programming and its
overall institutional image. Advertising at Globo was having
a spot next to Hans Donner's world famous computer graphics,
the best journalism and the most expensive programming,
reaching the ”most upscale mass audience” across the country.
The quality standard was aimed at keeping a large audience
while forcing competitors to invest more to enter the market
(raising the barriers to entry). Eventually, however, it lost
some public, especially from the lower classes, to the cheap
low-brow programming of competitors. SBT has been the mest
successful in collecting the program genres Globo discarded,
becoming the number two network in the country. Since
advertisers tend to target higher classes (with higher

énzquisitive power to consume), the large audience of SBT did

65

not translate into revenues, at first. The turning point for
Silvio Santos' network was marked by the effective use of a
Ries and Trout principle: “A competitor that wants to
increase its share of the business must either dislodge the
brand above [in the mental ladder] (a task that is usually
impossible) or somehow relate its brand to the other
company's position" (Ries & Trout, 1981, p.37).

During the regular programming, SBT in-house spots
announced its primetime programming as an alternative to
Globo's. If the leader had a drama feature, the contender
offered a comedy, and so on, in a typical counterprogramming
strategy. According to Eastman's definition, SBT's tactics
were indeed appropriate to combat the power of Globo. ”Most
other strategies are intended to hold viewers who are already
watching (flow strategies)," but the majority of the audience
was tuned to Globo's soaps during primetime.
Counterprogramming ”interrupts flow to gain different
viewers, making it an effective scheduling Option, especially
for the network facing a superhit program on another network”
(Eastman,Head, a. Klein, 1989. p.152). Better movies were
purchased to attract new viewers and the weekly schedule was
intensely announced in the commercial intervals.

Globo counterattacked by extending the time of its evening
soap operas - the second-best rated program in the country —
but SBT put cartoons on the air until the soaps were
finished. Santos was successful, because he acknowledged the

general taste for the competitor's soaps and related its

66

network to the leader by creating the habit of turning the
channel afterwards for alternative programming. In terms of
positioning, SBT was assuming the second place in the ranking
and consolidating it, much as Ries and Trout prescribe: “For
13 years in a row, Avis [car leasing] lost money. Then they
admitted that they were No. 2 and Avis started to make
money...[Their slogan was] Avis is only No. 2 in rent-a-cars,
so why go with us? We try harder" (Ries & Trout, 1981, p.38).
The “No. 2" positioning conquered the market (for
advertisers, besides viewers) in the provocative campaigns
designed by advertising wizard Washington Olivetto (See
Figure 1). Famous worldwide in advertising, Olivetto had
previously created similar campaigns, emotionally involving
the target and taking advantage of the Brazilian tendency to
sympathize with the less fortunate. Just as he had made
history with TV spots for Bom Bril cleaning pads or Sao Paulo
gas stations, SBT campaigns in the printed media forced Globo
to advertise itself (in other media) for the first time — and
with a rather defensive tone. Some Brazilian TV critics
(Silva, 1982) said that Globo decreased its standards of
quality programming as a defensive strategy against SBT.
According to Bolafio, however, the leader's strategy regarding
the target audience never changed. It introduced programming
and show hosts of more popular taste, but the standards are
still high. He explains that the strategy was more like a
ashow of force, balancing the programming to indicate to the

audience that the competitors cannot offer anything Globo

AI....._....l..__...‘.4.e“-~.Tl;~\“~\\s;..\\\‘\\\\\._\\\\\\\\\.w

 

. \

67

 

 

>
G

 

 

 

 

 

 

 

 

 

LIDERANCA ABSOLUTA E ASSUMIDA DA VICE-LBW

Figure 1 - SBT's vice leadership ad
Source: VejaSP May 6, 1992
Text:

We are the vice. And we assume.

Audience share — Séo Paulo 6:00/24:00. Monday through Friday.
lst. semester/92 - ADP—IBOPE Report

Absolute and Assumed leader of the vice—leadership

68
does not (Bolafio, 1988).

A reverse example Bolafio» mentions was when. Manchete
premiered with a long list of top-rated movies and Globo
counterattacked with even more premium movies. With promises
to go after the leader, Manchete never achieved enough
success to pay the huge debts of its creation. While rumors
of a buyout were constant, the network soon found out that
investments in technology were worthless without quality
personnel. Significant salaries attracted some key
professionals from Globo and Manchete finally scored in 1990,
with the soap opera “Pantanal,” whose slow pace, nudity and
beautiful scenery of Central-west Brazil reached a 40 percent
audience share. Since it was aired at a different period
(later at night), “Pantanal” managed to have more audience
than Globo's programming without confronting the competitor's
main programs: the Eight o'clock national news bulletin
(”Jornal Nacional") and the subsequent soap opera. Thus, in
the segment of “telenovelas” (soap operas) Manchete found a
niche in the Ten o'clock period that was not dominated by the
leader and successfully controlled it.

Counter-programming ”Pantanal,” Globo changed the schedules
of programs, introduced big box-office movies at the Ten
o'clock period and put more nudity in its telenovelas, but in
1991 the segment would suffer another attack, this time from
SBT. Imported from Mexican Televisa for $10,000 a chapter,
“Carrossel” reached 21 points against 41 of "Jornal Nacional"

at the eight o'clock period. This time, there was not much

aA.

av

--

’7

 

us

‘5
do

I:
I...

 

69

Globo could do. In the past, there was a war of
“telenovelas," now the competing products were different. It
is a fact everywhere that entertainment programs always beat
news bulletins, exception made to situations like wars, etc.
Afraid of a programming war that would annihilate their news
programs, the three American networks have long ago sealed a
gentleman agreement, airing their nightly news bulletins at
the same time. In 1988, during his show, Silvio Santos made a
proposal to the other channels to follow the American
example, but he did not succeed. Because of the lack of
competitors with the same level of equipment and resources,
Globo had no reason to accept the offer. Its three news
programs are among the five largest audiences of the network
(1991c).

In 1985, the SBT launched the Mexican children's comedy
“Chaves” to compete with the regional news bulletins of
Globo. This strategy worked relatively well and today the
program averages nine percent of the audience. Thus, using a
variety of marketing strategies, the other networks seem to
be drawing a pattern of more frequent programming successes
outside Globo, which was once impossible or very seldom
achieved. In the 19703, Globo had ”telenovelas" with average
audience around 70 percent, in the 19803 it was 60 percent,
and it started 1991 with 50 percent. The present average is
around 41 percent (1991c).

“Jornal Nacional" had an incredible average of 70 percent

in 1983, fell to 64 percent in the following year and in 1991

70

was surprised by “Carrossel” with 40 percent. In the first
five months of 1991, Globo went into debt by $20 million and,
while the apparent decline of Globo's dominance led some to
envision better and more diversified Brazilian television
programming, others are worried (1991c). As Browne reminds,
“in competing, stations may lower the quality of their
services in order to cut costs and may drop programs that
attract small audiences, no matter how devoted those
audiences may be" (Browne, 1989, p.17).
Indeed, some of the most recent Globo programs have assumed
a more low-brow character, even though it still invests much
more than the other networks (which implies the need for
higher returns). The preoccupation is that competition with
the cheap imported programs of its rivals may drive Globo out
of its more sophisticated productions. Each chapter of a
telenovela costs an average of $30,000 - three times more
than any Mexican soap. The only thing that Globo exhibits
that it does not produce itself is movies; more than 80
percent of its programming comes from its studios, a very
rare case in the world (1991c). But Globo has long prepared
itself for a scenario of increasing competition, not only
from other networks, but also from other TV distribution
systems. In marketing terms, the market leader brilliantly
performed Ries and Trout's recommendations:
The leader should cover all bets [they should]
swallow his or her pride and adopt every [competitor's]
new product development as soon as it shows promise ...

time is of essence if a covering move is to be
effective. You want to block the competitor by moving

71

aggressively to cover the new product before it becomes
established in the prospect's mind (Ries & Trout, 1981,
p.57).

Globo anticipated the competition process and initiated
some segmentation itself without losing its mass (or
“global") character. Globo initiated a market study to
identify the potential advertisers, which sectors they were
in, what kind of public they were looking for, with what kind
of messages, with what kind of service. Thanks to this move,
Globo maintained and even increased its audience in the first
half of the 19803. In 1980 it started experimenting with the
potential of some audience niches like children, housewives,
men class A/B between 30 and 50, etc. The strategy to seek
segments of the public at alternative schedules (out of
primetime) had a frustrating beginning with the program ”TV
Mulher," which premiered on April 7, 1980 and was terminated
shortly after. But other niches have been successfully
conquered and the program formulas copied by the competitors:
the country format (”Globo Rural" and “Som Brasil"), computer
format (”Globo Informatica"), educational format (”Zero a
Seis" and ”Globo Profissoes").

In 1986, Globo further defined the strategies it would
follow to cope with a scenario where its quasi-monopoly
situation vanquish (1991c). Besides adopting “a positioning
to use its immense resources to conserve the audience
leadership whenever possible," (1991c) it studied various

initiatives to Idiversify the businesses of the group.

Z
Q

 

72

Competing technologies, like Videocassettes or subscription
television, which promise to reduce the network audience and
harm its business, were then integrated into the group's
operation and, if necessary, Globo may cross—subsidize
network productions some day. Thus, as the video market grew
in Brazil, the new Globo Video started to market some movie
titles and documentaries. Paulista and Rio Metro in the
subscription television branch, and GloboSat in the direct-
broadcast satellite system, also mark the leader's foothold
on the new industries. Similar diversification initiatives
have been taken by the other networks as well, following the
international pattern to form communication conglomerates,
present in every line of media.

Since most of the Brazilian media companies are controlled
by family groups, instead of many little shareholders as it
happens in the United States, the conglomerate expansion took
a very interesting line. The origins of Globo and other
national conglomerates are usually associated with the
printed media, while the new family generations are taking
over the electronic media. The perfect example is Abril
Group, whose founder, Victor Civita, got started printing
Disney's Mickey Mouse comic books and now his grandsons are
entering the subscription television business. In America,
this expansion took a very different route. While the
networks had their growth limited by law (to protect the
public interest, convenience and necessity), the competing

media systems were not restricted and grew faster to buy them

u.

..-

 

73

out. Barnouw recollects how the competing media became simply
branches of larger parent companies, many of them without
even any communication background:

The 19803 saw not only a battle of technologies but
parallel battles at the corporate level ... Media were
the choice targets; contenders included not only media
organizations but conglomerates of all sorts seeking
wider diversification, and convinced that communications
had become the key to power and profit. [As networks
were allowed to own 12 stations, they became targets of
take-overs] achieved with borrowed capital. To cope with

resulting debts, the takeovers were often followed by
staff reductions (Barnouw, 1990, p.509).

Looking back in perspective, it is possible to say that the
limitation of the American networks may have made feasible
the appearance and progress of the competing television
technologies, which could otherwise have been suffocated by
more powerful networks in their efforts to maintain their
business. Just as the studios tried to prohibit the sale of
VCRs, the networks barred the quick expansion of cable, and
cable operators are now lobbying against telephone companies
delivering television. Different scenarios could have
emerged. In Brazil, however, these technologies are arriving
‘with a long delay and, since the companies already know their
impact in the market and their possible profitability, the
adoption of the new systems should be much smoother. The
Brazilian companies are not limited by the same American
Inegulations and the expansion might happen within
communication conglomerates, rather than across different

lines of business.

Chapter 4

Distribution Technology Segmentation
Another reason our messages
keep getting lost is the
number of media we have
invented to serve our

communication needs
(Ries & Trout, 1981, p.16).

One of the major driving forces behind television
segmentation is the multiplication of channels spawned by the
evolution of new signal distribution systems. Once, the
number of competing stations in a given market was limited by
the over-the-air radio frequency spectrum available. And,
considering only the original very high frequency (VHF) used,
practical competition was actually reduced to a couple of
stations, which targeted the complete universe of audience
with rather similar programming.

In 1952, the use of ultra high frequencies (UHF) and
microwaves to broadcast or just relay the signals of distant
stations introduced new competitors to the established
markets. But to lure a captive audience — as well as
advertisers — away from the existing stations, the entrants
would have to offer something different. Even if a similar
lineup was adopted, a new batch of sitcoms, news bulletins,
talk shows, etc., reached the airwaves. The fate of most
segmented television enterprises in the market is more
connected to the success of their programming than to the

attractiveness of the technology adopted to delivery it.

74

75

The increase of choices continued with the development of
distribution systems like STV (Subscription Television), MDS
(Multipoint Distribution Service), MMDS (Multichannel
Multipoint Distribution Service), DBS (Direct Broadcast
Satellite) and cable. At this point, however, there was not
enough mass audience - nor advertisers — for every entrant
and the programming had to attend to only a part of the
market. In Brazil, the introduction of some new signal
distribution technologies has only occurred in the last
decade, and the amplification of choices is still an ongoing
process (See Figure 1). In this chapter, the development of
some distribution systems is reviewed as benchmarks that can
orient the Brazilian operations, which have often imported
technologies and concepts without an overall national
blueprint. The segmentation of the programming by the
entrants in the Brazilian market is discussed in chapter
five.

The future of each distribution system in Brazil is still
impossible to forecast. The government seems to have leaned
toward STV and MMDS, although cable and DBS experiences are
defying the odds and increasing market penetration. The
competition has already started, but it seems unlikely that
some systems may preempt the chances of others, as happened
in America. As previously mentioned, programming has proven
to be of primary importance for attracting audiences.
Importing American cable programming or producing its own,

the companies have beenmaking use of satellite relays and

76

Microwave
1 - 500 GHz

..............................

Super High
Frequency
lSllFl

   
       
  
 
  
  
  
    
  

Air Navigation
960 — 1215 MHZ

Mobile Telephony
870 - 890 MHz
Radio Astronomy
608 - 614 MHz

UHF Television
470 - 512 MHz

FM Radio

- 88 - 108 MHz

VHF Television
54 - 216 MHz

Meteorological Satellite "
137—138MHz 300MHz
Citizen Band Radio .
26.1 — 27.5 MHz Xferyuflgc“
Amateur Radio (\(llH F) y
24.89 - 24.99 MHZ

Airplane Radio
17.97 - 18.03 MHz

Amateur Radio
14 - 14.25 MHz
Airplane Radio

- 10.1 H
Amateur ligdio M Z

1.8 - 1.85 MHz

 
  

AM Radio
525 - 21750 KHz

 

FireMen
490 — 495 KHz

Air Navigation
190 - 200 KHz

Figure 1 ~ Brazilian Radio Spectrum

Source: ”Congestionament Invisivel”, ' t
Magazine, sao Paulo, Abril, January 1990.

77

Table 1 - Systems' implementation costs in America

 

Cable

Installation on existing
utility poles - rural area
Installation on existing
utility poles — urban area
° Underground cable
- Channel capacity upgrade

- Color studio
- PPV hardware

Radio

- Small market AM/FM station
- Median equipment annual budget

Broadcasting TV

- Full power, major market station
- Median equipment annual budget

Satellite

- Construction and launch
- Transponders lease, per month
Transponders lease, per hour
~ Earth station (uplink) construction
- Uplink hourly lease (C Band)
: Uplink hourly lease (Ku Band)
TVRO dishes

SMATV

300 unit system (including
$35,000 for Earth stations, but
excluding cabling)
Table 1 - Cont'd
lflKDS

Per subscriber

$10,000 per mile

$100,000 per mile
$300,000 per mile
$10,000 to 15,000
per male

$200,000 or more
$10,000

$50,000
$20,000

$30,000,000
$300,000

$200,000,000
$25,000 to 200,000
$200

$600,000 to 750,000
$396

$480

$1,000 to 40,000

$80,000

$600

 

Source: Head, Sydney W. and Sterling, Christopher H.

:Hroadcasting_in_Americai_A_Surxey_of_Electronic_Media.
:Boston, Houghton Mifflin Co., Sixth Edition, 1990.

78

can easily switch the local distribution system as necessary.
In any case, the higher implementation costs are likely to
delay some systems more than others (See Table 1) and, in the
present environment, only a handful of enterprises can be

taken as examples.

4.1 The ultra high expectations toward UHF

The use of ultra high frequencies is not exactly new in
Brazil. In 1957, television broadcasting reached the
countryside of Sao Paulo state through UHF retransmission
stations. In the United States, similar intercity relay
systems have been in operation since 1950, using microwave
frequencies around 6 cu:’7 GHz in the super high frequency
(SHF) portion of the spectrum (Tessman, 1992). According to
Brazilian engineer José Roberto Cappia, a telecommunications
consultant in 350 Paulo, the process was simple and is still
being used. The main station in the capital broadcasts
locally through a very high frequency (VHF) transmitter
antenna within the metro area. At the same time, another
antenna in the outskirts of the city captures these signals
and converts them to UHF, which are rebroadcast to stations
in other cities. Thanks to the variation of frequencies and
-the concentration of UHF signals in a point—to-point basis,
‘the interference is eliminated and every station can relay

-the signals to even more distant localities (See figure 2).

    

. .. ...
~ x .

- I x .
. ....

' I . .
u ':

..

I

-

I -

a” In .....

..........

Capital \_) VHF channel captured
by VHF antenna

 

 

UHF channel captured I
Kc) by UHF antenna

signal Kl)

    
 
   

Broad signal

Small City B

Figure 2 - UHF relay system

80

The major problem with such a sequential network, as Cappia
indicates, is the possibility of breaking one of the links
and cutting communications with all the cities connected from
that point on. More recently, the implementation of a
satellite-based network provided for a wider and more
reliable coverage of the Brazilian territory, as described in
the following sections (Cappia, 1992). Decree 4.1117 of
August 27, 1962 instituted the Brazilian Telecommunication
Code; article four classified the frequencies between 300 and
3,000 MHz as UHF services. Nevertheless, the list of
commercial stations in operation licensed until 1967 in
Brazil does not include any UHF station (Sampaio, 1984).

The origination of signals by a UHF station presumably
started at cities that are too far from a capital station to
receive its signals, but too close to interfere with its
signals, in case another VHF broadcasting would take the
airwaves. In technical terms, no two stations of similar
frequency — co-channels — can be closer than 160-190 miles
(1955c), because the area of interference (80 miles radius)
is twice the area of useful reception. The pioneer experiment
in such a mode occurred in New York City with VHF station
WNBT and a UHF retransmitter, also called a ”slave station,"
in Bridgeport, located 55 miles away. Using a microwave
relayed signal, KCZXAK covered only 6 miles, and about a
hundred homes received UHF TV sets provided by RCA to

participate (Mann , 1950) .

81
In 1982, there were 3,097 UHF stations in Brazil

retransmitting the programming of one of the national
networks in cities other than capitals (Sampaio, 1984). In
the major metropolitan areas of the capitals, on the other
hand, the earlier assignment of up to seven VHF channels left
the need for UHF stations only to smaller centers, which
could not interfere with the capital's predefined
broadcasting frequencies. It was only in the mid-19803 that
large capitals, like 850 Paulo and Rio de Janeiro, received
concessions for UHF stations in order to allow for more than
the existing channels. Abril Group then became the first
licensee of a UHF station in a Brazilian capital, with
channel 32 of Sao Paulo. The insertion of original
programming in a market like 350 Paulo, where the public
could already count on seven channels, implied a further
fragmentation of the audience's attention.

The new availability of channels made the audience options
numerous enough that the expectation of a mass audience could
not be realized by all competitors. And the expectation of
smaller audiences in a segmented market justified the
targeting of certain niches. This tendency toward special
interest programming was realized by many American UHF
stations in the 19603. Most of them were not network
affiliated and had to produce their own shows or buy cheap
syndicated ones, usually opting for educational, ethnic or
alternative schedules. Some municipally owned stations, like

WNYC (NY), KCET (CA) or WETA (DC), enjoyed relative success

 

82

with mainly educational lineups. The ethnically-oriented
stations were also 'very popular' in some regions, with
bullfights and soaps imported from Mexico. But, the
commercial ones had more problems and, like Brazilian station
Jovem Pan has been doing, they relied heavily on old movies
and a lot of local sports (1966).

A few stations aired non—conventional programming to become
an alternative channel (1969b). New York's WUHF, for
instance, used to broadcast the morning lineup of police
prisoners four times a week — scrambled to 18 precincts
(Tepfer, 1962). In any case, most of these American stations
achieved relative success in a time when the military regime
in Brazil had traced rather different goals than the American
Federal Communication Commission (FCC). Some of the concerns
in America were the mmltiplication of stations, enhancing
competition and favoring a wider variety of programming
options, especially including the local affairs.

Meanwhile, the Brazilian military governments favored a few
sympathetic enterprises, building a national infrastructure
for their expansion. More than nmltiple voices, they were
interested in unifying the country under a few certified
connmnication channels. Thus, equivalent UHF experiences had

tx) wait two decades for new democratic policies.

 

 

83
4.1.1 The democratization of the spectrum

The end of the military period in Brazil was followed by a
great distribution of new television concessions, which
allowed for the present segmentation process. The arguments
of the past years that there was no market demand nor
capacity to sustain more channels are easily debunked by
Brazilian economics. The elite has long resented the low-brow
character of mass television (Sodré, 1981), and the present
development of new stations is happening in the middle of one
of the worst economic crises of the country.

Behind this recent proliferation of stations, it seems, is
the increased use by the civil governments of television
concessions as a political tool. In exchange for favorable
votes to their political projects, the governments have
awarded many politicians with such concessions. One of the
most transparent cases was the distribution of 418 licenses
(l991r) by ex-president Jose Sarney to the members of
Congress who supported the bill that maintained him in the
government for five years". The Departamento Intersindical de
Assessoria Parlamentar (DIAP or Department of Inter-Union
Parliamentary Assistance) has calculated that, in 1991, among

the 584 senators and deputies in the National Congress, more

 

* Frrnn 1964 to 1985, the military regime imposed indirect elections of
the president of the republic. In 1985, the last indirect votation by
‘the Chongress elected a civil government, composed by the governor of
Minas Gerais, Tancredo Neves, and the situation party dissident José
Sarney. The sudden ilness and death of Tancredo Neves in that same year,
just before the presidential ceremony, leaded Sarney to the presidency.
As a vice-president, his government was legally restricted to four

years.

84

than 130 were owners of radio and television licenses. And
this number is only a small fraction of the real one, which
includes those politicians who registered the concessions
under the name of friends or relatives (1991r). After the
issue of the new Constitution Letter in October 1988, the
process of conceding licenses to operate radio and television
stations became more public. The law still attributes the
concession decision to the Executive power, but now the
Congress has to validate such decisions. Afraid of
Congressional “harassment," the Communication Ministry
quickly gave away about 450 concessions in the nine months
prior to the issue of the new Letter — that is, one
concession a day.

The initiatives used to avoid Congress seemed rather
unnecessary a few years later. In 1991 the Senate approved,
without any discussion, the distribution of 64 stations of
radio and television, determined during the last days of the
Sarney government. The 51 members of the Science, Technology,
Informatics and Communication Commission of the Congress were
responsible for evaluating the Executive's decisions, but
their conflicts of interest were clear: at least 17 of them
were also licensees ($6, 1990). In total, Sarney distributed
1,316 radio and television stations during his government;
288 were sent to Congress for approval and only 185 were
finally conceded.

Although engineers insist that both VHF and UHF frequency

ranges have been used to the fullest in most of the important

85

Brazilian cities (which would mean a maximum.of seven VHF and
ten UHF stations), the proportion of UHF stations is still
restricted in comparison to the VHF. The most updated channel
attribution plans found for this study in decree number 86 of
September 26, 1990 (1990e) and decree number 90 of September
28, 1990 (1990f) confirm that the UHF may have more room to

grow (See Table 2 and 3).

Table 2 - Channel Distribution for Retransmission in Brazil

 

 

State Total VHF UHF
Acre 38 26 68% 12 32%
Alagoas 13 12 92 1 8
Amapa 11 10 91 l 9
Amazonas 91 91 100 0 0
Bahia 529 419 79 110 21
Ceara 240 218 91 22 9
Distrito Federal 3 0 0 3 0
Espirito Santo 27 14 52 13 48
Goias 293 107 37 186 63
Maranhao 33 29 88 4 12
Mato Grosso 103 102 99 1 1
Mato Grosso do Sul 146 135 92 11 8
Minas Gerais 577 150 26 427 74
Para 232 133 57 99 43
Paraiba 25 14 56 11 44
Parana 457 79 17 378 83
Pernambuco 78 54 69 24 31
Piaui 185 111 60 74 40
Rio de Janeiro 68 15 22 53 78
Rio Grande do Norte 18 13 72 5 28
Rio Grande do Sul 551 211 38 340 62
RondOnia 43 43 100 0 O
Roraima 31 31 100 0 0
Santa Catarina 166 147 89 19 11
Sao Paulo 1391 113 8 1278 92
Sergipe 11 11 100 0 0
Tocantins 122 107 88 15 12

 

Source: Decree number 90 — September 28, 1990

86
Table 3 - Basic plan of VHF/UHF channel distribution in Brazil

 

 

State Total VHF UHF
Acre 8 4 50% 4 50%
Alagoas 8 4 50 4 50
Amapa 8 4 50 4 50
Amazonas 10 6 60 4 40
Bahia 23 18 78 5 22
Ceara 10 6 60 4 40
Distr. Federal 10 6 60 4 40_.
Espirito Santo 17 13 76 4 24;
Goias 17 12 71 5 29
Maranhao 15 11 73 4 27
Mato Grosso 13 9 69 4 31
Mato Grosso do Sul 15 11 73 4 27
Minas Gerais 37 35 95 2 5
Para 28 20 71 8 29
Parana 36 30 83 6 17
Pernambuco 15 11 73 4 27
Piaui 9 5 56 4 44
Rio de Janeiro 26 23 88 3 12
Rio Grande do Norte 9 5 56 4 44
Rio Grande do Sul 40 38 95 2 5
RondOnia 12 8 67 4 33
Roraima 7 3 43 4 57
Santa Catarina 27 23 85 4 15
Sao Paulo 63 46 73 17 27
Sergipe 8 4 50 4 50
Tocantins 9 8 89 1 11

 

Source: Decree number 86 - September 26, 1990

In the analyses of many media professionals, the practical
problem is not the ownership of media by the politicians, but
the use of the media for political purposes. In fact, the
ownership of a media company or access to one is something
most politicians consider as vital for the success of their
political campaigns. In the absence of a Fairness Doctrine,
as applied by the United States to assure an equal time to

all candidates in the media, a Brazilian candidate can win or

87

lose popularity depending on his/her ability to conquer media
space.

President Fernando Collor also used media concessions as
political tools. In the beginning of his mandate, in 1990, he
refused a proposal to adopt a random assignment every time
there is more than one candidate for the same license. His
Economy Minister and cousin, Zélia Cardoso de Mello, also
benefitted from the politics of concessions -— she was a
partner in the first subscription channel of Sao Paulo,
Canal+ (86., 1990). This political instrument became more
abundant after July of 1991, when the government increased
the number of licenses available in the country from 500 to
1,539 (1,376 for radio licenses and 163 for television).

The compression in the radio and television frequencies (a
real expansion in the number of stations) was justified so as
to allow the government to attend to the 1,000 applications
that had accumulated in the Infrastructure Ministry, although
it was really designed to open the door to more important
markets. The 103 licenses that Sarney did not distribute were
located in some distant, politically less important parts of
the country, but the reform promoted by Collor allowed the
creation of new stations in rich and populous areas, from
which many politicians draw votes (Cruz, 1991). Since the VHF
spectrum is mostly taken in such areas, and new entrants are
more likely to pursue specific segments of the market, the
development of the UHF system and television segmentation

seem to be very intertwined in Brazil. The UHF system,

88

however, has a history of develOpmental difficulties. Some of
the problems are inherent in the characteristics of the ultra
high frequencies, but others are a mere reflection of the low

value given to this service across the years.

4.1.2 The UHF handicap

On July 1, 1952, the American Federal Communications
Commission opened the ultra high frequency band of the
electromagnetic spectrum to television broadcasting in the
United States (See Table 3). After a five-year embargo on any
permits, the Sixth Report and Order tentatively allocated
2,000 stations in 1,357 communities using 70 new channels (14
to 83). Together with the VHF stations, the television
spectrum had been increased six times. Nearly all stations
were for cities with less than 50,000 population, and the
goal was to increase competition to a national level,
encouraging a wide choice of television programming in an era
before cable. Indeed, the previous FCC's policy of localism
in the VHF television channel assignment had limited to three
the number of possible networks in the country, and of 272
major markets, only 71 were served by three or more TV
stations (1962b).

With the addition of VHF stations as well, the combination
should provide 2,000 TV stations within a few years (See
Table 4) (1951), elevating to five or six the number of

possible national networks (1962b). The FCC's enthusiasm for

89

 

 

Table 4 - 1952 Channel assignment in America
VHF UHF

Commercial 617 1,436

Educational 80 162

 

Source: Foster, E.. Understanding_Broadcasting. Addison-
Wesley Pub., 1982.

the UHF band was shared by the entrepreneurs.Two hundred of
the 500 applications filed were for the less disputed new
television band (1952). The first commercial UHF station to
go on the air was KPTV in Portland, Oregon, on September 20,
1952. By November 1, 1953 there were 94 UHF stations in
operation and the FCC had issued construction permits to 180
more (Hertzberg, 1954).

However, such high expectations would soon fade as neny
stations folded. Two years after the UHF was opened, a
comparison of the 135 UHF stations and the 151 VHF stations
that got started in that period revealed very negative
numbers. About 15 percent of UHF and 37 percent of VHF
stations were making a profit; from the 77 permits never
used, 64 were UHF and only 13 were VHF; and of the 12 who
quit after getting on the air, 10 were UHF and only 2 were

VHF (1954a).In his book, Understanding_Broadcasting, Eugene

Foster recollects this frustrated beginning:

By the end of 1952 there were three UHF stations on
the air and many were encouraged that within six months
of the lifting of the Freeze, three applicants could get

90

through all the red tape at the FCC, order and accept
delivery on their equipment, and begin broadcasting. A
year later the number had risen to 115 and there was
reason for optimism. However, in the summer of 1953
there had been stories in the trade press about UHF
stations that were encountering serious audience
andfinancial problems. By the end of the year some had
given up. The year-end figures for UHF stations on the
air in the 19503 were:

 

 

Year Number of Stations
1952 3
1953 115
1954 116
1955 102
1956 91
1957 84
1958 77
1959 76"(p.133)

 

Indeed, the arrival of UHF stations, more than a decade
after the FCC authorized television as a broadcast service,

found a very inhospitable market. A Newsweek magazine article

describes this late adoption of UHF:

Experimentation in television began before World War
II in the VHF range, because transmitters could not
handle higher frequencies. The small VHF band was hemmed
in by military frequencies, after the war several
engineers (including some at CBS) urged that TV be moved
to the wider UHF hand. But broadcasters and
manufacturers, anxious to increase set production and
programming, claimed that UHF equipment would be years
in developing, and that TV should start commercial
broadcasting in the VHF range. Somewhat reluctantly, the
FCC agreed (1966).

By 1952 there were already 108 VHF stations in 63 of the
United States' largest markets, broadcasting to more than 17
million households with antennas and receivers purchased for

VHF only. Moreover, the Big Three networks had established a

n
‘n
V
t
A.
\

i

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s;

:h

,
but

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91

VHF infrastructure and, along with the TV set manufacturers,

were said to be boycotting the UHF with fear that this
frequency would take over the VHF (1962b). The FCC took a
series of actions to alleviate such problems before realizing
that the network option for VHF was actually conditioned by
the advertisers' interest in the larger audiences delivered.
In 1954, the Federal Commission added two UHF stations to the
maximum of five each network could own (1954a), but after
frustrated attempts, the networks quickly reaffiliated with
their former VHF stations.
The competition for VHF stations was especially difficult
as the 1952 license "defrost" also allowed VHF stations to
increase their power and coverage, reaching former UHF-only
markets. The FCC's intermixture plan was designed to assure
at least two stations in small markets and about seven in the
larger ones, but the simultaneous growth of VHF seemed to
limit the chances of UHF stations. The so-called "drop-in"
authorized by the FCC allowed a VHF station to broadcast a
directional signal from a neighboring town, without
interfering with cities in other directions (1955c). Later,
the FCC also allowed VHF to extend coverage by operating up
to five satellite and booster stations (1954b). Facing direct
competition in 70 of the 100 top markets, many UHF stations
encountered severe difficulties. General Electric, which had
about $3 million tied up in UHF TV equipment that was yet to
be paid for, launched a new company called National

Affiliated Television Stations, Inc. The company was to give

 

 

92
management advice, and provide sales force and direct
financial aid to the new UHF stations. Another supporter, the
distributors of TV films, National Telefilm Associates,
furnished its library to UHF operators on time—payment plans
(1955d).

The unfair competition between UHF independents and VHF
affiliates led 35 UHF stations to petition the FCC to
restrict five cities to UHF-only, but the request was turned
(hymn (1955c). Under accusations of favoring the networks, the
FCC started a deintermixture plan in March 1957 (Foster,
1982). The plan at that time was to take VHF out of eight
medium-sized cities where UHF was working; push the all-
channel TV sets bill; and make UHF stations easier to get and
build, by changing the standards for some of the equipment
(1961). According to Foster, ”only one active VHF station was
deleted. There were a handful of other markets that were
deintermixtured but none of them had included VHF assignments
in use" (Foster, 1982). Even though a real deintermixture
(separation) between UHF and VHF stations never occurred, the
'plan touched for the first time on the major problem of the
(RH? introduction. Since there were few TV sets capable to
tune UHF, the advertisers were not attracted, and since there
was less advertising money, the programming was less
attractive, and — closing the vicious cycle — viewers were
not motivated to buy the more expensive UHF TV sets (1955c).
Forcing all manufacturers to produce sets designed to tune

both bands, the FCC expected to break the cycle and boost UHF

 

 

93

development. Once again, there was a rush for new UHF
licenses. In spite of warnings by the FCC that prolonged
losses should be expected, 86 commercial stations plus 64
construction permits were quickly granted. For the first
‘time, too, the FCC had contests between broadcasters wanting
tau; same UHF assignment (1962a). But once again the stations
failed to achieve profits. For each VHF station with
financial problems, six UHF stations were calculated to have
tnrrned their licenses back to the FCC (1955e).

The successive frustrations with the UHF enterprises called
for many viability studies. In October 1978, a definitive
(diagnosis of the so—called UHF handicap was produced through
at national survey conducted by the UHF Comparability Task
Force within the FCC. Among its many findings, the Task Force
iconcluded that the main reasons generally accepted for the
slrnv progress of the UHF stations are the higher costs of
«operation, poorer signal reception, tuning difficulties, and
even) poor programming (Boyle, 1980). The importance of such
analyses to the present flourish of UHF stations in Brazil is
iJl‘the definition of which problems the Brazilian enterprises
should expect and which were specific to the American

pioneers. Following is a review of each of these challenges.
CHALLENGE 1: Higher Operational Costs

The upper position of UHF in the spectrum implies that much

more energy is required to generate the wave signals, which

 

 

94

usually have a shorter range — 30 to 40 miles, compared with
50 to 60 for VHF (1964). For station managers, this means
twice as much power is required to obtain the same coverage
area as a VHF station. For engineer Bill Tessman, of
Lansing's channel 47, the slower evolution of UHF technology
is a direct consequence of its late start.The inefficiency of
such amplifying devices was still great, however, in
comparison to VHF. The early UHF amplifiers were only 30
percent efficient, and the four-feet-tall, 400-pounds tubes
dissipated most of their energy as heat, requiring complex
water cooling installations. In contrast, with efficiency
rates reaching up to 90 percent, the VHF tubes need less
energy - about 5,000 volts — so can be smaller and air
cooled.

In 1966, the cost of operating a UHF station was estimated
at between $500,000 and $1 million a year, plus a minimum of
about $1 million to set it up (1966). Today, the efficiency
is raised to figures between 50 and 60 percent, but Tessman
reminds us that the cost of the sizable infrastructure
required to manage energy supplies of around 25,000 volts and
to cool the water from the amplifier refrigeration system is
still two or three times that of a VHF competitor.
Nevertheless, he believes that the UHF evolution is gradually
being won on small grounds, and a transistorized UHF
transmitter should be expected by the end of the century. One
of the simplest evolutions, he suggests, is the adoption of

wave guides to deliver the signals from the studio to the

95

transmitter tower. The wave guides substitute the coaxial
cables with advantages and constitute square ducts where the
radio waves bounce up to the sides, reflecting their way up
to the top (Tessman, 1992). Until more efficient hardware is
developed, however, this overall technical handicap persists

for all UHF stations across the world.

CHALLENGE 2: Poorer Signal Reception

The physics of radio wave propagation also dictate unique
patterns of signal transmission and interference by other
sources of waves. While the VHF band is said to be more
subject to interference from man—originated noises, like
those coming from car ignition systems, neon signs or
electrical machinery, UHF was once said to be more easily
blocked by buildings and even trees (1951), ricocheting off
the ground and metal surfaces (Benrey, 1964). In fact, the
laws of physics do determine that the higher the frequency,
the smaller the wave length and the easier the blockage. But
the performance of UHF stations had to be repeatedly tested,
with many contradictory results, before a virtual handicap of
the higher frequencies could be forgotten.

WUHF, channel 31 of New York proved that UHF would work in
a large city, where the tall buildings could block the UHF
signals (1961). Other tests indicated that UHF transmissions

seemed better at night and in hot humid climates (Hertzberg,

1954). Overall, the picture quality of both frequency ranges

 

 

96

was found not to vary significantly and it is not an

important issue today. The FCC Task Force produced revealing

data about it :

Most Americans find picture quality better on VHF
channels than on UHF. However, there is no real
difference between UHF and VHF channels in the
comparative incidence of most reception problems. Weak
signal or snow is more likely to be a problem on UHF
than VHF channels. Nevertheless, this can hardly be the
source of the perceived UHF picture quality handicap,
since the difference in the incidence of snow is only
pronounced among those who receive equal numbers of UHF
and VHF channels. The survey finds, however, that
less than half of the public (49%) receive at least one
UHF channel whose picture quality they rate as
excellent. Moreover, fully two thirds of the sample
(66%) receive more VHF than UHF stations with picture
quality rated as good or excellent. Hence, the negative
evaluation of UHF picture quality may have more to
do with the availability of UHF reception than specific
reception problems (p. 97) .

In essence, their conclusion was that the lower reach of
UHF signals was responsible for a generalized negative
perception, even though the picture quality is comparable
within the more restricted coverage area. The signal
propagation curves are based on statistical calculations,
which were never really adapted from the American model to
the Brazilian scenario. The temperatures, the landscape and
the grounds are different, and the model is not perfect. In a
skyscraper in a metropolis the delivery of any airwaves can
be problematic, and in Sao Paulo the new UHF stations are
facing very congested airwave traffic. Since the receiving
antennas are not easily redirected, the stations tend to

place their antennas in the same direction as the pioneer or

 

97

most-watched channel. The Sumaré neighborhood, one of the
highest points of Sao Paulo, has four TV transmission
antennas -— SBT, Manchete, Abril and Cultura. The Avenida
Paulista antennas (Globo, Record and Gazeta) are not far
away, causing all sorts of interference problems in radios,
TVs, telephones and even medical equipment operating in the
area.

The concentration of powerful transmitters in one area
makes the level of signals transmitted very high and, as
these signals travel through the air, telephones and other
equipment that generate electromagnetic fields can become
reception antennas to them (Abreu, 1990). Unfortunately, the
concessions to build antennas are given by the federal
government and the city has no authority over them. The only
valid municipal legislation is the Code of Buildings, which
determines that any tower in town must be distanced from the
sidewalk an equivalent of a fifth of its height (Abreu,
1990).

Nevertheless, as the control is deficient, the majority of
antennas were irregularly built and, if many have already
received amnesty, others are getting regular penalty fees
even now. The ideal solution would be to have all
transmitters in one unique antenna, as has been done in
Brasilia and many cities across the world. The stations,
however, never came to such an agreement, which requires all

transmitters to have the same power and reach, whereas some

companies wanted stronger transmitters (Mawakdye, 1992).

98

Since the exposure to excessive radio and TV waves can cause
damage to the human nervous system and reproductive organs,
the state government ordered in January 1992 a report from
the Institute of Electrotechnique and Energy of the
University of Sao Paulo. A previous study by Companhia de
Tecnologia e Saneamento Ambiental (Cetesb) in 1986, when
there were fewer than a dozen antennas in the Avenida
Paulista region, indicated radiation three times the limit
imposed in America. Today, there are 30 transmitter antennas
and 2.8 million watts of power irradiated in the area, and
concerned politicians are said to be elaborating a legal
project to avoid more antenna concentrations like this
(Mawakdye, 1992).

The creation of UHF channels in all-VHF markets such as the
Brazilian capitals demands a few adaptations in the reception
hardware, too. The television sets must be able to tune UHF
channels, and the appropriate antennas must be installed.
(Many issues of Popular_Science magazine and others in the
early fifties described the various newly designed UHF
antennas: parabolic, rhombic, stacked vee, bow tie, etc.
(1951).) Thus, the lack of UHF antennas can also be a problem
associated with poorer signal reception, even though the FCC
Task Force discarded the relevance of it:

The impact of UHF antenna systems on the UHF reception
handicap is relatively marginal. ... Moreover, even with
a UHF outdoor antenna, we find that a very formidable
UHF reception handicap continues to exist. ... However,
the presence of some kind of UHF antenna significantly

increases the number of UHF channels and the quality of
reception on those stations. ... It is important to note

99

that lack of reception equipment does not make either
UHF reception or UHF viewing impossible in some
situations. Among those who have no UHF antenna on their
primary television receiver, 62% report receiving one or
more UHF channel, 36% report receiving one or more UHF
channel with good or excellent picture quality, and 11%
report some UHF viewing on the previous day. In each
case, these rates are below those of individuals with
indoor or outdoor UHF antennas (p. 101).

In Brazil, as shall be described in the following section,
dealing about STV, the majority of external antennas used are
old and scarcely effective. In a city full of buildings like
Sao Paulo, most of the collective antennas work with VHF
only. As a general rule, the smaller towns, which had already
UHF retransmitters, seem to be better prepared to receive
these signals than the capitals, where the UHF has just made
its debut. The new stations in 350 Paulo, on the other hand,
have enhanced their transmissions with NTSC productions and
stereo broadcasting. The stereo transmission enables the
audience to listen to the dubbed or the original sound,
depending on the characteristics of the receiver. The new TV
sets have a resource called SAP (Second Audio Channel), which
allows the choice of sound tracks to be received. Both Jovem
Pan and MTV also operate internally with the American NTSC
signals. The need for various transcoding between
incompatible machines is a common problem to television
producers in Brazil, resulting in lower picture quality. In
tflxis manner, they will also be able to incorporate, faster
auui more efficiently, any technological development offered

by the American and Japanese markets, which use the NTSC

100

system and consist the main innovators in the industry. The
conversion to the PAL-M system used in Brazil takes place
only before broadcasting, in compliance to national
telecommunications rules that prohibit television

transmissions in systems other than PAL-M.

CHALLENGE 3: Tuning Difficulties

Probably the biggest disadvantage of the UHF late adoption
was the lack of television sets capable of receiving the
higher frequencies. Foster comments:

If the Freeze had ended in 1948 rather than 1952, the
UHF problem might not have developed to any significant
degree. There were, at the earlier date, only fifty
stations on the air and fewer than a mdllion receivers
in the country. When families bought television sets for
the first time, it would have been much easier to
persuade them to pay extra for a built-in UHF tuner and
to put up antennas that were appropriate to the UHF

signals as well as to the VHF. In many markets the UHF
stations would have been minimal (Foster, 1982, p.135).

While there were an estimated 26 million VHF sets in
America, only 2 to 3 ndllion could tune UHF signals in the
early 503 (1954a). Right after the introduction of the higher
band, most manufacturers made experimental attachments to
allow the UHF reception. The trick was to change the UHF to a
‘VHF frequency not used for any channel (1951). But the costs
involved were high, and there were just not enough UHF
stations or desired programming to justify them. The cost of

conversion to UHF was estimated at $40, including the

101

converter and the labor of a new antenna installation — quite
a lot for that time (1962b). Moreover, the UHF tuners had no
pre-set channel buttons and required a patient and manual
search for the best tuning position. The Task Force
concluded:

Today (1980), UHF channels suffer a serious
disadvantage in ease of tuning. Only one-third of the
public (33%) find that there is no difference in ease of
tuning. Nearly half (47%) feel that it is easier to tune
VHF channels, while only 3% find it easier to tune UHF.
The principal criticism of current mechanical
systems of channel selection is that they require more
effort to turn channels among the highly dispersed UHF
channels, than 1x) select the highly' clustered.‘VHF
channels. ... This tuning handicap does have a
significant relationship with viewership. Only 14% of
those who find it easier to tune VHF channels on their
television watched any UHF television on the day before
the interview. By contrast, 26% of those who find no
difference in channel tuning had watched some UHF

television, while 52% of those who find it easier to
tune UHF report UHF viewing (p. 128).

This vicious cycle was only broken ten years after the end
of the Freeze, with ”an amendment to the Communications Act,
allowing the FCC to require that all television sets sold in
interstate commerce include a UHF tuner" (Foster, 1982). At
that point, an alarming 50 out of 55 million sets received
only VHF signals (1962b). And, in spite of the compliance
deadline of 1964, the fear of losing buyers with a $20 price
increase kept the production of new sets at a slow pace. Less
'than one year before the deadline, only 20 percent of TV sets
produced were all-channel receivers (1963).

In the following years, as manufacturers increased

prrxduction, the new sets started coming out of the factories

 

 

102

with built-in UHF tuners (See Table 5), the transistors

previously adapted only for those tuners gradually became

generalized to the whole set. Modern electronic television

Table 5 - U.S. TV sets versus UHF/VHF stations (1958—1990)

 

Year Stations VHF UHF Units Dollars
1958 5,131 720,000
1959 6,368 843,000
1960 515 440 75 5,829 797,000
1961 6,315 814,000
1962 7,134 1,005,000
1963 7,983 1,099,000
1964 9,764 1,384,000
1965 569 481 88 11,477 1,869,000
1966 12,714 2,617,000
1967 11,564 2,570,000
1968 13,211 2,677,000
1969 13,308 2,585,000
1970 677 501 176 12,220 2,202,000
1971 14,921 2,976,000
1972 17,084 3,474,000
1973 17,368 3,657,000
1974 15,279 3,201,000
1975 706 514 192 10,637 2,492,000
1976 14,131 3,388,000
1977 15,431 3,811,000
1978 17,407 4,308,000
1979 16,617 4,180,000
1980 734 516 218 18,532 4,938,000
1981 17,423 4,854,000
1982 17,365 4,760,000
1983 20,045 5,467,000
1984 21,613 5,957,000
1985 883 520 363 20,829 5,872,000
1986 22,721 6,353,000
1987 23,300 6,559,000
1988 23,460 6,253,000
1989 1064 545 519 24,669 6,900,000
1990 1186 569 617 23,065 6,624,000

 

Source: Broadcasting & Cable Market 1992.Data compiled by
jElectronic Industries Association. TV sets figures are in

thousands.

Television_a_yideorAlmanac_l992

- 37th. Edition.

103

receivers have made all channels equally easy to tune, so
this challenge: is not significant. in .America. anymore.
Nevertheless, the new Brazilian UHF stations are facing
similar problems now, especially in the capitals, where UHF
is just starting. Three decades after the American all-
channels law and the introduction of television in Brazil, a
1982 law required the Brazilian sets to offer UHF tuning
(Pinto, 1982). But it is generally estimated that the
majority of the 3.8 million TV households in Brazil have sets
unable to receive UHF signals.

The all-channel receivers have practically arrived in the
Brazilian market only in 1989 and alternative tuning devices
are still in demand. Since VCRs can tune UHF channels, they
have become important allies. The companies emphasize the
better reception of their broadcast signals by stressing all
possible tuning methods in their promotional campaigns. The
impact of tuning difficulties on new segmented UHF stations
like MTV-Abril or Jovem Pan is not likely to be very
significant, though. Their target markets consist of higher
classes, which can count on newer all-channel TV sets or any
other tuning device.

But among the four million TV households in metro Sao
Paulo, for example, only 1.5 million can receive UHF signals
(1990h). TV Abril calculates that 1,290,000 households have
TV sets and/or VCRs able to receive UHF signals in Sao Paulo.
This 30 percent of total households is raised to 57 percent

'within class B; 84 percent within class A (Department, 1990).

104

The penetration among the higher classes is also facilitated
by satellite relay and VCR tuning. It is estimated that there
are more than 150,000 parabolic antennas and between 800,000
and 1 million VCRs in Brazil, which means the same number of
potential UHF receivers (Luiz, 1989) (Department, 1990).

Like the FCC did just before the implementation of the all-
channel law, the UHF stations of 350 Paulo launched a joint
campaign in February 1991 to teach the public the various
ways to capture the UHF transmissions. Using basically in-
house resources, the campaign involved Jovem Pan radio, Abril
magazines and millions of pamphlets distributed across the
city. For young audiences like MTV's, the campaign has been
more effective. Abril officials explain that the youngsters
are more curious and more knowledgeable about electronic
equipment, having fewer difficulties setting up the TV

receivers.

CHALLENGE 4: Bad Programming

The UHF Comparability Task Force found basic programming

deficiencies with UHF broadcasting:

Since public preference for network programming has
been repeatedly demonstrated by audience share studies,
the limited access to network programming — only 20% of
American communities have any UHF channel that serves as
a primary network affiliate — represents a fundamental
handicap to UHF broadcasting. A full third of the
viewing public report that none of the programs they
enjoy are carried on local UHF channels. Moreover, since
UHF stations generally have smaller audiences and
revenues, it should be more difficult to produce or
purchase programming (p.133).

 

 

105

That was a time when UHF was synonymous with independent
station and poor or alternative programming. For the young
Brazilian enterprises, the survival of UHF stations with
segmented programming, especially those targeting ethnic
groups or the public affairs of local communities, represents
a positive sign. Chicago's WCIU was proof that local UHF
stations connected to the community had a chance to survive.
Its programming was based on taped soccer games, wrestling,
bullfights, and performances by local ethnic groups (1964).
These stations found original programming suitable for their
focused markets and survived with less audience shares. As
Chapter 5 points out, the original programming offered by the
segmented stations in 350 Paulo has interested market niches
as well.

In the search for programming that would attract audience
and advertisers, many' UHF stations opted. to <eliminate
advertisers and become subscription channels (STV). That was
the case of WBSX, channel 31 of Ann Arbor, Michigan.
President Christopher J. Webb says that, as the station found
itself with financial problems, it scrambled the signals and
became an STV channel, but with the arrival of cable
television the station opened the transmissions again. Today,
WBSX is a full-time affiliate of Home Shopping Network,
lxroadcasting direct sales programming and enjoying a
performance evaluation based on sales instead of ratings

(Webb, 1992).

106

But the real change in this scenario came only in 1988,
when Fox Broadcasting Co. launched its new network. Producing
and/or syndicating shows aimed at younger audiences, Fox
started with shows that aired one night a week through a
chain of 105 independent stations, most of them UHF. Beating
all the challenges of UHF, Fox offered alternative
programming for an audience that was not totally satisfied
with the family entertainment proposed by the Big Three
networks. The so-called “baby boomers" (18 to 49 year-olds)
were the right target, with money and a desire to spend it.
The advertisers, on the other hand, were happy with prices
that were half of those charged by other networks. Behind
this winning strategy is Barry Diller, the former Fox
Chairman who was also responsible for ABC's jump from the
third to the first place in the mid-19703. With marketing
strategies that include the broadcasting of original episodes
in the summer, when the audiences are smaller and networks
usually offer reruns, Fox overcame losses of $50 million in
1987 and is now filling almost five nights of the week with
audience shares that have threatened the networks (Grover,

1987).

CHALLENGE 5: Measurability?

.A.fifth challenge in Brazil may be the lack of ratings for

UHT‘ stations. Even though they may offer good programming and

'werea attracting significant audiences, the UHF broadcasters

l ()7

have found it difficult to attract advertisers without a
measure of their market penetration. In their early days,
indexes were substituted by the prestige of the parent
companies, but magical numbers were soon demanded. Without an
audience index in Sao Paulo, Abril used the phone calls
received by its “Disk MTV" program to evaluate the reception
by the public (Flesch, 1990).

Others are simply relying on the work of advertising
agencies. The media departments of advertising agencies have
worked with information furnished by the stations, in the
same manner as they used to do for magazines before the
Instituto de Veiculacao Comercial (IVC) started doing regular
measurements about the printed media (Luiz, 1989). By mud-
1991, Instituto Brasileiro de Opiniao Pfiblica e Estatistica
(IBOPE), one of the most respected market research companies
in Brazil, experimentally included some UHF channels in its
periodical audience report, more specifically for channels 32
(MTV) and 16 (Jovem Pan).

The bulk of the reports is based on the People Meter survey
system, which has electronic devices connected to the main TV
set of 256 households in metro Sao Paulo (See Table 6). The
devices indicate the channel tuned at every moment, including
the time the VCRs are used, but contains a major flaw. It
cannot indicate the use of VCRs to tune UHF channels, a
practice considered common among the middle class, which owns
older TV sets connected to VCRs. Thus, the solution adopted

is to add an approximate 20 percent of the VCR viewership to

108

the audience of each UHF channel. Moreover, IBOPE calculates
that only 37 percent of the surveyed households are capable
of receiving UHF signals, which may put under suspicion the
statistical validity of the data. As the audience shares
rarely exceeds one percent or approximately 37,000 families
in Sao Paulo, the margin of error is quite considerable

(Lima, 1992).

Table 6 - Brazilian IBOPE People Meter ratings of MTV

 

 

 

 

 

Date/ hour Sets on VHF UHF JP MTV Others VCR
1/25/92

10h30 19.09 17.80 0.09 0.03 0.06 - 1.21
14h00 37.87 34.78 0.15 0.09 0.06 — 2.96
18h00 46.50 43.63 0.71 0.71 — - 2.53
20h00 52.08 49.05 0.76 0.76 - — 2.28
1/26/92

10h30 22.51 21.26 — - - - 1.26
14h00 40.58 36.56 0.86 - 0.46 0.40 3.17
18h00 46.74 43.63 0.03 - 0.03 — 4.00
20h00 55.76 51.56 0.30 0.03 0.27 - 3.92
1/27/92

10h30 23.56 21.79 - - '— — 1.77
14h00 45.76 43.73 - — '— - 2.40
18h00 44.64 43.32 0.49 - 0.49 - 1.01
20h00 65.64 62.98 0.29 0.23 0.03 0.03 2.83
1/30/92

10h30 21.15 20.84 0.07 - 0.07 - 0.25
l4h00 43.95 42.23 0.03 0.03 - — 2.15
18h00 52.06 48.92 0.48 0.45 — 0.03 2.68
20h00 71.17 67.94 1.12 0.42 0.62 0.09 2.74

 

Note: Survey based on Metro 330 Paulo universe of 3,979,000
television sets.

109
4.1.3 UHF Today

Most of the UHF problems have been overcome today and the
number" of ‘UHF stations has actually surpassed. the ‘VHF
stations (See Table 5 previously). The percentage of
profitable UHF stations increased from 37 in 1967 to 58 in
1980, and no UHF station has gone off the air since 1976
(1969b) (1982c). For many professionals, the growth of UHF
was greatly boosted by the concomitant penetration of cable
television in America. Arriving at the subscribers' TV sets
with equally good picture quality and tuning ease, VHF and
UHF channels can hardly be distinguished anymore. But the
development of cable was withheld by the FCC, especially in
the larger cities (top 100 markets), due to fears that
cable's distant signal importation would be fatal to the
weaker UHF independents.

The 1970 Rand Report concluded, however, that ”the effect
of cable is to increase the revenues of UHF independent
stations in the near term (through the 19703), and decrease
them in later years. UHF independents generally get larger
audience shares on the cable in competition with distant
signals than they do over the air in homes with UHF sets"
(Park, 1970). Since the UHF entrants in Sao Paulo are leasing
satellite transponders to deliver signals to affiliates all
over the country, the growth of cable in Brazil may also be
positive, as a possible alternative outlet. In 1992, the FCC

authorized American networks to have "cable affiliates" where

 

 

110

their programming cannot be provided by a local station. This
may become a better solution in Brazil.

According to engineer Lucrécia Costa of TV Jovem Pan, the
Sao Paulo UHF stations are facing many problems to enlist
affiliates. In some areas, it is virtually impossible to add
another UHF channel because of bad or irresponsible
transmission setups. She explains that the intercity relays
that should use focused transmissions, usually irradiate
signals in a large area, affecting nearby stations. Since
there is no rule concerning the technical standards for
retransmission, a better use of the airwaves can hardly be
enforced. Moreover, in the smaller cities, where the local
government owns the satellite dishes that bring all the
channels to town, the decision to rebroadcast another channel
can be a political one. MTV and Jovem Pan are the main
competitors in these markets and, while the mayor's kids may
be pressuring him for MTV, Pan is marketing its news service
as political-plus, similar to the way CNN did among cable
operators. Worsening the situation, explains Lucrécia, are
equipment manufacturers that approach prospective affiliates
and sell inadequate materials. Most parabolic antennas in use
across the country are not able to receive the signals of a
half transponder, which requires high-power receivers and
larger antennas (Costa, 1992).

As a result of the 1980 UHF Comparability Task Force, the
FCC decided not to do anything else to help UHF other than

taxplain to consumers how they could enhance the broadcasted

lll

UHF images by installing proper antenna systems. At the same
time, the FCC also abolished a rule requiring TV set
manufacturers to include channels 70 to 83, which had already
been used by land mobile radio services, a market that grew
from $7 to $20 million between 1958 and 1968 (1959) (1982c).
In fact, the success of many UHF stations did not mean a more
comprehensive use of this portion of the spectrum, and other
radio services have been taking a bite of the UHF band.
Scientists requested it for the study of the cosmos and, in
more than thirteen American markets, private land mobile
radio services share channels 14 to 20 with television
(1986). In Brazil, the UHF channels 74 to 78 have also been
conquered by the growing mobile telephony services, a market
estimated at $2 billion (1991j). But the biggest bite may
come soon to the United States, with the upcoming High
Definition Television (HDTV). Using more than twice the six
MHz used by the present television channels, HDTV will take a
large portion of the spectrum, forecasts Bill Tessman, from
Lansing's channel 47. He sees a future where each station
receives an extra channel and most of the operations move to
the wider UHF band, leaving VHF for other services.

This kind of forecast, however, may only be a revival of
controversial arguments in the late 19503 in favor of an all-
UHF television. In 1959, the FCC believed that 50 contiguous
channels were needed to provide adequate TV service for five
stations in each of the 100 largest American cities, and FCC

Commissioner Robert E. Lee favored scrapping the VHF

112
structure and moving all television to UHF (1959). With the

multiplication of radio services, the battle for the finite

spectrum is likely to grow.

4.2 STV, MDS, MMDS and the like

The concept of a television system paid for by the viewers
instead of advertisers is almost as old as television itself.
But there have always been ethical and technical difficulties
associated with pay-TV systems. There is a need to convince
viewers to pay for what is customarily free and, at the same
time, find technology that efficiently and cheaply restricts
the signals to subscribers only. In 1951, three American
companies were thought to have the answers. Zenith was
authorized to test its Phonevision system in Chicago,
followed in 1954 by Skiatron in New York City, and Paramount
Pictures' Telemeter in Palm Springs. They transmitted
scrambled signals and devised three different systems for the
viewers to pay for certain television programs: dropping
coins or inserting a computer card into a meter attached to
the TV set, calling the telephone company, or flipping a
switch connected to a telephone cable wired to the set
(1955a).

In. any <case, ‘these pioneer experiences enjoyed. some
relative success and attracted the networks' attention. The
networks feared the challengers' proposed plans to produce TV

shows and sell to local TV stations, sharing with them the

113

money taken in from the subscribers who view each show
(1955b). The debate promoted at that time by the media was
whether fee TV was broadcasting — since it involved
subscription and the use of extra equipment - and whether it
was legal to charge people for programming sent over “free"
public air (1955a).

On the last week of February 1958, the Senate Commerce
Committee asked the FCC to hold up pay-TV tests pending a
decision by Congress on the whole isssue. This killed the
possibility of pay-TV tests already authorized by FCC and
postponed over-the-air pay—TV indefinitely. In the meantime,
wired pay-TV, which did not need FCC authorization, was
having difficulties. Bartlesville, Oklahoma, the only
operating commercial plant, was forced to reduce programming
and monthly charges to attract subscribers. In Los Angeles,
two other plants returned franchises to the city a few months
after they were granted, due to fears of an uncertain
government policy on the future of the industry (1958).
Bartlesville lost a reported $500,000 when it closed in 1958;
and Subscription TV, Inc. went bankrupt in Los Angeles after
a few months of operation in 1954, losing $26 million (1968).

Not all networks boycotted pay-TV, though. CBS even
considered that it could make more money than it was making
by using pay-TV. A survey CBS conducted in Columbus, Ohio
showed that 25 percent of the TV audience would be willing to
pay to see some shows, under what CBS called “optimum

conditions" (1955b). CBS even found that 70 percent of

114

American top advertisers were in favor of ”toll-TV" (1956).
It was never successful, however, in garnering a significant
return on the investments.

A decade-long history of abortive trials and power lobbying
by both sides kept pay-TV in the news, but out of the market.
The pressure on Congress was so high that it twice rejected
FCC proposals for a test run of pay-TV — first in 1957 and
again in 1958. In 1959, a sum of circunstances allowed it
another chance. The networks were still suffering the effects
of the so-called “plugola” scandal‘ and were not in position
to attack the competitors. And since the FCC was considering
authorizing subscription priviledges to FM stations, the
equally troubled UHF stations should receive the same
treatment (1955a).

Congress finally accepted the FCC's trial with three
conditions: the test was to be restricted to one area, with
three free programming stations, and the results of the
three-year period would be reported to Congress. This
approval was a result of the FCC's chairman Frederick Ford's
policy to start pay-TV over the air before it would go by
wire, a system not controlled by the FCC at the time and
which Paramount Pictures was promising to develop across
America (1960).

The company that was awarded this new trial, RKO-Zenith,

selected a UHF station with the hope that the need and cost

 

' The law prohibits the advertisement of certain activities, without the

public being aware that such material is being broadcast for pay
(plugola).

115

of a converter would filter out viewers with insufficient
interest in TV (or money) to pay for a converter. Moreover,
there were fewer applications for UHF than VHF, making the
proposal more likely to be accepted. Channel 18 of Hartford,
Connecticut, was a hybrid, with 28 hours of pay-TV during
primetime and free programming during the rest of the day. It
broadcast four hours of pay-TV each night for 5,500
subscribers out of 275,000 TV homes covered by the station's
signal. While it was successful in getting recent movies, it
could not get specials or sports events of high cost (1968).
In the application, RKO compromised by agreeing not to
transmit any sports events that were shown free on TV (1960).
Mindful that complaints would be strong if sets conked out
during a subscription show, installation crews rejected about
15 percent of the applications (1962c). RKO expected to
invest $10 million during the three years and get 5,000
subscribers by 1963, but to turn a profit it would need
around 50,000 subscribers, each paying out an average of
$1.50 per week for programs (1962c). By the end of the three-
year experiment, pay-TV accumulated losses of $12 million.
The House Committee on Interstate & Foreign Commerce and the
FCC, which had battled for the right to authorize pay-TV on a
national scale, were then advised to do nothing for a year
while the situation was studied (1968).

In fact, pay television was still a controversial idea.
.Against pay-TV were the networks (NAB), the Theater Owners

.Association, and even a Connecticut Committee Against pay-

116
TV, a group composed of veterans, women and civil groups
(1960). The brochure, “Does the American family need another
mouth to feed?," signed by Arthur R. Taylor for CBS,
comments:

The basic notion of pay cable television is
nothing more than that the average television viewer
should pay for the programs that he now receives free.
The effect of this change in the free broadcasting

industry would be an incalculable disservice to the
American viewing public (Taylor, 1975, p.330).

But the RKO-Zenith concept of a UHF pay-TV system caught
on, and when the FCC authorized the subscription television
service (STV) in 1968, that concept was adopted — along with
all the restrictions that blocked its growth. The so-called
"antisiphoning rules," which precluded STV from most sports
events and movies launched before two to ten years pleased
broadcasters and theatre owners, but kept STV from any
valuable programming. The restriction to nerkets with four
conventional stations and the technical difficulties of
charging for individual problems did not help either. In the
19703, the STV enjoyed a relative success with the end of
restrictive laws, concerning the programming and the markets,
respectively, in 1977 and 1979. As Foster describes, Wometco
.Home Theater“ in 1977 became the first successful STV
operation in New York City:

Three years later there were eight stations — all on
the UHF band — with over 400,000 subscribers. Each was
offering an STV service with monthly charges about $20.

Typical scheduling included fifty hours a week composed
of domestic and foreign movies (unedited and

117

uninterrupted by commercials), sports, events, and
occasional specials (Foster, 1982, p.135).

It is noteworthy that this new batch of pay-tv services was
sold by the month rather than by individual programs. And,
together with the fact that many UHF stations were still
having financial problems at the time, a favorable
environment appeared for STV. In the early 19803, some 1.5
million. Americans subscribed (Barbieri, 1985). But the
circumstances quickly changed with the expansion of the
competing cable systems and the increased commercial value of
UHF stations. STV is aa more efficient system than cable,
presenting advantages like ease of installation, technical
viability in areas of different population densities, and a
much smaller operational cost. However, cable's higher
quality of signals and channel capacity for similar prices
represented a stronger appeal (Hoineff, 1991). STV companies
felt they could find a niche in cities not served by cable,
but as cable increased its penetration toward the present 60
percent, co—existence became impossible. It is calculated
that up to 90 percent of STV subscribers discontinue such
service when a cable company starts operating in the same
area (Hoineff, 1991). Sensing the rising prospects for UHF
stations as advertising-supported media, some broadcasters,
‘whioh used to lease time to STV operators, also started to
refuse to expand STV hours, at the same time increasing

prices considerably (1983c).

 

 

118
Thus, by 1983 the STV was in frank decline in America,

while it had not even started in Brazil (Hoineff, 1991). The
subscriber base dropped to 1.1 million, from a peak of 1.4
million on July 1982, 65,000 subscribers became necessary to
break-even, compared to 47,000 two years before (1983c). The
president of channel 31 of Ann Arbor, Michigan, Christopher
J. Webb, says that the decision to terminate STV services was
usually based on the difficulty of making customers pay the
bills, while many were pirating the signal with illegal
decoder boxes sold by other bankrupted services. The numbers
of the decadence were impressive. OAK Industries, Inc., a
giant STV operator, with 17,400 STV subscribers in Dallas and
31,700 in Phoenix, shut down both services after losing 45
percent and 37 percent of their respective subscriber base
(1983c). After a year of service, Cox Communications Inc.
closed operations in St. Louis (1983c).

In 1984, the situation became critical. Not a single major
STV operation had started in more than two years, while
fifteen services closed and the total number of subscribers
had dropped to less than half of STV's peak (Goldstein,
1984). By 1985 even STV's trade association had closed its
«doors. The Chicago, Cincinnati and Miami STV stations closed,
leaving New York, Los Angeles and Washington as the only big
«cities with STV service. The nationwide subscribership was
under 300,000 and in only one trimester this figure dropped

100,000 (Barbieri, 1985).

...... C; E . t. ..\s

119

4.2.1 Higher frequencies, more television

Delivering more than one channel or operating as a common
carrier, other paid broadcasting services created in the
19703 were expected to have a better fate. Generally called
wireless cable, in reference to cable's multichannel
capacity, these services broadcast omnidirectional microwave
(2 GHz) signals to subscribers at line of sight within an
average of 25 miles. The subscribers need special rooftop
antennas, descramblers and a downconverter. The initial
assignment of 31 such channels in each market was aimed at
benefitting “nonprofit groups interested in broadcasting
instructional programming," but these groups never managed to
effectively use services like the ITFS (Instructional
Television Fixed Service) or OFS (Operational Fixed Service).

Thus in 1969, when it started to face a shrinking interest
for its low-cost closed circuit TV equipment to the education
market, Varian Associates, of Palo Alto, California,
pioneered the so-called MDS (Multipoint Distribution
Service). With Lipper's Microband Corp. of America, it
planned to sell time on an MDS network to pharmaceutical
companies aiming at doctors in hospitals, car manufacturers
aiming at their dealers, and even companies that would
transmit movies to hotel guests. The FCC's ruling of MDS as a
common carrier in 1970 opened it in 180 cities and the 350
applicants for the individual channels spent about $1,000 for

antenna dishes to send messages to stores and affiliates

120

around the city, like :management reports, new’ product
presentations, etc. (1973).

In May 1983, the FCC allowed schools to lease time on their
ITFS channels to commercial firms, provided that at least
three hours per weekday is used for actual education. This
made some ITFS operations economically viable and greatly
increased the use of commercial MDS. But, in the end, 8 of
the 28 ITFS channels were lost in cities where they had not
already been claimed, and the MDS boom quickly vanished. From
750,000 in 1982, the total MDS subscribership decreased to
some 500,000 in 1984. With more channels available, the
single channel MDS became a multichannel service. This
variation of the MDS service appeared in 1982, when Staggs
Telecommunication Services successfully operated eight
transmitters of eight consecutive channels in Salt Lake City
(Hoineff, 1991). The MMDS (Multichannel Multipoint
Distribution Service) was expected to succeed at cities
without cable. The capital required to start an MMDS system
is smaller than for cable. Big city cable franchisees are
faced with up-front construction costs of as much as $1,400
per eventual subscriber, while MMDS need to invest only $300
per subscriber, and then only after signing him up. Some
16,000 applications for four-channel MMDS licenses were
pending in the fall of 1984 at the FCC, awaiting selection by
lottery. "According to the Wireless Cable Association, some
‘tk systems served more than 300,000 subscribers in the U.S.

in 1991" (Yuster, 1992).

121
4.2.2 Will pay-TV work in Brazil?

The concept of pay-TV arrives in Brazil in similar modes.
The less costly infrastructures of wireless systems have
enjoyed a quicker development and more legal support than
cable communications. And the acceptance of high fees has not
been a problem among the reasonably large number of elites in
the capital cities, most of whom are acquainted with the pay-
TV concept (see subscription sales in Chapter 5). In 1982, a
decree first identified STV as a special service under the
radiodifusion regulations (Pinto, 1982). But it was only in
1988 that President Jose Sarney created Subscription TV
through a decree in the Union_foieial_Diar¥ of February
23rd. STV programming can include advertising (up to 10
minutes per hour) and it is not subject to any kind of
censorship. STV can follow the same legislation that applies
to regular television in what concerns the concession period
for it (15 years, renewable for an equal period) and the
prohibitions on it (it is not allowed to incite civil
disobedience, propagate contraventions or facts that are
anti-moralist, among others). The licensees must be native
Brazilians and cannot transfer concessions within five years
of the granting (1988c). On other points, however, STV
follows different rules. The regular TV networks, for
example, are free to explore the service, and like the

regulation of FM radios, STV cannot be transmitted in a

122

national or regional network form (Mauad & Rocha Filho,
1990).

As interested parties, the Brazilian networks did not
boycot STV — at this point at least — like the American
networks did in America. More important, the president can
distribute STV concessions without approval from Congress.
The legal basis for this is in article 81, item 111 of the
Constitution and article 15 of the Norms for STV Special
Service. These norms were instituted by decree number 95.744
and altered by decree number 95.815 of March 10, 1988
(Teixeira, 1988).

The official notice number 90 of the Communication Ministry
opened the competition for STV channels in the metro Sao
Paulo area on March 24, 1988 and fourteen candidates applied:
Pira Som & Imagem Ltda., TV Tres Ltda., Ipe Radio e Televisao
Ltda., Radio Jornal de Sao Paulo Ltda., TV Manchete, Rede
Jocam de Comunicacao, Paulista Metro, TVA, Rede Jaragua de
Televisao, Casablanca Produgoes Cine VT, DVT Cine VT
Producoes, Art Studio Radiodifusao, TV SBT Canal 4 de Sao
Paulo and Televisao Show Time. Alleging technical reasons,
the Communication Minister AntOnio Carlos Magalhaes changed
the first concession, granted to Abril Publishing's TVA, from
the planned channel 50 to 24, which benefitted Abril with a
less interference—sensitive channel. Globo Network's Paulista
Metro, Show Time (owned by Sarney's friend Mathias Machline)
and the recently created Pira Som & Imagem were also awarded

at that time. Within a year after that, the Communication

123

Ministry had opened concessions in Rio de Janeiro, Vit6ria,
Porto Alegre and Salvador. In 1990, president Sarney waited
for the recess of the Legislative to distribute, at once, ten
subscription television channels: four in Rio de Janeiro, two
in Porto Alegre, two in Brasilia, one in Fortaleza and one in
VitOria. At Rio, where the official notice 255/88 had been
receiving applications since August 5, 1989, the competitors
for an estimated 500,000 subscribers are Globo's Rio Metro,
Machline's Show Time, Nova Comunicacao (connected to
politician Alvaro Pacheco) and Radio RPC FM (owned by Paulo
Cesar Ferreira, connected 11) Globo's vice—president). In
Porto Alegre Rede Brasil Sul (Globo affiliate) and Sao Paulo
Enlaces (connected to Machline) have applied (86, 1990).

The avoidance of the Congress was granted by Justice
Minister Saulo Ramos, who used a loophole in the
constitutional norms to reassure, two months before, that the
concession of subscription channels were to be the exclusive
responsibility of the Executive power. The loophole was based
this time on the definition of radiodiffusion. A 1962 law
(number 4.117) states that the radiodifusion service is the
one that distributes signals ”in a direct and free manner.”
Paid television would be, therefore, a special service, not
under Congressional supervision. However, even if this
definition of radiodifusion were to be accepted, another law
of 1988 (number 95.744) allows the ”use of STV partially
‘without coding" - which makes it a radiodifusion service (86,

1990). In this first phase, the Communications Ministry has

124

given STV concessions only to state capitals, leaving the
medium-size cities to a second phase. Until the beginning of
1990, fourteen concessions had been distributed, not
exceeding four in each city. Sao Paulo and Rio de Janeiro got
four, Brasilia and Porto Alegre got two, Fortaleza and
Vit6ria got one (Mauad & Rocha Filho, 1990).

The challenge of these channels is to conquer the majority
of the Brazilian higher classes, a market relatively small,
compared to the overall population. One STV channel risked
calculating that there are two million prospective viewers of
STV in Brazil. From these, 50 percent would be in 350 Paulo
city, 20 percent in the interior of the state of 350 Paulo,
and 30 percent spread all over the rest of the country
(1991w). More conservative studies estimate the potential of
STV as equivalent to 20 percent of sets turned off during the
peak audience periods of the networks programming (1988e). In
any case, more than enough to support a couple of STV
channels. In may 1992, the companies in operation estimated
that at least 70,000 subscribers paying between $20 and $40
for a monthly fee would be required for any of the operations
to reach a break—even point (Iori, 1992).

The limitation of the signal broadcast to the paying
subscribers is done by scrambling the signals. In the UHF/STV
system, the signals are available to anyone with a TV set
that has the capacity to receive UHF channels. Images can
only be descrambled at the viewer's home equipped with

specific decoder equipment. The adoption of common decoder

125

equipment by all companies was the first challenge faced by
these fledgling competitors. The Communications Ministry
repeatedly stated that the national industry was capable of
producing the decoders on a large scale and, indeed, there
were a couple of plans in that respect. Machline, who also
owns a group of electronics companies, stated that it would
consider the manufacture of decoders in case the importation
proved less interesting, and Abril planned to build a decoder
factory, before the threat of competition made it abandon the
idea (Picillo, 1989). The pioneer STV company in Brazil,
Machline's Canal+, ended up importing the American Zenith
sets, but the other stations did not approve of such choices.
A pool of companies — Metro Paulista, Alpha and Abril -
agreed to let the Brazilian Society of Engineering and
Television (SET) evaluate the best equipment and suggest the
standard for them. Thus, on September 12, 1989, SET promoted
a conference in 350 Paulo, gathering large manufacturers of
decoders for pay-tv systems, such as Phillips Brasil, Nozatek
(Argentina), Scientific Atlanta, Zenith Electronic Co. and
Comband (USA).

Even though the choice of a decoder was not promptly
achieved by SET, the conference produced interesting reports.
Overall, the SET opinion elaborated that the viability of STV
in Brazil would depend on the formation of networks, uniting
several companies with one programming lineup. Only this way
can the costs be reduced and the programming quality be

maintained (1989c). On January 22, 1990, three new channels -

126
all in the super high frequency (3 GHz to 30 GHz) band — were

added to the Canal+ operations, making it the first MMDS
system in Brazil. The SHF use, however, has not been
regulated yet. According to Telecommunications consultant
José Cappia, the FederalJfficialJiary of January 3, 1991
launched a public consultation of decree 131 of December 11,
1990, but the proposed law remains unverified and unapproved
(Cappia, 1992). The concern of engineer Lucrécia Costa, from
Jovem Pan, is that the original proposal included the use of
the two GHz frequency for MMDS, the same one used by
television stations for the transmission of on-site news,
electronic news gathering (ENG) (Costa, 1992).

The MMDS initial expansion was troubled by a less than
enthusiastic reception of UHF and SHF by potential consumers.
Some eight percent of the Sao Paulo residents interested in
receiving UHF and STV channels do not receive quality, or
strong, signals. For those receiving SHF signals, the
proportion rises to 30 percent (Delmanto, 1991). In June
1990, the 200 technicians of TVA attacked the problem with
100 installation and repair crews that performed an average
of 6,000 services a month. Newton Guerra, general director of
TVA, confirmed at that time a number of about 100 customers
with image problems and installations delay of five weeks.
According to the Videotel company, which specializes in
developing collective antenna systems, the antenna systems in
buildings are capable of receiving only a dozen channels;

furthermore, there is not a single building in 350 Paulo

127

capable of receiving all of the 13 channels now available.
The problem is economic: a simple antenna may cost $20,000,
while an antenna for CATV (and the adequate cabling) would
cost $80 to $100,000 in currency exchange of January 1992
(Magalhaes, 1991). Videotel officers justify the high costs
as the equivalent of building a vertical cable plant.

At a time when cable is expanding not only in America, but
in several countries, the wireless option may demand some
more supporting arguments. The over—the-air system presents
cheaper and easier implementation, making it more appropriate
to the smaller size of Brazilian elite and the economic
difficulties of the country. Those who defend the system
mention the successful experience of STV in France, besides
other Latin American countries. By 1983 Peru, Argentina and
Bolivia already had American-like STV systems operating with
legally questionable programming - retransmissions of
American cable channels captured from the satellite (Hoineff,
1991). While the Brazilian pay-TV started as strictly legal
in 1988, one of the first other legal services in South
America appeared only in 1990. HBO and Omnivision, a
Venezuelan subscription channel, created a Spanish-speaking
movie channel - the HBO-Ole - transmitted via PanamSat to
Latin America. In the same period, the president of HBO
International, Steve Rosenberg, announced his intention of
creating a similar channel in Portuguese, aiming at the
Brazilian market (Hoineff, 1991). This study indicates that

HBO may very well provide the programming Globo's STV

128

channels have been waiting for. In fact, the importation of
programming by the Brazilian STV systems can assure their
survival even in a future where cable has become a
significant competitor in the country. As has already
happened, the STV operators can provide cable systems with
the imported programming, whose exclusive rights they locally
hold, through the same satellite by which they plan to
distribute their signals to various affiliates around the

country.

4.3 Cable's Competitive Edge

The wonders of cable television — a television signal
distribution system that delivers more than thirty channels
with perfect picture quality at prices comparable to STV
channels - have been held responsible for the decline of
other pay-TV systems. But, before cable would dramatically
expand in the 19803 to conquer 60 percent of the American
households (See Table 7), the operators had to overcome
serious problems. The laws did not favor cable expansion.
There was a lack of desirable programming and the high
investments were not compensated by public demand - a
scenario not too different from the present situation of
cable in Brazil. Thus, the question many scholars and
entrepreneurs are asking themselves is whether Brazilian

cable systems can enjoy success some day.

129

Table 7 - American cable penetration increase

 

 

Operating Systems Subscribers % of TV Homes
(000)
1960 640 0.7 1.4
1965 1,325 1.3 2.4
1970 2,490 4.5 7.6
1975 3,366 9.8 14.3
1980 4,048 15.5 20.5
1985 6,600 37.3 43.7
1991 10,704 56.07 60.3

 

Source: National Cable Television Association, Warren
Publishing & Nielsen Media Research. Reproduced from

Telerision_a_yideo_Almanac_1992.

Although a different political set and a revitalized
economy should precede the expansion of cable in Brazil,
there are signs that indicate cable may make more sense some
time in the future. Significantly, community antenna systems
are multiplying in buildings and condominiums interested in
tuning the STV and DBS services already offered (See Table
8). The old community antennas are being substituted by more
sophisticated equipment, capable of receiving the multitude
of channels presently available. And it is possible to
foresee a day when cable may start to reach not only a
building, but a whole neighborhood. In fact, the origins of
(aable are associated with the creation of Community Antenna
'Lelevision (CATV) systems to solve bad television signal
reception. Between 1948 and 1949, entrepreneurs like Ed
Parsons of Astoria, Oregon, or John Walson of Mahanoy City
anui Robert J. Tarlton of Lansford, Pennsylvania, built master

antennas over higher hills to capture distant signals,

130

Table 8 - Cable Concessions in Brazil

 

Per State

Sao Paulo 30
Rio Grande do Sul 23
Parana 13
Santa Catarina 12
Minas Gerais 5
Ceara 2
Goias 2
Mato Grosso do Sul 2
Rio de Janeiro 2
Bahia 1
Federal District 1
Maranhao 1
Per Year

1987 1
1988 4
1989 11
1990 15

 

Source: IstoeLSenhor magazine. p. 19. 6/31/91. and TVCabo
Ltda. 1/20/91

amplify them and deliver to some houses in the valleys
through coaxial cables hung on poles.

CATV grew because of the FCC freeze on new stations between
September 30, 1948 and July 1, 1952, which limited the number
of television stations to 108 —-not enough to cover the whole
American territory. Meanwhile, the number of sets continued
to increase, from 250,000 in 1948 to 15 million in 1952, and
CATV became a solution to communities not served by any
station. The end of the freeze did not limit CATV, as the
first broadcasting stations were only built in large
Communities and many small towns were still not served. As

Baldwin and McVoy describe:

131

From 1949, the number of cable systems grew slowly but
steadiLy. By 1961 there were 700 community antenna TV
systems. Growth accelerated so that in 1971 there were
2,750 systems serving nearly six million homes
entirely out of rooftop antenna range of any television
stations (Baldwin & McVoy, 1988, p.5).

In Brazil, the CATV systems were known as Dis—TV or
Distribution Television and also preceded real cable
services. It was only in October of 1969 that the modern
cable communications were implemented, as a result of the FCC
requirement that CATV systems with 3,500 or more subscribers
start to originate programming (Jaffe, 1974). At this point,
cable became a complementary service, usually in rural or
distant communities served by less than three commercial
stations. Even though Foster distinguishes cable TV from CATV
by the offering of five different services — local stations,
distant/imported signals, origination, pay and access (FCC
prescribed) channels — the main benefit of cable was the
clear reception of a television channel barely available over
the air (Foster, 1982).

The concept of cable as a multichannel programming source
and, therefore, as a competitor to the networks, was
developed in.tflma 19703 through many lobbying and marketing
victories. (MI legal grounds, the government policies that
limited cable growth were gradually reversed. First,
Operators had to convince the FCC that they could import
Signals from distant stations without harming the businesses
<1f independent local UHF stations. Then, they had to conquer

the right to coexist with over-the-air television in the

132

larger cities as well. By 1973, the FCC freeze on cable
construction in the nation's 100 largest cities had been
lifted, and in 1980 the importation of distant signals was
allowed, attracting new investors. Considered “the way of the
future," cable even attracted investments from the networks.
The parent companies of the three nets were pressured by the
stock market to enter cable. If they didn't, they would be
considered “behind the times" and their stock would be
undervalued (1983a).

The conquest of city markets, though, proved not as easy as
the traditional rural areas cable had dominated. Although
building costs rise faster than population densities in rural
areas, a study by cable consultant Paul Kagan concluded in
1972 that, as a rule, a rural cable system that enrolled 30
percent of homes passed could pay its own way. In the cities,
where the cable plant costs are higher and there usually are
more stations providing better signal reception, cable needed
a stronger sales pitch. A report of the Sloan Commission on
Cable Communications in 1972 estimated that only 15 percent
of potential subscribers in large cities could be persuaded
to subscribe to improve reception, the main benefit sought by
rural subscribers (MacGregor, 1973). The marketing victory
came with the introduction of cable-exclusive channels,
delivered nationally by satellite, transforming cable into an
alternative source of television. Videoclips, news, cartoons,
(documentaries, movies and other genres that shared fragments

C>f the broadcasting hours became 24-hour lineups. In 1972,

133

the pay-per-channel idea was inaugurated by Home Box Office
(HBO), a Time—Life (now Time-Warner) channel distributed by
the group's cable operator in New York, the Manhattan Cable
(Hoineff, 1991).

The huge investments necessary were partly financed by
large cable operators, the so-called multiple system
operators (MSOs), conscious of the value of original
programming. A 1988 Frank N. Magid Associates survey
indicated that 82 percent of cable subscribers in the United
States thought the enhanced image was the main reason for
subscribing, while 93 percent said better and more varied
programming was the main reason (Hoineff, 1991).

Some of these new channels, like MTV, CNN, TNT and ESPN,
are arriving in Brazil through exclusive contracts with over-
the-air systems, which have also retransmitted the signals to
some of the incipient cable systems in the country. For
American programmers, overseas cable offers another outlet
for films and an opportunity to amortize production costs
over' an. even broader base (1983b). In fact, the ever
increasing production budgets and the multiplication of
competitor channels have been some of the major problems of
the whole American television industry in the 19803, making
other markets, like the Brazilian one, an attractive
alternative. The multiplication of programmers supported by
Hollywood studios could finally bring the diversity the FCC
luui always called for, but the American audience was watching

much less television than it was offered. The competition for

134

the fragmenting audience reached a point that led some cable
channels to pay cable operators for carrying and, without an
audience rate system, the growth of advertising revenue was
slow. The interest existed, though. In 1981, when penetration
was 28 percent, advertisers were reviving trends from the
early days in the production of programs and infomercials (3-
10 minute messages). An article in Business—Week magazine
comments:

Besides the extra control over the programming,
advertisers faced cheaper production costs, which are
about $2.5 million for a network two-hour show. A half
hour of client supported programming usually cost $3 to
15 thousand. Others were not producing, but sponsoring

programs, enjoying the possibility of having commercials
of non—standard duration... (1981b).

Most cable networks, however, made the mistake of believing
that cable could be supported by advertising, just like
broadcasting. In 1983 only seven cable channels reached 15
percent of all U.S. homes to be rated by Nielsen, and
advertisers were actually scared of cable. The market demand
for original programming was also reaching a borderline and
new channels were having more difficulties in insuring
successful launchs. It took five years for Showtime to reach
2.8 million subscribers and finally break-even in 1982, the
same period HBO took to break-even in 1977 with only 750,000
subscribers (1982a).

In a turnaround, television entrepreneur Ted Turner charged
operators a per-subscriber fee for carrying his channels —

'the superstation TBS (an independent UHF station

135

retransmitted via satellite), the controversial all-news CNN
and TNT's MGM library. He knew that advertising would not be
enough in the short term and had an average 50 percent of
revenues coming from operators. Others, like MTV, followed
his idea and the timing for this change in sales strategy was
right. According to the National Cable Television Association
(NCTA), about 400,000 new subscribers were added per month in
the early 19803, while there was a merger fever that reduced
the offer of programming, leaving operators in a bad position
and very willing to pay (1983a).

Cable advertising revenues are still scarce. In 1990, they
totalled $1,393 million or just 1.1 percent of the total
advertising volume in America (Monush, 1992). The almost
exclusive dependence on subscriber fees has caused
significant price increases and government threats to
reregulate the industry. Since the probable target of a new
regulation would be to ensure the availability of locally
originated. channels at “reasonable" prices, many' cable
operators have also redefined their service tiering to
restrict the so-called basic service to these future
regulated channels. The most recent tierings define basic
service as the local channels, the public broadcasting and
local access channels; enhanced services include most of the
cable networks and premium service is comprised of pay-
channels (HBO, Cinemax, Showtime, etc.) (Annis, 1992).

Moreover, operators are preparing themselves for a bloody

competition with local telephone companies, which have been

136

allowed in 1992 to enter the cable business. Counting on an
infrastructure many times larger than the cable operators',
the regional Bell telephone companies (RBOCs) are proposing
to combine several services — like TV, telephone and computer
communications — through a single cable connection. Cable
operators, on the other hand, are striking back with the
promise to change coaxial cables to fiber optics that allow
up to 154 channels (Hoineff, 1991) of communication.
Installed by MSOs or RBOCs, the systems of the future are
likely' to become broadband integrated. digital services
networks (ISDN) that, within the television scope, will offer
two-way communication programs and several pay-per-view
channels.

The Brazilian cable industry may be much farther from this
brilliant future, but those who do not believe in the
possibilities of cable in Brazil should know that the
Telebras research center in Campinas, Sao Paulo already has
advanced plans to implement pilot ISDN plants in the country
(Graciosa, 1988). And, in cities with a confusing underground
network of cables, as is the case in most Brazilian cities,
the thinner fiber optics may be the only solution for the
installation of cable systems (Hoineff, 1991).

In fact, most. of the delay' in the Brazilian cable
development can be attributed to legislative problems. Many
cable entrepreneurs believe that the emphasis on the economic
obstacles may be overdimensioned in many cable-related

studies. Brazil was one of the last countries in Latin

137

America to institutionalize cable, ten years after Argentina
and much after Chile, Colombia or Bolivia (Hoineff, 1991).
The updated law on the industry still awaits definition
today, and the few entrepreneurs who have started
construction are betting high. In January 1991 the estimated
cost to build a cable system was $100,000, and a cable

subscription was $400 (Schwartsman, 1991a).

4.3.1 Cable's legal battles in Brazil

The attempts to implement cable television in Brazil date
back as far as the 19703. In 1971, Globo network, already an
American-like well-structured television system, developed a
strong interest in the new technology and created the TVC
company. Electronic engineer Wilson Brito worked for Globo at
that time and was invited to participate in the enterprise. A
short time after, he became the sole owner of TVC, as the
network inexplicably lost interest by the project (1979b).
The few existing plants two decades later lead one to think
that Globo acted wisely, forecasting a scenario where
politics would delay appropriate legislation, and initiatives
- even from the government — would be torn apart. That was
the case in 1974, when the Communication Ministry denied
authorization for the Federal University of Rio Grande do Sul
to implement an experimental cable service in a small nearby

community (1979b) .

138

But if the government was not fostering the growth of cable
television, it was certainly not unaware of it. For eight
years, several research studies with unknown results had been
conducted for the mdlitary governments. One of these studies
was performed by César Valente and Luis Lanzetta, professors
at Federal University of Santa Catarina, and by journalist
Daniel Herz. In an interview published later, they reported
that the Communications Ministry and some group of
entrepreneurs were defending the immediate implementation of
cable services. Universities and researchers, on the other
hand, preferred a cautious implementation, conditioned to
“deep studies" and the elaboration of a complex and
democratic legislation. And they revealed that these later
groups were leading a movement for the de—accelaration of the
implementation of cable services in Brazil (1979b).

Under such circumstances, and still suffering the negative
public relations effects of the recent denial of a license to
Rio Grande do Sul University, the National Secretary of
Telecommunications, Romulo Furtado, rushed to present a
decree in 1975 to regulate cable services in Brazil. The
president at that time, Garrastazu Medici, never ratified the
decree, but Furtado, who survived three other presidents in
the government, tried again in 1979. This time, his proposal
included some of the previous demands by the intellectual
groups, like strict rules for the qualification of
franchisees, mostly foundations and universities.

Nevertheless, he defended that cable technology was similar

139

to radiodifusion and did not require further studies by
Brazilian universities before being regulated. The debates
were switched to the social value of cable and the authority
of regulation itself. Many politicians in charge of the
communications policies were against the implementation of
cable TV, because it was considered an elitist service
promoted by foreign interests for an underdeveloped country,
having no social value. In this manner, the strong opposition
by nationalist general Andrada Serpa is said to have had the
most negative impact on Furtado's proposal (1991d).
Overwhelmed by a demand for 15 telephones per hundred
habitants — while there were only six — the government had
to agree that cable TV did not justify investments from the
State, as it attends to a restricted group. Nevertheless,
Furtado tried to indicate that the growth of the cable
industry had positive effects, like the amplification of the
job market and the preservation of regional cultures through
increasing the viability of more local program productions.
As the manufacturers of cable and wire for telecommunication
in Brazil were mostly multinational companies, cable services
were pointed to as the exclusive interest of foreign groups
and, therefore, against the “national sovereignty.” Furtado's
challenge was to prove his point that cable technology was
controlled by national companies, with 83 percent of the
investment spent within the country in the national currency.
The opposition was also concerned that the regulation should

be implemented through a law voted by Congress and not an

140

Executive decree, as proposed. However, the Brazilian
Telecommunication Code, law number 4.117 voted by 'the
National Congress in 1962 - when not even the videotape
existed — attributes to the Executive power, the authority to
create special telecommunication services through decree
(1979a).

In spite of all the opposition, by late 1982 the proposal
was under final revision. A broad perspective was adopted,
with services like computer connections and bidirectional
communication planned through the use of fiber optics. The
project stated that franchisees named by the Ministry of
Communications would have to carry, besides their own
programming, all channels freely offered in their operation
area. The service was to be paid by subscribers and the fees
charged would be defined by the market. Telephone ducts and
poles could be used for the installation of cables. The
channels would be operated through a rental contract and
would have to be yielded to public service operations
whenever necessary (1982b). But it was not until 1988 that
Brazil got its first legislation for cable television. Decree
143 signed by the Communications Ministry on June 21, 1988
authorized the simple reception of signals through a
collective antenna and their redistribution by cable (Duo,
1989b). Restrictive and bureaucratic, it was not a legal
piece to foster the industry growth, but it definitely was an

important first step.

141

Operating like a Community Antenna Television (CATV), these
systems required three authorizations to be established: from
the networks whose images would be distributed; from
Embratel, the state satellite company, allowing it to receive
signals via satellite; and from the National
Telecommunication Department (Dentel), indicating the area
attended to by the service. Pioneer plants, like the one in
Presidente Prudente (580 kilometers west of Sao Paulo city),
complained several times that their requests for
redistribution authorization were never answered by the
networks, while Dentel was surprisingly quick in shutting
them down. Unlike American cable legislation, the generation
of images and the distribution of signals from Intelsat were
prohibited, but no mention was made of charges for the
distribution service (Duo, 1989a). Apart from these real
problems, many entrepreneurs started developing plants and,
for 1989, many headlines previewed a boom in cable plants,
expecting up to 300 new systems in the country as a whole
(Duo, 1989b).

The euphoria in that year was so great that 36
entrepreneurs in the cable TV area created the Associagao
Brasileira das Antenas Comunitarias (Abracom) or, in English,
Brazilian Association of Community Antennas, on July 28, to
foster the new industry (Duo, 1989b). Some of these first
experiences happened in Presidente Prudente area, Goiania
(capital of Goias state), and even in a condominium at the

suburbs of Sao Paulo city. Although it only retransmitted the

142

national channels, Presidente Prudente is acknowledged as the
first city in Brazil to have a cable system, starting right
after the legislation was implemented, in the middle of 1988.
On June 6, 1988, the 16,000 inhabitants of the city of Santo
Anastacio — a few miles from Presidente Prudente — became the
second. The person responsible for this latter experience was
father Jose Antonio de Lima, who installed two parabolic
antennas next to the church and a small studio in his house.
Before that, the city could watch only two channels. A month
later, the 250 customers already listed had a potential for
35 channels. Initially, they could *watch. all national
networks and five foreign channels — Spain 1 and 2, NBC,
Bright Star and C-Span (Duo, 1989b). A local channel
transmitted two movies a day. Paying only NCz$10 (ten
cruzados novos‘) a month, which was reinvested in the
maintenance of the plant and the payment of three employees,
the service was not restricted to an elite. The investment of
$41,000 was financed by TV Cabo do Brasil, also responsible
for the plant in Presidente Prudente, and by Huler, the
Argentine electronic industry. Installing their own poles,
and even using the light towers of some houses, the
entrepreneurs decided to transform Santo Anastacio into a
laboratory for other projects, which TV Cabo was franchising

in other parts of the country (Duo, 1989b).

 

* The currency in Brazil has changed from cruzeiros (Cr$) to cruzados

(CzS), then cruzados novos (NCZ$) and now back to cruzeiros. In most
cases, the changes were accompanied by economic reforms and cuts in the
number of zeros in each bill. See chart in appendix for dollar
equivalent. ’

143

TV Cabo of Goiania sprang out of these experiences. The
$600,000 invested there were expected to start paying a
financial return within four years. In April 1991 the system
already had 1,000 subscribers, attending to an area of 900
blocks in the richest neighborhood of the city. The
subscriber paid Cr$60,000 for the installation and the
decoder, and Cr$4,000 as a monthly fee (Franga, 1991). Exempt
from the restrictions on generating images, closed
communities, like rich condominiums, also started developing
cable systems, usually bringing television signals to hard-
to-reach areas. Barra da Tijuca in Rio was soon a prospect
market for cable. It had problems receiving the television
signals due to its mountainous location, and the acquisitive
power of its residents was high enough to pay the estimated
$150,000 investment (1979b). The Tamboré condominium plant,
30 kilometers from. 330 Paulo city limits, is another
initiative from that time. Approximately 700‘houses were
served with 40 channels, including a closed circuit that lets
the residents see on their TV sets the image of visitors in
the entrance of the condominium.

The $500,000 plant at the Tamboré condominium was the
second built by Panavisao company, which had previously
experimented with service to the 600 houses of the country
club Pro-Vida, in Sorocaba (92 kilometers east of Sao Paulo
city), with a micro system built in 1986. The prospects of
financial return within two years, according to company

executives, really explain. why these plants became an

144

attractive business in Brazil (Duo, 1989c). But, following
the American definition previously presented, those cannot be
considered real cable systems, which are allowed to insert
advertising into the programming and even to generate their
own images. Such a distinction came with another decree,
number 250, signed in December 1989 at the end of the Sarney
government by the Ministry of Communications, AntOnio Carlos
Magalhaes. The so-called Service of Television Signals
Distribution (DISTV) (1991d) had a very simple application
process, as well as political importance. The National
Communications Secretary simply acknowledged — or not — the
right of a company to provide the DisTV service as it
intended to do. For the real cable TV service (with ads and
generation of programs), the Secretary planned a more complex
legislation (Carla, 1991).

It was 1991 and approximately 5,000 people were already
watching cable TV in Brasil (Arruda, 1991). But on March 20,
the applications for DisTV were suspended until new rules
could be implemented. A proposal for cable service regulation
was published on June 10 in the Qfficial_Diary_of_the_Union
and there were many changes to the prior legislation. The 18-
page decree was written by communications engineer Savio
Pinheiro, with several elements of the American legislation.
The prospective franchisees, for example, must file
application informing the region of service, the area
attended to and the number of channels provided, besides a

viability study, programming definition, installation

145

chronogrmm and number of households attended to within two
years. Having received the application, the SNC will publish
a note in the Official_Daily, giving a waiting period during
which other companies can dispute the application. Each
franchise will be valid for ten years and is limited to
Brazilian companies with national capital (at least 51
percent of share capital owned by native Brazilians)
(Bensimon, 1991).

To avoid monopolistic practices, the decree establishes
that whoever already has communications companies -radio,
newspaper or conventional TV‘— in the same city loses points
in the application evaluation. The maximum number of
franchises in one city is 20, and multiple ownership was
conditioned to the size of the cities (a maximum of four
systems in cities with more than one million habitants, ten
systems in cities between 300,000 and one million habitants,
and 30 systems in cities with less than 300,000 habitants)
(19913). The offer of local and educational programs was
mandatory, and the renewal of the franchise was conditioned
to a positive plebiscite by the subscribers. Abusive
increases in the fees, or contract violations, were punished
accordingly, with fee, suspension of services for a
determined period or termination of franchise (l99lh). The
proposal fixed July 2, 1991 as the date for a public audience
about the subject, and many entrepreneurs and social groups

were present to defend their interests.

146
Again, the general complaint, embodied by the National

Forum for the Democratization of Communication Media, was the
implementation of law through an Executive decree, instead of
Congressional vote. They indicated the recent 1988
Constitution, in its chapter V, where it states that the
distribution of television channels must follow criteria of
social interest. The government, however, classifies cable TV
as a special service of a private nature, that is, only the
paying subscribers can watch it. The Brazilian Communication
Code of 1962 guarantees the president's exclusive powers to
distribute such concessions. When the franchises were
suspended in 1991, 95 had already been distributed (40 by
Collor and the rest by Sarney), and the various companies
were anxious to have legislation that would allow them to
start profiting. Many of them were afraid that, if the
proposal had to be approved by Congress, no law would ever be
implemented, due to a strong negative lobby from over-the-air
subscription stations (Arruda, 1991).

The strong political character of these concessions
indicate that their fear may be substantiated. About half of
the 95 franchisees does not intend to meet the demands of the
decree. In spite of the application fee, equal to four
percent of the project value, a large number of companies are
ghost ones, without any address, and most applicants do not
have any qualifications. IstoeLSenhor magazine published the
story of Bayard Umbuzeiro, owner of a transporting company,

city deputy in Santos (a Sao Paulo state port), and close

147

friend of the Infrastructure Minister, who — in spite of his
inexperience in the sector — took only 21 days to create
seven projects for cable plants. Now that all of the projects
were approved, Umbuzeiro may face the need for an investment
of approximately $1 ndllion for each plant, going up to $8
million if the equipment used is from the last generation
(1991x).

But there are also real entrepreneurs in the business. In
Capao Novo, a beach condominium in the north of Rio Grande do
Sul, Pan Sat, a parabolic antenna manufacturer, invested $3.5
million in 1990 to build a sophisticated cable plant. Part of
the 60,000 meters of cable line were financed by 1,200
subscriptions, from a calculated total of more than 250,000,
and with a potential to grow by 200 outlets a year.
Authorized by the government to provide cable services, Pan
Sat signed technology transfer contracts with four Canadian
companies: Conrad, Beckerman, Nexus and Norsat. Canadian
technicians also coordinated a group of 40 Brazilians in the
implementation of the system, which fixed cables to the local
electric company's poles. Equipment like cables, satellite
receivers, modulators, cameras and. videotext had 1x) be
imported.

The company will run the system in Capao Novo for ten
years; the official starting date was January 5, 1991. The 17
channels initially defined were to be captured by parabolic
antennas from Brasilsat and PanamSat. The local channels were

to be received through a special link from the nearby

148

retransmission stations. The foreign channels were to be CNN,
ESPN, RAI, Mexico TV and National TV of Chile. Locally
generated programs were also scheduled, providing information
about the condominium's internal activities. For this
service, each subscriber paid an inauguration fee in January
1991, which totalled approximately Cr$66,900, besides a
monthly maintenance fee (Arruda, 1990).

Surrounded by mountains, the television reception at
Alphaville, a rich condominium 27 kilometers from Sao Paulo,
was never good until the beginning of 1991. That was when
resident Guilherme Stoliar, executive vice-president of SBT
(Sistema Brasileiro de Televisao), the second-largest network
in the country, decided to implement a cable system in the
neighborhood. With Marcos Amazonas, who was also involved in
the first days of MTV Abril, they decided to make the area a
“show—room" for their new cable company. The 22,400 meters of
cable were to initially service 700 houses of the 5,000 built
in the condominium, which also has 9,000 empty lots (1991a).

For $580, divided into six monthly installments, and a
monthly fee of $40, the subscriber receives 25 channels, with
potential to expand up to 60. The pay channels of GloboSat or
TVA, which associated itself to the TV Alphaville system, are
voted upon by the residents. The five parabolic antennas,
three edition tables and a little studio are designed to
offer a very sophisticated array of services. Besides a
«closed circuit channel that allows condominium visitors to be

seen on TV sets, the locally produced programming may offer

149

English classes, recipes, computer-accessed databases, and
traffic and ‘weather information through an interactive
system. The $1.5 million investment has a break-even point of
1,000 subscribers, with each one paying $1,100 (l991a).

Ribeirao Preto and Franca, two cities of Sao Paulo, also
received authorization to build cable plants. Franca received
a green light in 1989 and started operations only in 1991,
due to difficulties with the local electric company over the
use of poles. After building their own poles, they started a
subscription campaign that conquered 1,400 subscribers in two
months, paying yearly fee of Cr$45,000 (1991u).

Video producer Sergio Adaid's TV Video a Cabo Belo
Horizonte Ltda. inaugurated a cable plant in a neighborhood
of Belo Horizonte, the capital of Minas Gerais state, on
April 5, 1991. Created four months before, the company
already listed 540 subscribers by its inauguration. The
company expected to add 40,000 viewers in three years by
expanding the service to the other 24 neighborhoods of the
city. With the capacity to carry up to 35 channels, the
system started operating with 12 channels: the six national
networks and six foreign channels. The plans were to have
CNN, ESPN, TVT (24-hour subtitled :movies), C-Span, the
Spanish TVE International and Italian RAI (two hours a day).
The $290,000 investment included the purchase of the whole
physical plant from Argentine Novatek, responsible for more

than 40 other cable plants in Latin America. The initial

150

price per subscription was Cr$130,000 and the monthly fee was
Cr$3,800 (Nicolau, 1991).

In the South, the powerful independently owned Group RBS,
affiliated to Globo network, won 17 of the 43 concessions
distributed in Rio Grande do Sul and Santa Catarina. A
campaign of $80,000 launched VTV - Televisao a Cabo Ltda. of
Curitiba, capital of Parana in April of 1991. Attending to
15,000 subscribers initially, the company owned by the well
known journalists Ivan Carta and Bernardo Rosemann had
already invested $1 million in the project. The initial
package offered to 24,000 households in three neighborhoods
includes foreign.1channels RAI (Italian), CNN, TNT, and
ESPN(USA), Prime (English), TV Chile, Argentina TV Color, TVE
(Spain), Televisa (Mexico) and Televen (Venezuela). Such
programming can cost $2 per month per subscriber. With
technology by the Canadian company Lindsay, the system has
50,000 meters of cables installed on electric company poles.
A previous survey indicated that about 75 percent of the
residents (of the three neighborhoods) were interested in
having the system, which has a monthly cost of Cr$6,000
(Monteiro, 1991a).

The cable legislation proposal under study by the
government was expected to be implemented by September 1991.
It still has not been implemented, but in any case it does
not mention the present concession holders. The government
can recognize the rights of present franchisees — with

systems built or not — or it can redistribute the concessions

151

so as to leave politically uninteresting groups out of a game
potentially worth $60 million within four years (1991x). In
the aftermath of President Collor impeachment, any forecast

on such a matter is impossible.

4.4 Satellites: a future reflected in the skies

In 1992 the Brazilian satellite program celebrated its
first decade. It was on June 7, 1982 that the military
government signed the contract with Arianespace to launch the
BrasilSat, built by the Spar consortium. The total cost of
$210 million was considered exorbitant in face of the overall
poverty of the country, but the program has certainly
achieved its purpose (1982d). Scholars like Omar Souki de
Oliveira define the military goals in the following terms:

The generals believed in the geopolitical advantages
of unifying the land and the people, who should speak
one language (Portuguese) and hold allegiance to one
nation (Brazil). To that effect they used television via
satellite. The telecommunications sector received
particular attention, substituting the old terrestrial
microwave links with two stationary satellites. Today 99

percent of Brazilian territory is covered by the medium
(Oliveira, 1992).

On February 8, 1985, BrasilSat AI was launched, followed by
BrasilSat AII on March 28, 1986 (Arrudao, 1990). The ground
segment, though, started to be setup much earlier to make use
«of the first international satellite services, created in the
19603. Brazil was one of the 50 countries that originally

ccunposed the International Telecommunications Satellite

152

Consortium (Intelsat) in August 1965, with one percent of the
shares — the equivalent annual volume of its system
utilization. The Empresa Brasileira de Telecomunicacc'Ses
(Embratel), created in September 1964 to operate the
satellite communications, rushed to build an Earth station at
Itaborai, Rio de Janeiro. Tangua I was inaugurated on
February 28, 1969 with a 30—meter parabolic antenna to send
and receive signals through 268 voice channels and two
television channels (Sampaio, 1984). In 1976, Brazil
increased its shares to 4.36 percent, becoming the fourth
largest shareholder among 100 country members, after the USA
(26.7 percent), United Kingdom (11.14 percent) and France
(5.8 percent) (Vampré, 1979).

In the beginning of the 19903, the Intelsat system totalled
about 120 countries operating 15 geosynchronous satellites
over Atlantic, Pacific and Indian Ocean stations and more
than 800 ground stations. This network serves around 170
countries and territories, being responsible for two-thirds
of all intercontinental telephone calls, besides the majority
of television transmissions (Hoineff, 1991). Thus, even
though the Americans developed the communication satellite
system, Brazil can be considered an early and relatively
heavy user of it, jumping on the bandwagon as soon as the
medium proved useful. From the initial conceptualization by
writer Arthur C. Clarke to the launch of Early Bird, the
first commercial communications satellite, the Americans

overcame many drawbacks to build the medium, which is now

153

internationalized (See Table 9). In recent years, however,
the U.S. government has opposed this internationally
controlled satellite system, stating that:

Intelsat's monopoly is inefficient, its rates do not
reflect actual costs, and its sheer size makes it
inflexible. Competition from smaller, nimbler satellite
firms, they contend, would lower prices for all, enhance
services, and encourage innovation (Head & Sterling,
1990, p.515).

This new policy reflects the growing interest of American
companies for satellite services in the 19803. By 1981, there
were nine domestic satellites serving the United States with
all 24 transponders of each one already occupied. Cable
networks were major users, but some companies were just
holding transponders against future use (n: for resale. A
BusinessJeek article tells the story of cable consultant
Timothy Flynn, who requested a Satcom transponder in 1979,
paying $250,000 for its rights, and sold his leasing
privilege to Warner Communications two years later for $5.5
million. Flynn was benefiting from FCC legislation that
considered space satellite companies as common carriers that
should provide space on a first-come, first-served basis for
monthly fees between $50,000 and $150,000 and limited
profits.

In 1981, Hughes Communications International, which was
planning to launch the $100 million Galaxy I, defied the FCC
rules by selling its transponders instead of leasing them.

With sales to Time, Westinghouse, Times Mirror and Turner

154
Table 9 — Satellite developments

 

Initial American Experiences

Passive Reflectors

ECHO I, II 1960 First to carry transponders
orbitted the Earth in 90
minutes, remaining in line of
sight for approximately 15
minutes

Medium Height Active Reflectors

TELSTAR 1962 In this year, U.S. Congress
enacted the RELAY
Communication Satellite Act.
Private company COMSAT
authorized to launch and
operate a world satellite
system

High Active Synchronous Repetitor

SYNCOM I, II 1964 First with synchronous orbit
about 22,300 miles above the
equator

 

 

International Consortium

Intelsat I 1965 50 MHz bandwidth
(Early Bird)

Intelsat II 1967 130 MHz bandwidth
Intelsat III 1968 300 MHz bandwidth
Intelsat IV 1971 500 MHz bandwidth
Intelsat IV—A 1975 800 MHz bandwidth
Intelsat V 1980 2,144 MHz bandwidth
Intelsat V—A 1985 2,250 MHz bandwidth
Intelsat VI 1989 3,300 MHz bandwidth

 

Source: Head, Sydney W. and Sterling, Christopher H.

Broadeasting_in_America1_A_Surrey_of_Electronic_Media16th
Edition. Boston, Houghton Mifflin Co., 1990

Broadcasting for prices between $8 and $10 million, Hughes
proved that there was a demand for satellite services that
common carriers could not appropriately explore (1981a).

Today, the equator is congested with about 150 satellites in

155

geosynchronous orbit, but this number may reach up to 200
satellites by the end of the century. The increased offer
reduced costs. It is estimated that between 1975 and 1985 the
real cost for renting space in an American domestic satellite
dropped more than 120 percent (Hoineff, 1991)

In 1986 the FCC authorized several satellite companies to
launch separate systems, bypassing Intelsat in the Atlantic.
Many member nations have protested, foreseeing a loss of the
most profitable services that may even force a change in
Intelsat's cross-subsidy policy, favoring smaller countries
with lighter communication traffic. The national
telecommunication companies, which usually enjoy a monopoly
on the lucrative terrestrial segments (all satellite
connections tend to be funneled to their few Earth stations)
are also opposing the bypass.

Private satellite operators can now establish direct links
to consumers who erect their own Earth stations or even buy
smaller parabolic antennas. Pan American Satellite
Corporation (PAS) was the first such American private company
to launch a satellite to provide services to the United
States, Central and South America, the Caribbean and Europe.
The PanamSat was launched on September 1988 by the Alpha
Lyracom group, and 18 of its 24 transponders are focused on
Peru and Brazil. In spite of the American cable networks'
interest in relaying their programs to Latin America, few
companies or government agencies were eager to face the heavy

investments or legal obstacles to settle contracts.

 

156

Gradually, Peru, Dominican Republic and Costa Rica signed up,
joined by Britain, Ireland, Luxembourg, Sweden and Germany on
the other side of the Atlantic (Head & Sterling, 1990).
PanamSat is planned to have ten to 13 years of life and its
operators will invest $310 million in this period, including
construction and launch (1989b).

The new American satellite services caught Brazil in a very
different scenario from the early days of the Brazilian
satellite program. The military regime is over and, with it,
its huge investments in telecommunications. Some
denunciations indicated that “at the end of 1987, official
data (most likely inflated) counted 20 of the 24 transponders
at one BrasilSat satellite in use, but none in the other"
(Oliveira, 1992). In fact, Embratel controls 24 transponders,
but only 22 are operational, while two are kept in reserve in
case any of the others fail. Two kinds of BrasilSat services
are offered for transmission of television signals via
satellite: TVSat, for television networks, and TV Executiva,
a closed circuit for the use of banks and other companies.

Some networks lease full and others half transponders. The
TV networks that demand full permanent transponders are
Globo, Bandeirantes, Manchete, SBT, TVE/Funteve (Rio de
Janeiro) and Jovem Pan. They pay Cr$40 million, and each
additional programmed 30—minute use costs Cr$92,000. Half
permanent transponders are used by Abril/MTV, Record, TV Rio
and TV Brasil Oeste. They pay Cr$24.42 million and each

additional programmed 30-minute use costs Cr$56,000. Regional

157

TVSats operate 'with. two half transponders shared. among
various regional TV networks and, in this case, the rent of
permanent services costs from Cr$10 to $18 million. Embratel
operates closed-circuit services only with half transponders,
in a total of 12. GloboSat has four, TVA has three, TV Gaficha
has one and KTV Comunicacées Ltda. has two. Two of these half
transponders are shared by several companies. Each half
transponder costs Cr$45 million per month (Magalhaes, 1991).

Both services — TVSat and TV Executiva — can be utilized in
a permanent (all the time) or programmed (only specific
moments) manner. But, with the exception of the networks,
these transponders had usually been used for short periods. A
satellite rush, as happened in America, came only five years
after the launching of BrasilSat II. In April 1991, GloboSat
(under the legal name of Horizonte Comunicacées), leased four
transponders, followed in July by TVA (Radio Enlace Ltda.)
with three more and, in August, TV Gaficha (RBS Group) leased
the last one available. The two pay-TV companies (GloboSat
and TVA) not only assured their operations with the
transponders, Inn: also precluded possible competitors from
entering the business until 1994, when a new Brazilian
satellite is scheduled to be launched. BrasilSat B1 and B2
are scheduled for 1994 and 1996, respectively) (Apolinario,
1991).

The addition of PanamSat services complemented the larger
use of national satellites in the increase of this system's

value. It was through the PanamSat that American cable

158

programming became available in Brazil. Test transmissions
via PanamSat started on November 8, 1988, and the U.S.
version of CNN started to be freely delivered in December.
Two years later, the recently created CNN International
replaced it with scrambled signals reaching houses and
commercial stations in the country thanks to a breach in the
national legislation. Embratel has a monopoly on commercial
telecommunications in the country and, by contract, it can
only distribute signals received from Intelsat. The reception
of signals by private parabolic antennas is not legally
restricted or controlled, however (Hoineff, 1991).

In 1988, the 120,000 backyard dish owners in Brazil, who
were used to a traditional limitation to the AFRTS (Armed
Forces Radio and Television Services) programming, welcomed
the new satellite services. Freely capturing signals from
three international satellites and two domestic ones, their
programming options were more varied than ever (See Table
10). Even though technically unauthorized, the reception of
satellite-relayed television signals not intended for public
viewing was tolerated for a long time. While the American
cable networks had nothing to lose, since there was no pay
television system in Brazil, the national networks increased
their audiences, even though the commercials were not seen
(due to the local character of most advertising, they are not
carried by the satellite) (Hoineff, 1991). The parabolic dish
antenna manufacturers, too, are enthusiastic. Biasia company,

for example, experienced a nine-month growth of 150 percent,

159

Table 10 - What is seen through a parabolic antenna in Brazil

 

Signals captured from Gorizont, Intelsat, PanamSat and

BrasilSat II:

Russian TV
French TV
TVE/ Spain

news, events and sports
variety

Cadena Audio Esporadio/ Colombia

~ Televen/ Venezuela
Brighstar/ London-UK

- NBC/ London-UK

- Worldnet/ USA

- TV Chile

- TV Mexico
Telefe/Argentina

Japanese TV

- Commercial TV/ Peru

- ATC/ Argentina

. CNN/ USA

° TNT/ America

- RAI International/ Italy

Globo/RJ
- SBT/SP
' TVE/RJ
- Manchete/RJ
- Bandeirantes/SP
- Globo/ Manaus
- TV Abril-MTV/ SP
- TV Embratel
TV Rio
Jovem Pan

USIS, PBS and C-Span news

Half transponder, requires
special antenna

Sunday programming, 1:30 to
3PM

Encoded
Encoded
7 to 9 PM, encoded

Half transponder
Half transponder

Half transponder

 

Source: (Boarini, 1991)

conquering 20 percent of the market with the production of
2,000 antennas and 2,500 receivers in the beginning of 1992.
The Brazilian parabolic antenna market is disputed by six
large companies that, together, produce around 18,000
antennas per month, while in the United States this number is

50,000 per month (Moreira, 1992).

160

The free tuning bonanza did not last, though. The launch of
GloboSat in 1991 was coincident with the codification of
Globo TV images, transmitted through BrasilSat II, and the
scrambling of CNN and TNT signals on the PanamSat satellite.
Other' channels are likely' to follow' suit, as .American
channels did after 1986, when Home Box Office (HBO) scrambled
its pay—TV service. Curiously, it was also HBO that, in 1975,
inaugurated tflua satellite—cable relationship, transmitting
its signal through Satcom I to cable operators all over the
United States (Hoineff, 1991).

The move in the United States was intended to protect cable
subscribers, who were paying for what the programming dish
owners were getting free, as they bypassed the cable
operators. The fact was that most dish owners were not served
by any cable company and were not able to receive any
television over the air either. As more and more channels
were scrambled, a very small percentage of the dish owners in
America became subscribers (See Table 11). The average fees
of around $150 per year were considered too high and the
majority of dish ownerws was only concerned about the
possibility of the three networks scrambling (1987).

Even though Sao Paulo is estimated as having fewer than
15,000 parabolic antennas, the scrambling is depriving many
people of their sole source of television. Likewise, the
majority of dishes are located in places where television is

not at hand: the rural areas and, especially, the Northeast

161

Table 11 - How American dish owners cope with scrambling

 

The survey results are based on the responses to four
questionnaires that were bound into the April, May, June and
July issues of Satellitelflrbit magazine. More than 20,000
responses were received and tabulated. The figures reported
reflect the percentage of readers who answered each question.
Source: Satellite_Qrbit magazine, September 1987, p. 20- 7

Have you bought or leased a VideoCipher II (descrambler)?

Yes 17%
No 83%

Does the local cable company sell satellite programming
subscriptions to dish owners?

Yes 22%
No 78%

Do you feel your satellite TV system has been a worthwhile
investment?

Yes 73%
No 27%

When you bought your satellite TV system, were you aware that
some services would be scrambled and available by
subscriptions only?

Yes 44%
No 56%

What is the total amount you pay per month for programming
subscriptions?

Less than $15 37%
$15 to $30 36%
$30 to $45 19%
$45 to $60 4%
More than $60 4%

What type of area do you live in?

Rural 72%
Suburban 20%
Urban 8%

Do you have access to cable TV?

Yes 22%
No 78%

162

region of Brazil, where large farms and sparse communities

prevail (Delmanto, 1991).

4.4.1 From TVRO to SMATV and DBS

The military regime's satellite program was not limited to
the federal level in Brazil. Since the 19603, the mayors of
many small cities have bought TVROs (television receive-only
antennas) to bring one or more channels to town. The local
advertising spots available proved to be useful not only to
the businesses in the area, but for political purposes as
well. The smaller cities invested in relatively inexpensive
TVROs, that were six to eight meters in diameter, just large
enough to compensate for the low power (less than 100 watts)
of the traditional C-Band satellite-relayed signals, which
were then rebroadcast locally through modest
amplifiers/transmitters.

The satellite relay of the new channels MTV and Jovem Pan,
however, encountered reception problems in many of these
cities. Engineer Lucrécia Costa, from Jovem Pan, explains
that the old dish-receiver equipment is not always adequate,
and better receivers are necessary to receive the weaker
signals delivered by channels using half transponders.

In the United States, the TVROs multiplied after 1979, when
the FCC eliminated a problematic and expensive licensing
process. Cable éuui broadcast stations quickly shifted from

land to satellite relays and, as the technology improved to

163

smaller and cheaper antennas, households out of the reach of
standard television service became new clients. As Head and
Sterling summarize:

About two million backyard dishes, on the order of six
to ten feet in diameter, had been installed in the
United States by 1989. They can pick up as many as 150
different programs from domestic satellites, many of
them private relays, such as news feeds, not intended
for public consumption. These home pickups became known
as C-band direct reception because C-band satellite
users normally intend their transmissions for designated

intermediate addressees, not for direct reception by the
general public (Head & Sterling, 1990, p.173).

The success of C-band (3 to 6 GHz) satellite-delivered
television revealed a potential market for the high—powered
short-wave Ku-band (11 to 15 GHz) transponders, which allow
the use of smaller antennas, between one and three feet in
diameter. Thus, in June 1982, the FCC allocated 500 MHz (12.2
to 12.7 GHz) to the new Direct Broadcast Satellites (DBS)
designed to provide services specifically for home reception.
After a few years, though, seven of the eight original
applicants gave up, including Comsat's Satellite
Telecommunications Corporation, which closed its doors in
November 1984, after accumulating $140 million losses in five
and a half years of operation (Yuster, 1992).

Among the new round of eight applicants granted permits in
1988, Hughes Communications is the only one still promising
to launch a DBS service by 1994. In the meantime, cable
<Jperators have gotten together to explore a quasi-DBS service

‘via conventional medium-power fixed satellites. This service

164

can only use three— or four-foot dishes, but it is suspected
to be just a move to preempt any high-power DBS enterprises
(Yuster, 1992).

The launching campaign of GloboSat services in 1991
promoted it as the first DBS system in Brazil, leaving many
people confused. Actually, GloboSat is more properly called a
C-band direct-reception system. The weak signals delivered by
BrasilSat II, which relays GloboSat's channels, are focused
on the equator, and the receiving dishes can be smaller, the
closer they are to the equator. In Para, in northern Brazil,
the dishes may have a nunimum two-meter diameter, while in
Sao Paulo they must be at least three meters. The most widely
used ones are actually 4.65 meters in diameter. Thus, the
real Ku-band DBS and its smaller dishes have not reached the
country yet. Rumors suggest that the next Brazilian satellite
will be launched in 1994 with some Ku-band transponders, but
the technicians say that at least three of such satellites
would be necessary to cover the whole Brazilian territory.

According to information presented in a recent book by
Nelson Hoineff, of Manchete TV, prospective DBS users will
not have to wait long. A DBS earth station, with higher power
is under construction in Morungaba, Sao Paulo. Joining some
of the first DBS services to reach the Americas - RAI, BBC
World Service and Japan Satellite Television — Intelsat k-4
is scheduled for launch sometime in 1992 with eight
transponders directed to Europe, and eight to America. Two of

them would be reserved for DBS transmission.

165

While the promise of a more sophisticated satellite system
remains just that, a promise, the low—powered DBS services of
GloboSat is conquering subscribers. Today, the industry
estimates that 160,000 dishes are installed in Brazilian
backyards, including those TVROs that serve more than one
household (Moreira, 1992). In this case, the earth stations
can be more appropriately called SMATVs (Satellite Master
Antenna Television). The first SMATVs appeared around 1980 in
both the United States and Brazil and, since they operate on
private land, usually serving an apartment building or group
of buildings, their proliferation has occurred independently
of legislation. Hotel Maksoud Plaza in Sao Paulo installed
such a system, offering 25 channels — all the commercial, the
paid and the satellite-received ones. Three other channels
show events that occur in the hotel (1992c). And some English
language schools are pulling cable from their backyard dishes
to TV sets installed in each class or across different
building units. The signals captured by a SMATV parabolic
antenna are distributed by cable to the several households,
making these earth stations a sort of mini-cable plant. Even
though American cable operators are strong enemies of SMATVs,
in Brazil these systems may very well be the embryo of future
cable plants, as one operator may be tempted to cross its
fence to serve more houses.

With its multitude of names and users, the satellite
systems certainly illustrate the signal distribution

technology that will support the expansion of all other

166
systems in Brazil. STV, MMDS and cable depend on satellite

relays. In the era of marketing segmentation, all the little
segments in each market are brought together to recompose a
mass audience on the national and international level thanks

to the satellites.

Chapter 5
Programming segmentation
The time for extra effort is
clearly when the situation is
in doubt. When neither side
has a clear-cut superiority.
Winning the battle for sales
leadership in a single year
will often clunch the victory

for decades to come (Ries &
Trout, 1981, p.54).

The establishment of new television signal distribution
technologies in Brazil enlarged the programming offer
significantly. About 188 hours of daily broadcasting were
added by the main pay-TV companies in the market alone — TVA
and GloboSat (See Table 1). If the 16- to 24-hour schedules
of the new open UHF channels Jovem Pan and MTV-Abril are
included, along with the 14 foreign television signals
captured by satellite dish owners, this number is
dramatically multiplied. But while the increase in television
time was accompanied in America by more program production,
the same does not seem to be happening in Brazil. The
American example shows that a large portion of the cable
companies were led to invest in the creation of networks with
differentiated programming to fulfill the new channels made
available and make cable television more attractive to
prospective subscribers. Comparatively, the number of new
channels created in Brazil is much smaller than in the United
States, but enough to present a critical mass in the demand
of new television programs. Identifying the audience niches

167

168

Table 1 - Total broadcasting hours added by new channels

 

 

 

Company/Channel Daily hours Program Nationality
Pay-TV
TVA
Filmes 24 USA(99%), European(1%)
Noticias (CNN) 24 USA
Esportes (ESPN) 24 USA
Supercanal 18 USA(99%),Italian(1%)
Classicos (TNT) 24 USA
Total 114
GloboSat
Filmes (Telecine) 24 USA(99%),European(1%)
Noticias (GNT) 16 USA/Europe(99%),Brazil
Esportes (Top Sports) 16 USA&Europe(99%),Brazil
Shows (Multishow) 18 German, Japanese, French
Total 74
PluralSat 12 German, French
Open channels
MTV-Abril 24 USA(50%), Brazilian(50%)
Jovem Pan 16 Mainly foreign
Grand Total 240

 

Source: Abril, GloboSat and Jovem Pan - January 1992.

not previously satisfied, and considering the social-economic
conditions of Brazil, most of the new channels have opted,
however, for predominantly imported lineups.

According to Browne, the Brazilian option is the common
alternative of most nations. ”[Since] imported programs
almost always are much cheaper than those made by the
domestic system, ... most of the world's television systems
import. more programs than they‘ produce ... [This fact
explains] the increasing homogeneity of TV programming

schedules" (Browne, 1989). All of the recent changes in the

169

global traffic of television programming suggest, however,
that importation does not have to be a fact of life. The new
Brazilian television companies that survive their initial
tribulations and conquer a piece of the market will be
inserted, it seems, into a scenario where they will have the
option to co-produce with international partners and even
become exporters. In their initial stage, nevertheless, these
young companies are expected to find that it is inconvenient
to maintain parallel investments such as program production.
Since the return of the initial investments have not been
accomplished yet, heavy investments in equipment and
specialized labor represent an extra debt not recoverable in
the short term.

Imported programs, tested and amortized in their original
markets, are clearly a better option. Moreover, the focused
character of the new channels means that no large segments of
the market will be reached to justify the prompt investment.
Such circumstances are common to all new television systems,
and the recently created private European channels have
resorted to importation as well. If the American cable
networks have not followed this importation trend it was
because they relied heavily on old productions, which had
their costs already amortized by broadcasters' exhibition and
were cheaply available in the syndication market. Barnouw
.recalls that:

Cable systems produced little that was new; ... each

was a supermarket of items made largely by others.
Spokesmen for the networks — still dominant but

170

increasingly edgy — were fond Of pointing out that cable
schedules, when not featuring old movies, were often
filled up with old television series — network hand-me-
downs ... Cable spokesmen, in response, expressed
satisfaction that they were helping television
“classics" find a new audience, and noted that many
viewers apparently found them preferable to current
network fare (Barnouw, 1990).

The incredible program production of the United States
represents a rather unique case with some contextual
differences from Brazilian television. Initially, it is
necessary to recognize that the expansion of television time
occurred in Brazil much later than it did in the United
States. The market environments are different, and it is
possible to point out many reasons for the American
production increase, as well as the Brazilian drive to
importation. The latter, for example, can now count on a very
developed international television market that simply did not
exist at the time that cable entrepreneurs were growing in
America. Moreover, as Chapter 6 further analyzes, there seems
to exist a very controversial cultural difference between the
two publics. Brazilians (or at least the elite) are
apparently more open to other cultures and programming —
especially the First World ones — whereas the American
audience seems to feel more comfortable with the particular
characteristics of nationally produced programs.

Without the same Open appreciation of international
programs, pioneer American television, unlike the Brazilian,
had its demand fulfilled by a powerful cinema industry. Owner

(of most equipment patents, and counting on a large, wealthy

171

market, the American. cinema studios have invented and
dominated with “iron clash" the feature film production
worldwide. A 1973-83 study by Tapio Varis about sources of
programs for TV stations in 50 countries indicated that the
United States exported more than twice as many programs as
all other countries combined. Moreover, in the USA, where
more than 150 companies were involved in the mid-603 in the
production and exportation of TV programs, the nine companies
that form the Motion Picture Export Association of America
have accounted for about 80 percent of the total American
sales abroad (Varis, 1974). Ultimately concentrated into a
handful of large companies, this industry takes advantage of
a privileged market position to dictate the international
program commercialization norms. Restricting the distribution
of some movies or conditioning the sale of blockbuster
productions to the purchase of second-class movies (of low
repercussion), the American giants have sometimes ruined
competitive industries in the process.

When Brazilian television started to demand more programs,
the unfair practices of American distributors in Brazil had
already caused the decline of a once vigorous cinema
industry. And since Brazilian broadcasters had to develop
their own program production centers, there is no independent
production industry to serve the new channels now. By
operating both as producers and exhibitors, the Brazilian
networks have closed the doors to independent production for

a long time. Globo, for example, produced up to 95 percent of

172

its own primetime schedule. It was only in the 19803 that new
technological improvements have reduced. the: cost. of TV
equipment, allowing many small entrepreneurs to conquer
spaces in networks like Bandeirantes, Record and Manchete,
with simple program formulas, commercialized by themselves.
The networks' vertical integration was not totally negative,
though. Along the years, the networks have gradually replaced
importation with their own breed of programs, composing
lineups radically different from the American ones (See Table
2).

Building upon the strength of Brazilian radio, instead of
cinema, the first television productions assumed most of the
radio program formulas, as well as professionals. Live comedy
or music shows with simple sets and traditional radio hosts
were transmitted from theaters and, since film equipment was
still clumsy, news bulletins and imported materials were
costly and hard to deal with. Paradoxically, the same factor
of technology development that has allowed for more national
production in the 19803 was responsible in the 19603 for more
importation. Thanks to the videotape, program importation
became simpler and cheaper, which caused a boom of foreign
programs supported by many multinational' advertisers,
especially among the smaller TV stations. Recording shows in
advance, Excelsior' network. introduced .in tflua 19603 the
concept of horizontal programming with the daily evening soap
operas. In the traditional vertical programming, still partly

adopted by the American networks, there is a different

173

Table 2 - Programming evolution in Brazil and United States

 

 

Brazil United States
19503
Telenovelas Variety shows
- Musicals News/Information
- Variety shows Live drama
Westerns

19603
Expansion brings low-brow

Talk/variety shows
Melodramatic style
of radio soaps

- Circus humor

- Rites of folklore
performances

19703

19803

Beginning of Situation
Comedies (Sitcoms)

Success of one program
generated similar
Medical and lawyer programs
Sports

Feature movies (8 per week)
News/ reality programs

Competition reduces innovation
old sitcoms
Programs about crime
Mini-series

Recycle of old sitcoms, often
zany,increasingly obsessed
about sex, and dramas of the
tracking, subduing, and
killing of enemies foreign and
domestic (Barnouw, 1990)

Reality shows substituted

documentaries

Judicial programs

Panel shows attended by

large studio audience and

odd guests

 

Source: Compiled from the references indicated in the text.

program every day and,
certain day of the week,

connected.

even if a program is repeated on a
the episodes are different and not

Horizontal programming the transmission of the

 

174

same program — the ”telenovelas" (the Brazilian version of

soap Operas) — several days of the week, greatly promoted the
habit of watching television among Brazilians.

As television became popularized, however, the nationally
produced programming was skewed towards the tastes of the
lower classes that represent the largest proportion of the
audience. As Straubhaar explains, “the lower class audiences
are seem as having their own needs and identities, which tend
to make them loyal to traditional, ethnic and regional
cultures, which are often adapted to mass media" (Straubhaar,
1989). But the low-brow character of the overall programming
did not mean low quality productions. On the contrary, as
Globo consolidated its market leadership in the 19603, it
raised its production quality standard as a way to
differentiate itself, while at the same time increasing the
volume of necessary investment for entering the business (a
barrier to entry). In the 19803, its quality productions
definitely conquered foreign markets, even though domestic
competitors started to lure away the upper and lower classes,
as Straubhaar comments:

Although Globo ... seems to reach a very broad general
audience, there is evidence that at both the upper and
lower class ends of the television audience that
interests and tastes diverge. Economics-based dependency
theory predicts that the cultural interests and
consumption habits of the 'bourgeoisie' will be
increasingly internationalized, by virtue of the upper
and upper middle classes' greater contact with foreign
culture via travel, education, occupations, and their

role in the international economic structure
(Straubhaar, 1989).

 

175

Thus, even though Brazilian television production has been
growing strong' with the introduction in the 19803 of
independent producers and the SBT and Manchete networks,
which respectively target the lower and upper classes, there
is a demand for imported programming, especially among the
upper classes. A quick look at the Brazilian television
programming suggests that some of the programs best
appreciated — after the telenovelas, of course — are those
not produced nationally: feature films and action series. Not
by mere chance, these are exactly the types of programs that
the American cinema industry has mastered, and which
constitute the bulk. of the traditional importation. of
Brazilian television. But the domain of Globo as exporter and
the American companies as providers of TV programs has been
increasingly challenged in the 19803.

Besides Globo, Manchete and Bandeirantes have started to
export to other Latin American countries, looking forward to
the implementation of the 1993 South Cone common market,
which promises a larger business flow between the industries
in Brazil, Argentina, Paraguay and Uruguay. The Brazilian
product is not so easy to sell, however, as the American's.
Produced on videotape, it is expensive and not as prestigious
as the American film. As a heritage of its radio origins, the
«emotion and action is more present in the words, not in car
pursuits and other easy gags, making it more difficult to
‘understand (Bolafio, 1988). Melo points out that ”exhibition

rights for one Globo telenovela (comprising at least 120

176

chapters) cost about only one—third of those charged in the
case of an American series (averaging 20 chapters)." Globo's
initial sales to Latin America also indicated a low return
rate due to high dubbing costs, reaching $150,000 for each
telenovela (Melo, 1992).

Not only American feature films and action series for the
upper classes have hit the Brazilian market, but also some
Latin American programs targeted at the lower classes. With
the difficulties encountered in sustaining the production of
its Mexican-style soap operas, SBT decided to import the real
ones and reduce expenses while obtaining some sporadic
audience hits, like the 21 percent share of ”Carrossel" in
1991 (1991c). Melo reports that “newcomer Brasil OM network
has similarly started to import telenovelas produced in
Argentina," and SBT is ready to step into co-productions with
the Mexican giant Televisa network (Melo, 1992). In fact, co-
productions have increasingly become a good option for
television companies around the world.

With the recent changes in the American Fin-Syn Rules,
described in Chapter 3, the American networks received
incentives to initiate co-productions with foreign companies,
which can become an interesting investment for Brazilian
entrepreneurs in the future. Up to now, Globo has been the
only Brazilian network to actively engage in various
international co-productions, most of them directed to its
foreign markets. Thanks to Globo's partial ownership of some

European stations, like the Portuguese SIC and

177

TeleMonteCarlo, it is able to easily exchange productions
among the various markets. On the other hand, the American
networks were also allowed into the international syndication
market and the Brazilian networks may find themselves flooded
with old American series instead.

In the past, the American companies were more aggressive
and quicker to act, transforming markets like Brazil as a
secondary step to the exhibition of their programs. Nowadays,
the American movie productions go through a series of
exhibition “windows" after they are launched. First, they are
exhibited in the first-class theaters, then in the second—
class theaters and then they reach domestic television at the
same time as they reach theaters worldwide. In the United
States, the movies start in television at the pay-TV systems
and VCRs, going to cable and regular broadcasters afterward.
In the rest of the world, the movies are tending to follow
similar routes as each window is made available. The new
Brazilian pay-TV represents a new window between the theaters
and the broadcasters, attracting the attention of American
companies but, in light of all such turnabout in the flux of
programs, the future schedules of the new Brazilian channels
will mainly depend on the companies' policies.

Each company has introduced the foreign programs under a
different contract agreement with providers, but most of them
have leeway to introduce or increase the proportion of
nationally produced programs. Globo's pay-TV channels enjoy a

significant edge, being able to use the parent company's

178

library and expertise. Already the service with the highest
index of nationalization, GloboSat, has assembled its own
schedule, with programs coming from a variety of sources.
Based on Globo's active international expansion, GloboSat is
likely to use its satellite coverage of Latin America to
promote exportation to neighbor countries in the future.
Since 1975, when Globo first exported the telenovela
“Gabriela" to Portugal, it has learned the value of the
international market. Melo indicates that:

In 1977 Globo was already accounting for profits of $1
million with the revenues of exported telenovelas; in
1985 these profits had increased to around $15 million;
more recent profits have stabilized around the level of

$20 million a modest amount [compared to] gross
yearly sales revenues of $700 million (Melo, 1992).

Another form of program importation that may allow for an
increased amount of local productions was adopted by Abril.
Similarly to the Globo-Time/Life agreement in the 19603,
Abril has signed a franchise agreement with the American MTV
network to use its brand, programming and management
expertise. As the American partner did not invest in the
Brazilian channel and receives only the payment of royalties,
the deal did not attract any legal controversy. By acquiring
a program package and balancing it with up to 50 percent of
national productions, MTV-Abril is empowered to increase its
production gradually. The same liberty may not be feasible
for companies like TVA and PluralSat, which have simply

imported the satellite signal of foreign channels. For these

179

channels, the insertion of local productions is conditioned
to the inclusion of new channels or the end of the contract
for a foreign 24-hour channel. The remainder of this chapter
is a background on each of these new channels, with possible

clues about their future.

5.1 The new channels

Television segmentation started in Brazil with the advent
of new concessions in some large metropolitan areas, like Sao
Paulo. Since the VHF spectrum in such areas had already been
taken, the ultra-high frequency was a compulsory choice. But
the UHF that allowed for segmentation was not exactly new to
the metro Sao Paulo region. Point-to-point UHF transmitters
deliver network signals to affiliates in the countryside.
Independent UHF stations, also recently built in the
outskirts of the metro area, drop in their signal in the
capital. This new market for independent stations offered
them the chance to grow and, with them, the variety of
programming offered besides that of the large networks.

One of the first UHF stations to start broadcasting in the
metro Sao Paulo area was TV ABC of Santo André (the “A" of
three sister cities that include 850 .Bernardo and 850
Caetano, in the vicinities of 350 Paulo city). Operating
experimentally as early as July 1989, channel 40 initially
reached only the so-called ABC region, with transmission

power around ten kW. That was already a good beginning,

1 80

considering that Santo Andre had 2.3 million inhabitants and
figures among the ten cities with the highest acquisitive
power per capita in the country (the first is 850 Caetano)
(Pimenta, 1990). The individual responsible for the station
is 23-year-old Keynes Dotto, son of Edson Danilo Dotto, owner
of the newspaper Diario_do__Grande__ABC, three FM radio
stations (at Sao Paulo, Ribeirao Preto and Curitiba) and one
AM station (at $50 Bernardo do Campo) (1988d). The Dotto
family has invested about $150,000 intending to reach
households of classes A, B and C with viewers older than 25
years (Pimenta, 1990), supposedly attending to the need of
the region for regionalized media. Nevertheless, the bulk Of
its programming consists of retransmitting the educational
lineup of Funteve of Rio de Janeiro. ABC managers explained
to the press that the plans were to start with transmissions
of Funteve from 8 to 12:30 A.M., including, some day, local
sports and news provided by the ABC newspaper journalism
staff (Pimenta, 1990), reaching a maximum of 20 hours per
week.

According to Ministerial Decree 93 of July 20, 1989,
educational stations like ABC can generate their own
programming, as long as it does not surpass 15 percent of the
original broadcasting from the station to which it is
affiliated (Fernandes, 1990). Production is very likely to be
cost inefficient, though. Since the educational stations
cannot sell slots to advertisers, the return on investments

depends on special interest projects supported by private

181

companies through the Sarney Law, which offers tax discounts
to those investing in cultural promotions (1988b). While this
region of Sao Paulo state, which encompasses the largest
industrial plants of Brazil, still waits for its local
television news, in 1990 350 Paulo won its most important
retransmitter of Funteve programming. Now, besides the 60-
meter antenna tower on the highest point of Santo Andre, TV
ABC also has a transmitter in downtown sao Paulo. Another
antenna 110 meters above the ground, was erected above a
building on Avenida Paulista, in the same place where Scala
FM radio, also owned by the Dotto family, operates. A
$300,000 transmitter is planned to increase the transmission
power from ten kW to 316 kW (Pimenta, 1990).

Located in Guarulhos, another city of metropoitan sac
Paulo, channel 58 of Sistema Metropolitano de Radio e
Televisao started experimental operations in November 1989, a
few months after TV ABC (19909). Both stations retransmit the
programming of Funteve, under the same contract basis, but TV
Metropolitana has been demonstrating a more aggressive
enterpreneurship. When TV Metropolitana officially went on
the air, in August 1990, it became the first UHF channel to
be received by TV sets in 350 Paulo city (19909). Its 1,000
Kw transmission covers a radius of 30-40 kilometers, reaching
3.5 million inhabitants in the eastern area of Sao Paulo city
and approximately 900,000 living in Guarulhos, besides Osasco

and Greater ABC regions (l991t).

182
Like TV ABC, the majority of TV Metropolitana's programming

comes via satellite from TVE of Rio de Janeiro and is
retransmitted between 8 and 1 A.M. But the local production
time, restricted by contract to about 25 percent of the
programming, has been gradually fulfilled by internal crews
or by independent producers. Running Monday through Saturday
at 7 P.M., the first local program was ”Jornal
Metropolitano," the 30-minute local news show produced by a
staff of 15 journalists. Following suit, came “Quem Sabe
Ganha" (a four-minute quiz show that runs three times a day
with distribution of gifts over the telephone), “Domingo
Musical" (a variety show with invited artists and
contestants), ”Top Clube" (a talk show with city
personalities) and ”Metropolitana Esporte" (a daily lS-minute
news show that focuses on the amateur sports in the city and
is scheduled to transmit local soccer matches). Behind these
initiatives are professionals with a variety of backgrounds,
like Tony Auad, ex-host of wrestling shows and now commercial
director; or Edi Newton, one of the pioneers of Brazilian
television, with 30 years of work at Globo TV, who became the
artistic director of Metropolitana (1991t).

Also like ABC, Metropolitana is not allowed to sell
advertising slots, but has innovated by performing a barter
deal with a local billboard company. It exchanged an outdoor
with its promotional campaign for the production and
transmission of a documentary on the use of outdoors.

Metropolitana is also leading a campaign to demand from the

183

government the right to sell slots. The law establishes that
the educational stations cannot sell slots because they
already have the support of the government (l991v).

However, since the owner, Jair Sanzoni, claims not to have
received any support from the government, he calls the right
to sell slots the right to survive (l991v). And he knows
about surviving. Jair Sanzoni owns the largest group of
private radio stations in the country — 16 radio stations (13
FM and two AM) — and has 29 other affiliates, besides eight
educational TV stations in the main cities of the interior of
550 Paulo: Mogi das Cruzes (channel 49), Jundiai (27),
Taubaté (33), Campinas (10), Sorocaba (39), Osasco (48), Sao
Jose dos Campos (25) and Guarulhos (58). Until the first
quarter of 1991, however, only Mogi das Cruzes, Sorocaba and
Guarulhos were operating. More recently, it was announced
that TV Morada do Sol, channel 42 of Araraquara, was planning
to reach 350 Paulo, with a power of 100 kW. The director,
Roberto Montoro Filho, indicated a programming focused on
news, northern music (sertaneja) and specials about

agriculture and cattle.

5.2 The Niche Channels

Jovem Pan and MTV-Abril promoted a big revolution in the
Brazilian television industry by introducing the concept of
segmented channels. For the first time, a channel

concentrated on offering only one kind of programming for a

184

certain niche of the market. Like all pioneer experiences,
the history of their first days was full of setbacks and
innovative solutions to new and old problems. In essence,
they had to identify a market demand not fully or properly
serviced by the existing networks — Abril found rock music
and Jovem Pan found news. Then they had to measure this
segment of the market and define its potential, both in
numerical terms and acquisitive power. If there were enough
potential viewers and advertisers, the new stations went on
to develop or buy programming that would service the specific
demands of their audience. Another contemporary concession
never came off the ground. The UHF channel 53 Of Sao Paulo,
conceded to Fundacao Evangélica Trindade, was scheduled to
start operating on July 1, 1990, according to commercial
director Gidalti Alencar. While its programming focus is
still unknown, it was said to be applying for an increase in
transmission power, from one kW to about 100 kW (Fernandes,
1990).

Here are some of these "niche channel" experiences, as
recollected through a series of personal interviews and

hundreds of newspaper clippings.

5.2.1 Yes, We Have MTV!

It was more than a decade ago that the Abril Group, founded
in the early fifties by two Italian-Americans, started making

plans to become a real communication conglomerate. From its

185

printing plant - the largest in Latin America — comes about
120 magazines and several telephone directories, among other
publications, which qualify Abril as one of the most
important media companies of Brazil. The expansion of the
group towards the electronic media was, therefore, supposed
to be the next step of its consolidation in the market,
following the example of Globo Network, which started as an
offspring of Q_Globo newspaper. Under the close scrutiny of
the government, however, the television industry has always
posed strong barriers to the entry of groups not totally
aligned with the government's interests.

The first opportunity for Abril appeared after 1980, when
the government dismembered. the pioneer’ TV’ Tupi. After
numerous political, besides business negotiations, Abril was
passed over in favor of the Silvio Santos Group and Bloch
Publishing Group. In 1985, when Silvio Santos was pressured
to sell his share of TV Record, Abril was again considered by
the press as the best bidder. For reasons yet to be properly
explained, however, the deal failed to come to terms. Abril
started pursuing different strategies. Abril Video, an
independent video producer created a few years before, bought
time at TV Bandeirantes and, later, at Gazeta to air its
journalistic programs. In spite of the low ratings, the
programs enjoyed a reputation for innovative and critical
journalism. This latter characteristic (criticism) could have
bothered enough political figures to seal the end of the

programs in 1987. The next year, Abril Video withdrew from

186

broadcasting television, repositioning itself in the growing
home-video market as both a producer and distributor (1989a).

In 1985, the government opened the bidding for concessions
of new UHF transmitter stations in Sao Paulo city. And on
this front Abril finally succeeded, beating other powerful
media groups for the concession of channel 32. Six years
later, Abril's video and TV companies (Abril Video, TV-
Abril/MTV and TVA), headed by the founder's grandsons, were
already responsible for 6.2 percent of the conglomerate's
profits (See Table 3), with forecasts that this percentage

will rise to about 35 percent in four years (Blecher, 1991).

Table 3 - Abril Group — Profits per Area 1991

 

Division Percentggg
TV/Video‘ 6 . 2
Publications Distribution 6.5
Printing 11.5
Telephone Directories 19.0
Magazines 56.8

 

Source: Blecher, Nelson. “Televisao muda o perfil do Grupo
Abril." Folha_de_Sl_Paulo.September 13, 1991.

Meanwhile, the challenge is still to amortize Abril's huge
initial investments. Channel 32 consumed investments of $15
million just before inauguration — $10 million on equipment
alone (See Table 4). That includes 4,300 square meters for
three central studios, a mobile studio and six mobile units

(Regina, 1990). Another $400,000 were spent on computer

 

*In 1991, Abril Video sold almost a million prerecorded tapes to rental
stores.

187

equipment; a system based on PCs is responsible for the
programming of the station. The Automatic Cartridge Recorder
controls the insertion of 256 videotapes, with 30 minutes
each, maintaining the station on the air for 125 hours

without help (Lachtermacher, 1991).

Table 4'— TV Abril's equipment

 

Equipment Nationality Brand
Antenna French Thomson
Transmitters American Comark
Cameras German Philips
Digital Effects American Ampex
Maintenance Equip. American Tektronix
Computer Graphics Canadian Alias

Graphic Station Silicon Graphics

Personal Iris
Paint System Ampex Visual Arts

 

Source: (Fernandes, 1990)

It was only more recently that Roger Karman, Abril's Vice-
President for TV/Video, confessed early plans to have a
programming either centered in journalism or aimed at the
female public, using the successful experiences of their
magazines (Sayao, 1990). Past experiences in these niches
were, nevertheless, very negative. Abril's ”Olhar
EletrOnico," aired by Gazeta, and Globo's “TV Mulher" (TV
Woman) were marked by low ratings and short life spans.

The mystery surrounding Abril's programming was removed on
March 7, 1990, with the official launching of “MTV Brasil" in

350 Paulo city. Abril, whose magazines had already surveyed

188

and identified the young public as an attractive market, was
probably more than interested when Gazeta turned down a $2
million Music Television (MTV) programming package (Pimenta,
1990). After successfully translating such well-known
American trademarks as “Playboy," ”Cosmopolitan" and
“Disney," Abril managed to get even more than programs from
MTV.

The five-year renewable contract brought to Abril the
technical and management know-how of MTV as well, raising
inevitable comparisons with the Globo/Time-Life agreement in
the 19603. Like the Time-Life/TV Globo contract, the
participation of the American partner includes decisions such
as which commercials can be accepted, but the contract does
not involve investments from the American MTV. And instead of
shares in the profits of the Brazilian channel, MTV payments
after the contract fee consist of royalties for the use of
its brand - all legal practices under the Brazilian laws
(Regina, 1990). Present in 38 countries (See Table 5), MTV
expansion into Brazil soon presented some local twists to the
American long-planned corporate strategies.

The videoclips coming from different MTVs all around the
world are exclusive to Abril for a period of one to three
months, and the Brazilian videoclips can also be retransmited
in the other countries (Gaspar, 1991). There were just not
enough national videoclips, nor rock stars, to fulfill even
half of the primetime (7 to 10 P.M.), which the law required

to be Brazilian productions. MTV-Abril's premiere at midday

189

Table 5 - MTV in other countries

 

MTV Europe

Launched on August 1, 1987.

A partnership between Maxwell Entertainment Group and Viacom
International, Inc., the network currently reaches 20.4
million households in 25 countries, 24 hours a day, by
satellite, cable and terrestrial distribution. It acquires
its own videoclips, drawing from the domestic markets in
individual countries, to discover non-English and American
bands making an international sound. MTV Europe is an
English-language network.

MTV Japan

Originally launched on October 1, 1984, through a licensing
agreement with Asahi Broadcasting Corp., MTV was seen four
hours a week for four years. On July 4, 1988, MTV was
launched 5.5 hours a week on the Tokyo Broadcasting System,
Inc.(TBS), through a licensing agreement. TBS is the largest
commercial broadcasting station in Japan and reaches 13.5
million households in the metro Tokyo area. MTV Japan is a
Japanese-language network.

MTV Australia

Launched on April 16, 1987.

Seen live 5.5 hours per week on The Nine Network, ranked
number one across Australia, the network reaches over seven
million homes. MTV Australia is an English-language network.

MTV International

Launched on July 15, 1988.

Seen in the United States and other countries throughout
Latin America (Aruba, Argentina, Bolivia, Chile, Costa Rica,
Honduras, Mexico, Panama and Paraguay), reaching 10.2 million
households. In the U.S. it is distributed by Telemundo
Network and in Latin America by MTV Networks Syndication
Sales Worldwide. It is a weekly one-hour program, on
broadcast television, including Spanish and English videos.
MTV International is a Spanish—language program.

 

Source: U.S. MTV's press releases

on October 20, 1990 (Blecher, 1991) was marked by 70 percent
imported programming (Alencar, 1990). By March 1991, when the
law promoting Brazilian-produced programming was abolished,

Abril had produced by itself twenty videoclips, with unit

190
prices evaluated between $20,000 and $30,000. That meant

almost one clip for each furnished by the national record
companies (19911). Using film instead of videotape, Abril was
the only MTV network in the world to produce videoclips
(Gaspar, 1991).

According to Abril officials, this kind of production was
practically restricted to Globo TV, which transmitted an
average of two foreign and two internally produced videoclips
every Sunday night. To break the dependence on Globo, Abril
had to find new human resources. Foreign directors and
Brazilian movie professionals were contracted to produce
clips and, to diversify from the limited artistic base on the
national scene, the program “Demo MTV" was created with the
task of discovering new music groups and talents (Gaspar,
1991).

Besides videoclips, Abril was also pushed into the
production of commercials, since they had to follow the
characteristics of the programming, as defined by American
MTV. These efforts paid off. Abril has gained the respect of
the radio stations, which are playing more MTV—selected
songs, and of the record companies, which consult Abril when
deciding which song of a long—play record should become a
videoclip (Gaspar, 1991). By the time of this study, in
January 1992, the proportion of national materials had been
raised to 50 percent and Abril staff proudly talked about how
impressed the MTV consultants were during their last

inspection visit. The record companies have assumed the

191

budget and the choice of directors, while Abril has become a
sporadic co-producer.

The average productions rarely exceed $30,000, while the
specials reach a maximum of $60,000 — a humble figure
compared to Michael Jackson's $4 million [, 1992 #320]. But
Abril offers more than videoclips (See Table 6). Programming
is composed of music (65 percent), sports, humor and
journalism aimed at a 12- to 34-year-old public. Surfing and
roller-skating are the main sports covered and each hour a
three minute arts and entertainment news bulletin is inserted
(Regina, 1990). Like American MTV, Abril adopted a single
segment marketing concentration, balancing the risks of being
the first targeted television channel in Brazil with the high
attractiveness of the market. Some early surveys detected
that the people within the MTV age segment are heavier
consumers of several products, like beverages, fashion, etc.
Even though the videoclips did not exactly abound in
Brazilian television, there were signs that a young group
with high acquisitive power already knew the MTV concept,
either through American movies and music or through tapes
recorded in the United States by traveling friends.

On the other hand, this segment's attention and loyalty is
traditionally the hardest one to conquer and maintain. The
teenagers, in particular, have a more unstable profile and
are less exposed to the media. The advertisers know such
Odds, and Abril was faced with a triple challenge: expand

signal reception in already congested markets, increase

192
Table 6 - MTV-Abril programming of all times

 

Program Schedule Description

MTV no or daily - 7:30 to 8 PM news of the music world

Disk MTV weekdays, 6 to 7:30PM 10 videoclips more asked by audience
during the day, besides 12 segments,
including ”Invasao de domicilio" in
which the host interviews singers in
their houses

TV Zone wednesdays-9 to 10PM singer Rita Lee performs and presents
videoclips

Notoa do comedian Marcelo Tas revisits the

Amara]. places reporter Amaral Neto showed in
his weekly program in the 19703

Video Music 12 PM Video-jockey (VJ) Cuca hosts
videoclips only

Cldanicon MTV VJ Rodrigo presents Old classic
videoclips

Top 10 VJ Luiz Thunderbirdpresents the 10
most requested videoclips in USA

Selena Rock Saturdays Zeca Camargo does interviews and
music news

Dance MTV VJ Maria Paula presents music to
dance

Lado B VJ Luiz Thunderbird presents new
songs by local independent groups

Rockatéria Sundays interviews and retrospectives

Top 20 Brasil VJ Astrid Fontenelle presents the 20
most requested videoclips in Brazil

Cine MTV interviews and critics of movies

TuttiiDani weekdays—11AM to 1PM VJ Daniela Barbieri presents the
weekends-1:30 to 4PM music hits of the FM radios
663 Total weekdays-4 to 6:45PM VJ Gastao hosts heavy metal music
Beat MTV weekdays-9 to 10:30PM VJ Maria Paula shows new
tendencies and rythms
Check Up Sundays—9:30 to 10:30PM VJ Maria Paula hosts a restrospective
of the career of invited artists
12]. Saturdays-12:30 to 3AM VJ Thunderbird hosts less famous bands
It»! MTV’lhaps
Master-ix
Top 10 can
Furia Metal

 

In 1991, Abril introduced five new programs — some take
‘turns in the primetime — and expanded the broadcasting hours
frxnn 11.A.M. to 3 A.M. (Teixeira, 1991). The strategy for the
[period 1992/5 is: ”Discover, help to develop and support new
-talents in the Brazilian pop music; distribute and promote
Brazilian music internationally; establish a contact between
-the national and the international pop music scenes." The
"Demo” program and the new “Acfistico,” scheduled to premiere
le December 1991, were initiatives in this sense (88, 1991).
jFive new programs premiered on February 10, 1992:

193

Table 6 - MTV-Abril Programming of all times (cont'd)

Zué, with Astrid Fontenele, starts with two hours of
videoclips, in the place of VideoMusic, presented by
Otaviano.

- At 2 P.M., MTV-Pix brings the clips most frequently played
in Europe and USA. VJ Cuca presents it, leaving “Non Stop."
° Every night, from 8 to 9:30PM, Megamax, with Maria Paula,
substitutes Ffiria, with Gastao. It corresponds to the
programming of American VH-l channel, aimed at a more adult
public (27+).

Every weeknight, from 11P.M. to 1A.M., VJ Thunderbird
presents “Rock-Blocks," with vanguard rock.

“Big-Vid" starts every weekend morning, with Otaviano
presenting the best clips of all times (Lazaretti, 1992).

Source: Compiled by author from several MTV promotional
materials.

general public awareness and lure advertisers to the new
segmentation concept.

MTV-Abril started with a restored building which once was
the headquarters of TV Tupi, the first television station in
the country. Its 143-meter antenna has an irradiation power
of 1,000 kW (Department, 1990), reaching a radius of 100
kilometers in metro Sao Paulo (Regina, 1990). Initially, the
broadcasting was restricted to 13 hours, Sunday through
Thursday, extending to 16 hours on Fridays and Saturdays. A
24-hour schedule was planned to be implemented only after two
years, but a gradual increase of hours has been taking place
toward a round-the-clock channel. The expectation was to
reach at least one percent of the four million TV households
of metro Sao Paulo (Regina, 1990), and the expansion
previewed for the first year included 30 million people in 22

municipalities.

194

Through 1995 the forecast is to reach 50 million people in
50 cities (Department, 1990), completely returning
investments already exceeding the $20 nflllion figure. The
planned network, with 30 retransmission stations, is not
intended to be an extensive network, but is planned to cover
selected parts of the country (Martinho, 1990), which has not
kept Abril from a quick expansion (See Table 7). Since June
8, 1990, Abril has leased channel 4A1, transponder frequency
3830 MHz (Sayao, 1990) of BrasilSat II. The first dolby
stereo signal on the Brazilian satellite (Netto, 1990) costs
Abril $1.3 million a year (Martinho, 1990), but allowed
reception in at least 10 other cities in the first year of
operations (19912).

Most of the stations capture the signal from the satellite
and retransmit it at the UHF frequency. That was the case of

MTV Porto Alegre, which started operating at October 7, 1991

Table 7 - MTV Channels in Brazil

 

 

City State Channel
Sao Paulo Sao Paulo 32
Porto Alegre Rio Grande do Sul 24
Recife Pernambuco 27
Manaus Amazonas 23
Sao Luis Maranhao 18
Rio de Janeiro Rio de Janeiro 24
Porto Velho Roraima 25
Macapa Amapa 24
Sorocaba* Sao Paulo 18
Novo Hamburgo* Rio Grande do Sul 18

 

* These cities are not capitals of the state.
Source: MTV-Abril's advertising on VejaSP magazine of August
17, 1992.

195

on UHF channel 24, reaching 15 cities in Rio Grande do Sul
state, at the extreme south of Brazil. The $200,000 initial
initial investment was partially financed by six founding
sponsors — Pepsi (soft drinks), Colgate (chemicals), Nike and
US Top (clothing), Cashmere Bouquet (deodorants) and Lacesa
(dairy) — paying $45,000 (1991k).

In Rio de Janeiro, the case was different. On August 17,
1990, Abril signed a three-year contract with TV Corcovado,
VHF channel 9. By this contract the station started producing
and airing MTV-like programs to an expected audience of 1.8
million people between 15 and 39 years old (Xexéo, 1990), and
shared the revenues with Abril. That was a radical
programming change for TV Corcovado, which used to be filled
with paid programs by religious groups (Silva, 1990). In 1991
the Corcovado station was bought by deputy Jose Carlos
Martinez. The press reported the purchase as part of
President Collor's political strategy of having supporting
media in each state for the next presidential elections. The
$1 nullion-per-month contract between Abril and Guilherme
Stoliar — main shareholder of Corcovado and also vice-
president of SBT Network — terminated in October 1991, but
had an extension of 6 months, in case any of the parties
decided not to have it renewed (Lobo, 1991). In February
1992, MTV-Abril returned to Rio on UHF channel 24.

To make people tune in to these new channels, Abril
invested $1.5 million in advertising for the launching, a

campaign entitled ”Yes, We Have MTV!” (Regina, 1990). But

196

when it transmitted its first image — a welcome clip to the
audience — the initial results were far from rewarding
(1990c). The first day of MTV-Abril in Sao Paulo was full of
problems due to mistakes in the software of the computer that
controls the insertion of programs. Bad cuts, long periods of
black screen and confusion in the insertion of vignettes were
the first hints that something was wrong. In spite of the
calls during the day, “Cine MTV" and “Saturday Night Live,"
respectively at 4 and 9:30 P.M., were simply not transmitted
(1990c). The first day in Rio was even worse. TV Corcovado
premiered without any sound. And when the problem was
detected, it arbitrarily put any sound track on the air,
remaining like this for a full hour (Xexéo, 1990).

In March 1991, after six months of transmission, an IBOPE
survey indicated that 17 percent of respondents from $30
Paulo and 27 percent from Rio had watched MTV-Abril (1991e).
Nevertheless, American. consultation (n1 programming ‘was
seemingly not achieving many positive points, as other
surveys revealed many critics. The video-jockeys (VJs), for
example, were criticized for a false intimacy, for using old
slang and for moving too much on the screen (1990c). After a
month of operation, Abril changed the programming. The plan
was to introduce live shows and move some late—night shows to
earlier hours. Programs like “Yo! MTV Raps" on Mondays at 1
A.M. and “Ffiria Metal" (heavy metal) on Fridays at 2 PuM.
were hardly watched, while there was criticism that there was

too much repetition of clips during the day (Flesch, 1990).

197

It was in the commercialization process that the MTV know—
how really made a difference for Abril. With the support of
consecutive surveys and unorthodox audience promotions, Abril
raised the number of advertisers from 23 at the premiere to
153 one year later (86, 1991). Actually, before its premiere
Abril already had five founder-advertisers — Bamerindus
(bank), Philips (electronics), sao Paulo Alpargatas
(clothing), Nestle (food) and Brahma (beverages) - which
signed contracts to invest $864,000 each in advertising
within six months (Marques, 1991).

In September 1990, the advertising space started to be
sold, and the expectation was to get $2.3 million by the end
of the year, but the real profits ‘were $3.5 :million.
Advertising at Abril does not surpass the limit of eight
minutes per hour, almost half of the time of the regular
networks. The length of the spot is not rigid, varying from a
few seconds to a minute or more. An insertion of 30 seconds
cost $530 in August 1991 (Lobo, 1991), and the revenues for
that year were expected to be $10 ndllion (Marques, 1991),
although the economic crisis of Brazil did not help.

Indeed, in the beginning of 1991, while the regular
networks counted revenues 40 to 50 percent below their
expectations, Abril was only 30 percent below (Gaspar, 1991).
Their secret of success was tied to convincing the
advertisers that Abril could reach their target market better
than the other networks. Since the UHF channels were not

included in the regular audience survey services of

I98

institutions like IBOPE, Abril had to produce its own
convincing data. For example, based on a study indicating
that going to a fast-food restaurant was the most common
practice among youngsters — after listening to music — large
fast-food chains were convinced to advertise on MTV. Other
surveys indicated that MTV's typical viewers are from class A
and B, with high acquisitive power and personal income,
constituting a market that consumes eight million sneakers
and 35 million pairs of jeans every year (Lobo, 1991).

Until April 1991, when Abril audience ratings started to be
part of IBOPE regular reports (1991e), the phone calls
received by the program “Disk MTV" were also used to evaluate
public reception (Flesch, 1990). The average viewership in
Rio, where the VHF transmissions were included in the IBOPE
measurements, was one percent, with peaks of three percent in
events like the ten years of MTV (Lazaretti, 1992). Since the
inclusion of UHF stations in the IBOPE People Meter in
September 1991, the average audience index has been one to
two points in $50 Paulo (Gaspar, 1991).

Like American MTV, Abril offers several promotions
involving the audience and pop artists. The lists of entrants
in every promotion become high-valued mailing lists to the
clients and Abril, which now has more than 100,000 of these
leads (prospective consumers) (Lobo, 1991). The winner of the
first promotion had a dinner with Paul McCartney in London
(Flesch, 1990). Another promotion involved three sponsors and

two supporting newspapers taking the selected winner to the

199
1991 Video Music Awards in Los Angeles (Lobo, 1991). The Nike

brand, licensed by Alpargatas in Brazil, invested $70,000 in
a one-minute TV spot transmitted exclusively by MTV, besides
a six-month exclusive sponsorship of ”Top 20 Brasil," one of
the most popular programs. The selected letter that contained
five of the most frequently played clips won a tape of them,
plus a pair of Nike shoes (1991m). More extraordinarily,
Philips sponsored a promotion in which the winner received
Philips' most complete sound system and a weekend to listen
to it very loudly, while the parents won a trip to Aguas de
Lindéia, a peaceful resort (Marques, 1991).

At the time this study was conducted, in January 1992, the
impression was that Abril was still adapting MTV programming
to the Brazilian tastes, including some videoclips from VH—l,
MTV's channel directed to older audiences in America. For
example, a survey by the Sinal agency made in December 1991
with 1,400 youngsters in $50 Paulo and Rio de Janeiro from
classes A, B and C indicated:

- 80 percent of the audience thinks MTV's programming is
addressed to them and the same proportion approves it.

The medium viewer is 12 to 19 years old, from classes A
and B.

The heavy viewer, who watches MTV five to seven days a
week, is male. Four in ten are between 15 and 19 years old
and six in ten are from classes A/B.

Rock is the most preferred overall and rap is more

listened to by boys in Sao Paulo (34 percent). Next is heavy

200

metal, also appreciated more by males (29 percent in SP and
28 percent in Rio)

- Surprisingly, Brazilian popular music — which is not
present in MTV — also got fans: the girls in Rio (58%),
followed by the girls in Sao Paulo (49 percent) (Lazaretti,.

1992).

5.2.2 Jovem Pan - Is the dream over?

After a frustrated application in 1983, when it lost to
Abril, Televisao Jovem Pan was granted license number 101 in
1987, beating out larger media conglomerates, like Jornal do
Brasil, Visao, Radio Jornal de Sao Paulo/TV Bandeirantes, TV-
3/Editora Trés, Supertupi and Diario do Grande ABC. The
success of the application can be attributed, to a large
extent, to the high credibility and respect gained by AM
radio station Jovem Pan-1 (620 KHz), also owned by one of the
partners of the TV station (which inherited the name). The
strong and nimble journalism that characterizes the radio
station - and that was planned for transplantion to the TV
station — classifies this station as one of the most
respected radio stations in $50 Paulo. Still, the sum of
brief moments of attention dedicated by Jovem Pan audience to
its news bulletins are not enough to provide any significant
audience ratings in any given survey. The advertisers
consider it a mandatory radio station, even though the

station's prices are the highest in the market (Nunes, 1987).

201
On January 20, 1988 Jovem Pan (JP) signed the contract for

a 15-year license to operate UHF channel 16 of open reception
(Maiello, 1988). JP is considered by some as the first
company to study the viability of subscription television in
Brazil in the beginning of the 19803, but its option for the
free delivery of signals may be a symbol of its disbelief in
the consolidation of such a system in the country (Demarchi,
1990). The contract fixed in six months the time for the
company to present the technical plans and two years to put
it on the air (Maiello, 1988). JP barely made it. Many
setbacks delayed the initial operations, forcing Jovem Pan to
abandon its plans of being the first UHF station to broadcast
in the capital. The rush for primacy also had a technical
reason. JP technicians were convinced that the public would
align their new UHF antennas to the first transmitters
available and that late comers would have few choices but to
place transmitters close to the ones already in operation.
The first problem the technical director, José Olimpio
Franco, had to face was the delay in the importation process
of the $8 million worth of equipment he bought in the United
States from well-recognized manufacturers, like Sony and
Bosh-Philips. When the equipment finally arrived, in late
1990, Jovem Pan was ready to set up an impressive journalism
machine. Planned to operate in the same mode as its radio
counterpart, JP-TV's electronic news gathering would allow
journalists to count on nine mobile units, besides

helicopter, to cover the city. The news is sent, by microwave

202

to automatic-tuning memory antennas at Avenida Paulista,
Barra Funda's headquarters in the city, or at Jaragua Peak
outside it.

For special events, a bus was converted into a mobile
studio. Eight cameras, post-productirnl and. broadcasting
capacity enable the bus to nmintain the station on air by
itself. The quality of the images is assured by 36 digital
Betacam video cameras with professional videotape recorders
that operate in NTSC with metal Beta tapes (1/2 inches).
After passing through one of the 12 editing tables available,
the news bulletins go to post-production and preparation of
”mother tapes," performed by three new' D2 'tape format
machines. The Pen System, which allows the coloring of
pictures on the screen, a still images databank and a Digital
Video Effects computer are responsible for quality vignettes.
And a Betacard Computerized Insertion System automatically
controls the insertion of commercials (Giannini, 1989).

Experimental broadcasting started on November 29, 1990 for
12 hours a day, during economic reforms implemented by
president Fernando Collor, who had assumed the position two
weeks before. The official start, scheduled for March 1991,
was again delayed for another 60 days, hoping for the best.
It was the beginning of one of the largest economic crises in
Brazilian history, and JOvem Pan had invested, by then, a
total of $16 million. About $5 million were spent on the
basic infrastructure alone (Nunes, 1987). JP bought a 3,850-

square-meter lot of land in a central part of 350 Paulo (240

203

Varzea Street, Barra Funda neighborhood) and built a
monumental. 4,000—square-meter' (built. area) headquarters,
designed to hold the studios, transmission center and
administrative offices. The larger studio, with 500 square
meters, was to be used for the production of journalism
programs, while the other two were for post-production
activities.

Still looking for a strategic position for its transmitter,
JP invested more to have an antenna in one of the highest and
most expensive places in the center of the city, where many
other broadcasters' antennas are also located. An 88-ton
antenna tower was erected over Senai (Industry National
Service) building at Avenida Paulista, which was remodeled to
support it. Approximately 200 meters above the ground, the
antenna has the same height as the TV Globo's antenna — for
years, one of the most recognized of the city's landmarks —
supported by the Gazeta building, practically beside it. The
20-meter antenna built by Dieletric Communications has a
power of 1,000 Kw, and the stereo transmission reaches a
radius of 50 kilometers, servicing metro Sao Paulo or the
equivalent of 60 municipalities. The eliptic polarization
that characterizes such antennaes facilitates the reception
by indoor antennas, which are predominant in Sao Paulo
(Giannini, 1989). Until the end of February 1992, the antenna
had cost JP about Cr$780 mdllion ($780,000 in January), which
were to be paid through the production and transmission of

twenty institutional videos to Senai.

204

By the end of the two-month delay period, a huge recession
had definitely taken over the country. Old barter contracts,
which financed more than $3.5 million for Jovem Pan indicate
the strong interest by the advertisers in the new channel.
Companies like Pirelli (cables), Ford (cars), Hobjeto
(furniture), Olivetti, Philco-Hitachi, Philips (electronics),
and Concrelix (construction), for example, have guaranteed
their commercial spots very early, in exchange for equipment
and materials. However, many of the advertisers that Jovem
Pan expected to help finance its official start were scared
away at that time. Without much financial slack, the plans to
deliver sports, journalism and service information — and
eventually to add feature films and clips — were far from
becoming true, in spite of the effort of JP's executives
(Demarchi, 1990). Narciso Kalili, Journalism Director since
November 1990, had designed operations to transform JP into a
Brazilian equivalent of CNN (Cable News Network). Programming
was to be divided into long blocks, with news, debates and
entertainment, with a bulletin of ongoing news and service
information every half hour, all coodinated by anchors - a
figure not common to Brazilian news yet. On weekends, the
sports were to be featured and JP already purchased
exclusivity rights for the transmission of the Argentine
soccer championships.

The ex-chief director of special reports for Globo Network
had plans to initially hire 200 people for the production of

journalism programs, increasing staff to 500 as the

205

broadcasting period reaches 24 hours (Anderaos, 1991a). On
the commercial side, vice-president Marcelo Mainardi planned
to attract advertisers like Rhodia, Gessy Lever (chemicals),
Itafi, Bradesco and Unibanco (banks), with approximately
thirty different formats to run their advertising. And if
such an eclectic policy was not convincing, specific packages
could be negotiated to better reach JP's audience of older
men from classes A, B and C (Demarchi, 1990).

Even though its infrastructure was ready, Jovem Pan was
being forced to maintain a minimum group of eight to ten
people, broadcasting a programming with zero cost, based on
movies received from embassies and soccer games whose rights
it had already paid for. A few months before the deadline
legally imposed for its official start in September, the need
for capital injection was clear and the original partners —
Objetivo Schools' Joao Carlos di Genio (30 percent) JP
radio's AntOnio Augusto Amaral de Carvalho (30 percent), and
Fernando Vieira de Melo (40 percent) — sought new money.
Indfistria Brasileira de Formularios (IBF) bought Melo's 40
percent in a $10—million transaction in July 1991. The
buyout, however, was not as welcome as it seems. For many
years, the JP radio station has used the slogan "Jovem Pan is
only radio” in order to demonstrate that it was not
conditioned to any other interest but radiodifusion. The
slogan was also a critique of the communication oligarchies
of the country, which were compromised by other business

interests (Nunes, 1987).

206

Nevertheless, the press has repeatedly denounced the
connection of IBF and political interests. With a profit of
$170 million in 1990, IBF is a group comprised of 14
companies in the printing industry that specialize in the
production of computer continuous-feed paper, check books,
air tickets and instant lottery cards. In the last six years,
IBF, which took 42 years since its foundation in 1943 to
incorporate eight companies, managed to buy five companies
and to create a sixth. In January 1991 it bought DCI Group,
the ninth in the list of largest national journalistic
companies, for cash. Such incredible buying capacity started
rumors in the market that political groups could be using IBF
as a front (Chaim, 1991). The rumors are also based on a 1988
scandal involving the company and the ex-governor of Sao
Paulo, Orestes Quércia. The governor was accused of favoring
the company in the competition for providing the instant
lottery cards and, considering his interest in media
companies - he owns directly and indirectly three television
stations, four newspapers, a magazine and three radio
stations in the main cities of the state - it seems
reasonable to think that IBF and JP could help him be elected
in the next presidential elections (1991f).

Jovem Pan's regular broadcasting started on July 2, 1991
with 16 hours a day — just enough not to lose its license.
Even though it is going to keep its coverage restricted for a
while to Sao Paulo city, JP has been active in the war for

rebroadcasters in the interior of the state. By the first

207

months of 1992, engineer Lucrécia de Fatima Costa counted ten
stations with contracts to rebroadcast signals and about 60
others were in preparation to do so [interview]. Some news
segments are scheduled for production in Rio de Janeiro and
Brasilia, and the transmission may reach the whole country
through JP's full transponder in Brasilsat II. International
news is provided by a subscription to CNN services, but in
the future there were plans to employ correspondents in some
of the less conventional places, like Berlin and Peking
(Anderaos, 1991a).

In spite of its potential for success, Jovem Pan's future
is still hard to predict. Without a definition of its
programming, and running' many hours of short Japanese
documentaries, JP's audience rating barely reaches a half
point during any time on any day. Much of the equipment
remains untouched in its boxes and only four programs have
been produced: Jornal Sao Paulo (news), No Pique da Pan
(sports news), Parada Obrigatéria (interviews) and Super VHS
(video technology). With monthly losses amounting to
$500,000, JP has already consumed more than $30 million from
the pockets of its three owners, who do not seem to be able
to come to any agreement.

In spite of their old friendship, AntOnio Augusto Amaral de
Carvalho (better known as ”Tuta”), owner of Jovem Pan radio,
and Joao Carlos di Genio,also owner of Objetivo Schools
fought in 1991 and have never talked again. Tuta has not been

to the company's buiding since December 5, 1991, and many

208

articles report him out of the company, even though his 30
percent shares have not been sold (Luz, 1992). One of the
pioneers of the live transmission. of sports, Tuta. was
considered by JP's employees as the spirit behind the whole
project. After all, Tuta produced and directed many hits
during his 20 years at TV Record of $50 Paulo, when this
network was the audience leader (Nunes, 1987). In 1972, after
winning 11 “Roguete Pinto" trophies and many “Governador do
Estado Awards," he bought Jovem Pan radio from his brothers
and made it a success (Maiello, 1988).

While all three partners confess to be trying to sell their
shares, Globo TV has offered to buy the immense headquarters
of JP-TV. The fate of the “Brazilian CNN" is dependent on its

owners' disposition.

5.2.3 Luqui - May play someday

More than a year after receiving its concession, the
premiere of UHF channel 21 of Sao Paulo city was still
uncertain by mid-1992. Its plans, however, have been long
exalted by the press. The history of what is to be the first
all-sports channel of Brazil is also the history of Luciano
do Vale, narrator of three soccer World Cups, 74 Formula One
races, and main sports presenter of Globo TV in the 19705. In
1981 he left Globo and in 1982 he founded his own company —
Luqui —»in association with his long-time colleague Francisco

Leal Filho (known as ”Quico"). His idea was to create a

209

sports programming package to be sold to any channel,
following the syndication example of American television.
Record was the first network to be interested, but there was
never an agreement. Bandeirantes then offered a consortium
operation in which Luqui used Bandeirantes' equipment and
broadcasting time, managing the production and
commercialization, while the profits were equally divided. It
was a tough deal for Luqui, one that had to overcome the
overall low investments in the sector and popular unawareness
of other sports besides soccer. But with vibrant narration,
Luciano managed to popularize volleyball in 1982, initiating
the public to a whole diversification of sports. When the
sports events were not there to be broadcast, Luqui promoted
the events by itself. That was the case with the heavy-weight
boxer Maguila, coached by Luciano, and with the Senior Soccer
Cup, which he organized while simultaneously working as coach
for the Brazilian team.

The initial 14 weekly hours of programming on Bandeirantes
reached 20 hours in 1990 and keeps expanding. With an average
audience twice the size of the normal programs produced by
Bandeirantes TV and peaks of 25 points, Luqui became vital to
the network, whose new slogan changed to ”the sports
channel." So by the time the new UHF channels started to be
distributed, Luqui already had 273 employees and, while
Luciano had been an informal adviser for Bandeirantes TV for
eight years, the network was feeling the pressure to give him

a more proper position. in the {organization. Thus, an

210

arrangement was made. Bandeirantes has always had tempestuous
relationships with the government and would hardly stand a
chance to win a UHF concession, but Luciano and Luqui had no
political past. Luciano also had casually come to know the
son of ex-president Sarney, who recommended that he apply for
a concession (Xavier Filho, 1991). In 1990, the just-created
company LQB (Luqui-Bandeirantes) won the concession and set
the premiere day for December 21, later postponing to May 13,
1991, the date Bandeirantes TV commemorated 24 years with a
new antenna at Avenida Paulista (1990d). It was planned to
initially have eight hours of programming, quickly expanding
to 12 hours, from 2 P.M. to 2 A.M. A 24-hour schedule was
supposed to come within six months (1990d).

Since June 11, 1991, however, Luciano and Quico have
assumed positions at Bandeirantes, leaving questions about
whether channel 21 will ever go on the air. Theoretically,
Luciano explains that his company's association with
Bandeirantes will follow a strategy used by the American ABC
and ESPN networks. The UHF channel will present all phases of
£1 tournament, creating the public interest for the subject,
while the coverage of the last phase will be made by
Bandeirantes (Xavier Filho, 1991). The investment anticipated
was frcm|$10-15 million (Fernandes, 1990) to have transmitter
powertcxf 1.5 MW, sending the signal to all of metro sao Paulo
anui even to some other important cities in the interior of

the state (1990d).

211

Luciano announced a programming based on journalism, sports
and movies, aiming at the family and avoiding scenes of sex
and violence (Xavier Filho, 1991). He plans to include one
hour of educational sports programs, with famous athletes
teaching the basic techniques of each sport and sponsors
providing special didactic books with exercises. About 40
percent of the programming is to be national, presented by an
all-female staff, of various races, in contrast with the
other channels (1990d). And, contrary to the ESPN lineup
offered by TVA, LQB promises to cover sports that are more
popular in Brazil. In order of preference, they list soccer,
Formula One car racing, volleyball, basketball, tennis and
swimming (Pimenta, 1990). The events already contracted to be
broadcast offer an idea of what is to come: Italian Soccer
Cup, NBA basketball, National Soccer Tournament, Indy Formula

racing and Luqui's Pele Cup of senior soccer players (1990d).

5.3 The pay-TV channels

In 1988, bulletin number 90 of the Brazilian Ministry of
Communications established March 24, of the next year as the
date to start receiving the applications for four new UHF
channels in the metropolitan area of $50 Paulo. It was the
official beginning of pay television in Brazil. By August of
1989, president Jose Sarney named the winners: the largest
graphic company in Latin America, Abril Publications; the

largest television company in the country, Globo Network;

212
Walter Fontoura, then director of Q_GlQbQ newspaper; and

Showtime, a company connected to Mathias Machline. Actual
operations, however, preceded regulation and KeyTV, which
started operating in 1988, has been considered a pioneer pay-
TV system in the country (Hoineff, 1991). Transmitting horse
races through Brasilsat to ten subscribers — mostly horse
owners — and for the Jockey Clubs of Sao Paulo and Rio de
Janeiro, which redistributed the images by UHF or cable to
more than 200 betting places. KeyTV was more a closed-circuit
system than a real pay—TV.

Owner of Sharp Brasil, SID Informatica (computers) and
Digibanco (bank automation equipment), Machline is also a
well-known personal friend of Sarney and his channel — Canal+
— was the first real pay-TV station to start operations.
Later, Abril acquired half of Cana1+ and launched its channel
in a joint venture called TVA (Mageste, 1989). While Globo
maintains complete secrecy about its plans, Fountoura has
divulged impressive projects for his channel that, likewise,
is not on the air yet. The concessions for other parts of the
country followed, as a general rule, affiliation to these
pioneers. Pay television was not restricted to UHF channels,
however. Soon afterwards, the government conceded SHF
channels to Canal+, and Globo found a breach in the law to
launch its satellite delivered channels. As the following
recollections indicate, the elitism of pay television has not

made the industry less attractive and competitive.

213
5.3.1 Canal+ — A troubled beginning

It does not exist anymore, but the story of Canal+ and its
young entrepreneur André Dreifuss is still talked about. Back
from the United States with a degree and experience in
television, Dreifuss would have convinced his father—in-law
to invest in his ideas for a Brazilian pay-television
station. Fortunately, his father-in-law was Mathias Machline,
owner of several electronic companies, including Sharp do
Brasil. In fact, Dreifuss implemented (or tried to) on Canal+
most of the services that characterize paid television in the
country today, making it the first STV and later the first
MMDS system created in Brazil.

It all began on March 28, 1989, when UHF subscription
channel 29 of Sao Paulo started transmitting the programming
of American cable channel ESPN. The initial $8 million
invested by Machline provided for' 16 daily hours of
transmission, soon increased to 19 hours (from 6 A.M. to 1
A.M.) (Mageste, 1989), but the subscribers still had to be
conquered. The initial free preview period would indicate the
difficulty of the task. After all, Dreifuss had to look for
television viewers that had the necessary language skills to
understand the English transmissions, an interest in such
foreign sports as golf, a UHF reception capability and
significant disposable cash. At the time of the premiere, a
decoder cost NCz$150 and the monthly fee was a tenth of that

(Magyar, 1989).

214

If the market penetration was hard and slow, however, the
service and technology enhancements were fast and impressive.
Fueled by increasing investments, Cana1+ started broadcasting
in stereo on August 26, 1989 in preparation for the future
use of the SAP (Second Audio Channel) technology, which would
allow for the transmission of dubbed audio on the second
channel. The mild public response was only offset at the time
by the resale of ESPN excerpts, whose exclusivity it held, to
other VHF channels like Cultura, Gazeta and Globo (1989c).

It was only on December 2, 1989 that Canal+ added
commercials 11) its programming. The advertising content was
mainly institutional or for highly priced products and took
just eight minutes of every hour, even though the Brazilian
legislation allowed for fifteen. Soon, spots from McDonald's,
Sears, Volkswagen and Dillard's Department Store were
responsible for about 20 percent of the profits (1990a). By
the end of 1989, the improving situation already led Dreifuss
to announce plans to open space for national independent
productions and for the creation of a journalism crew
(Mageste, 1989).

While the full potential of the system had not yet been
reached, the government was opening the concession of super
high frequency channels and American cable networks were
arriving in Brazil via new satellite systems. The conditions
were set for the establishment of MMDS systems in the country
and, again, Dreifuss took the lead. On January 22, 1990,

three new SHF channels — the Super Canal — were added. It was

215

an $11 million investment ($6 million in equipment and $5
million in programming), with return expected in four or five
years (Marsiaj, 1990a). SHF channel 5 of Sao Paulo
retransmitted the American cable channel CNN 24 hours a day,
holding an exclusive contract for Brazil. In May 1989, Renato
Pachetti, president of RAI Corporation, an American
subsidiary of the Italian state network, visited South
America and was approached by Dreifuss, who was interested in
the RAI programming; But. the .RAI retransmission rights
almost did not come to Super Canal. RAI's Pachetti first
asked for the approval of his personal friend Roberto Irineu
Marinho, owner of Globo TV, who was known to be interested in
a similar project (Gancia, 1990). RAI programming consisted
of variety shows, including Italian music, concerts and
ecology programs. The most important program was the news
bulletin, broadcast live from Italy between 7 and 9 P.M. The
rest of the 12 hours of transmissions was filled by
repetitions of the news bulletin, shows, movies, soccer and
even a culinary program.

The third channel, SHF 2, presented 24 hours of videoclips
furnished by CBS, BMG, Ariola, EMI-Odeon, Stiletto and other
recording companies. The so-called TVM channel also included
videotext-like news from UPI (United Press International),
all edited and generated from a studio at Avenida Paulista
(Vizia, 1990). The name and programming were a poor mimic of

American cable channel MTV (Music Television), whose $2

216

million programming Dreifuss could not afford to contract in
an earlier offer (Netto, 1990).

Such an odd programming package must have had an equally
odd audience, but not much subscriber data was ever released
by Canal+. The only survey mentioned by the press happened in
1990 and indicated that 68 percent of subscribers were men
and 32 percent were women, primarily between 25 and 40 years
old. It also revealed that 83 percent preferred the original
sound track in English and 93 percent had traveled outside
the country (Vizia, 1990). The expansion of the subscriber
base would, nevertheless, require effort to make the
programming more accessible and more attractive. In this
manner, a second audio channel started to be used for
Portuguese transmissions and, while all subscribers — even
those without stereo TV sets — could have it at no extra
cost, the company had to pay an estimated $48,000. The first
Portuguese transmission happened on February 3, 1990, when a
Brazilian tennis player narrated the live transmission of a
tennis match between Brazil and Canada for the Davis Cup in
Toronto (1990b).

Business seemed to be getting better by July, as Canal+
started operating in Rio de Janeiro with UHF channel 48.
Other expansion plans of the time listed Porto Alegre and
Curitiba in the south of Brazil, besides 12 other cities
around the country, to be reached through franchised systems
(Vizia, 1990). Dreifuss even had plans to create another

channel dedicated only to movies all day long, but by the end

 

217

of 1990, Showtime, the partnership of Dreifuss and Machline,
had invested more than $10 million without finding the
formula for success. Interferences, sudden cuts in the
programming, lack of trained personnel to install the UHF/SHF
antennas in a VHF city, uninteresting programs, too much
repetition of programs and all sorts of technical
difficulties caused a bad picture on the subscribers' sets
and on the company budget graphs (Vizia, 1990).

Some industry observers then declared the failure of pay-TV
in the so-called “Globoland.” That was certainly not the
case, although changes were urged. In essence, even more
investments were necessary ‘while sales and. promotional
efforts had to match technical advances. Dreifuss'
experiments may have set the tone for the industry, but they
consumed huge investments without ever defining a marketing
strategy. Thus, Mathias Machline, who was a major partner in
the Canal+ and owner of 50 percent of Super Canal, started to
look for a new partner with the financial and
technical/marketing backup that the company needed. With
17,000 subscriptions in Sao Paulo and 5,000 in Rio de
Janeiro, Showtime was cancelled in November 1990 when
Dreifuss sold his shares to Machline, leaving the company

(Compdo, 1991).

 

218
5.3.2 Yes, we also have TVA

In the same month that Dreifuss left, his shares were
resold by Machline to a new partner — Abril, the same group
that was successfully launching MTV in Brazil and that had
recently won the concession for pay—TV channels in Rio de
Janeiro and Sao Paulo (Comodo, 1991). The new joint—venture,
called Delta TelecomunicaQOes, was to have a renewed impulse
with more investments and the characteristic Abril way of
doing business — i.e. marketing oriented. Indeed, Delta
consumed in that same year $20 million of the $50 million
invested by Abril Group in 1990, when the raw profits were
$810 million (Monteiro, 1991b). As it had happened on MTV,
the young generation assumed conunand. Beside 25-year-old
Paulo Machline, son of Mathias, is 27-year-old Giancarlo
Civita, grandson of Victor Civita, the founder of Abril.

Supported by an experienced staff and plentiful resources,
their task was to transform Canal+ into TVA (the “A" may
stand for ”Assinatura" [or Subscription], or even Abril),
reformulating the old service and incorporating Abril's UHF
channel. It was a significant change that involved not only
variations in the programming, but also in the technical
operations and marketing strategies. The objectives were to
put together a package that would attract more people, fix
reception problems mainly associated with the receivers'
antennas, make subscription easier and use Abril's

respectable name as a good product warranty.

 

219

The incorporation of UHF channels 24 in 550 Paulo and 54 in
Rio de Janeiro with an all—movies lineup was certainly the
most important feature of the new TVA Brasil Radioenlaces
Ltda (Abril's company in the Delta joint-venture). The
Brazilian version of American movie channels like Cinemax and
Showtime is simply called TVA Filmes and spared further
surveys to prove that movies, especially those from
Hollywood, are one of the most in-demand products among all
segments of the market. The movies come with five-year
exclusivity contracts from large distributors like CBS-Fox,
Columbia, TriStar, Universal, Paramount, Orion,
Disney/Touchstone and also European distributors like French
Gaumont, Beaumont and Lumiere (Delmanto, 1991). Initially,
TVA bought a package of 600 movies, 360 of them unseen before
on Brazilian television, to fill 16 hours (noon to 4 A.M.) of
daily programming. About eight movies — one of them
previously unseen on television — were presented each day,
with repetitions at different times on the following days
(19910). In May 1992, the programing was expanded to 24
hours and 12 movies a day, with the promised inclusion of
more movies from distributors like Playboy and
Touchstone /Disney .

In fact, these are companies Abril had known for years as
publisher of the Brazilian issues of Playboy and Disney
magazines, which justified announcements that besides
programs like ”Playboy Late Hours" and “Inside Out," TVA

would soon add a sixth channel with Disney programming for

 

 

220

children (Iori, 1992). TVA Filmes is also the window to a few
locally produced — or just edited — segments, designed to
attract new subscribers with unscrambled transmissions. A
series of short programs show the behind-the-scenes
activities of Hollywood productions (“Luzes, Camera, Agao"),
curiosities about the movie world (“Takes") and facts about
what happened in Hollywood on the same date in the past
(“Neste dia em Hollywood"). Special events, like cinema
festivals, have been announced to be covered by free-lance
news crews.

Behind and in front of the Brazilian cameras is Rubens
Ewald Filho, one of the best known movie critics of the
country. After years of writing for Abril's magazines, he
became Program Director of TVA and host of two shows. On
Saturday nights, at 8:30 P.M., he hosts “Premiere," with
commentaries about movies at the theaters, new video releases
and news about movies in production stage. At the same time,
on Mondays, he presents a European movie on a program called
“Espago Belas Artes," result of an agreement with the theater
chain of the same name (19910); to the frustration of non-
subscribers, his presentation is not scrambled, but the movie
(that follows it) is.

The American sitcom ”Married With Children” is the only
program always open to the general public, on weekdays at 8
P.M., and always dubbed in Portuguese (Schwartsman, 1991b).
In fact, as the leading channel of TVA, the movies have

received special attention with regard to the Portuguese

221

adaptations. The oldest movies (80 percent) only get
subtitles, the new movies are just dubbed (20 percent), and
the big hits of all times have both dubbed versions and
versions with subtitles.

For the first time in Brazil, the subtitles are being
edited through a computer process. The translator inputs the
text right into the computer and marks the start and ending
time on the screen. In this manner, a movie can be subtitled
in one week --half of the normal time — by one person instead
of three. Translation and orthography mistakes have been
corrected by a group of four people; and they have been
finding lots of them. In “Wall Street," for example, rare
roast beef became “unusual roast beef." The correction is
communicated to the distributors and new video copies are
also corrected. Censorship was also found. When ”Godfather”
was translated, for example, it was prohibited to mention
drug traffic in Brazil (19910).

The old Canal+ lineup was also reformulated to attract a
broader variety of subscribers. First, TVM was extinguished
as an unnecessary competitor to the real MTV owned by Abril.
Then, the RAI channel became two daily hours of live evening
transmission on the Supercanal channel, which offers a total
of 12-18 hours of daily programming. The rest of Supercanal's
schedule is filled with news from the three American networks
-— ”Meet the Press” and “Nightly News" from NBC, ”Good Morning
America" and “World News Tonight" from ABC, and ”This

Morning" from CBS - besides a selection of programs from

 

‘fl‘i-h- .

222

various American cable channels like The Discovery Channel,
Fashion Channel, Travel Channel and videoclips from the
American Top Ten (Rodrigues, 1991) (Comodo, 1991).

TVA still holds the exclusive rights in Brazil for the
integral transmission of ESPN and CNN programming, but they
too have gone through changes. Since February 4, 1991, CNN
International replaced the CNN program aimed at the American
market, on the new TVA Noticias (Serapicos, 1991). To compete
with GloboSat national programming, TVA promises the coverage
of national sports by a well-known producer (whose name was
not revealed) along with ESPN shows on the TVA Esportes
channel (Moreira, 1992).

Together with the scrambling of CNN signals on PanamSat
satellite on January 28, 1991, the Turner company also
started transmitting the programming of its cable channel TNT
tx> all of Latin America. Turner Filmes do Brasil, a local
subsidiary in Rio de Janeiro, first planned to offer the
programming to one of the upcoming cable systems, but soon
negotiated an exclusive contract with TVA for its Latin
transmissions. For TVA, it represented 3,700 movies, 1,150
short productions and 450 cartoons produced up to the 19703,
which are part of TNT's Metro Goldwin Meyer library. The
schedule of TVA Classicos consists of five new movies (rerun
on the same day) on weekdays, about eight on weekends and
holidays; because of the size of the collections, the movies
are likely to be repeated again only after four months.

Giancarlo Civita says that the agreement with TNT was to dub

 

 

223

the movies in Brazil, send them back to Atlanta, and receive
the whole programming package through the satellite, making
it the first TVA channel in Portuguese (besides TVA Filmes).
But up to mid-1992, the TNT programming still had only the
equally foreign Spanish subtitles added to the original sound
track (Schwartsman, 1991a).

Enhanced programming would not be enough, anyway, to escape
the same fate as Canal+. TVA signals had to arrive at
subscribers' TV sets with a more reasonable quality, and
previous experience indicated that most receiver antennas
were not adequate to tune higher frequencies. TVA had to
invest about $2 million to change obsolete antennas in many
buildings (Iori, 1992). The approximately 200 technicians,
recruited among electric engineering students and community
antenna repairmen, go to the residences and measure the
strength of the signals, recommending solutions that usually
involve the installation of higher towers or more appropriate
antennas. In case the quality of the image received is not
satisfactory due to geographical problems (buildings or trees
between the residence antenna and the transmitter can affect
the reception of SHF signals) or poor residential
installations, the technicians may recommend that the
potential viewer not purchase the service.

Another $15-20 million were spent on new equipment. In this
manner, TVA was trying to avoid the criticism of bad signal
reception that undermined the Canal+ operations. The

improvement on customer service, though, was miscalculated.

224

The initial flow of orders was so great that many subscribers
complained about waits of 20 to 30 days before the visit of a
technician (Iori, 1992). Another technical issue feared by
'I'VA officials was the choice of decoder and pirating
protection level. For reasons that may have ranged from the
inventive Brazilian character to the widespread pirate wave
that plagued the last days of American STV, TVA is said to
Ilave taken extreme measures against piracy.

A source that prefers to remain anonymous commented that
the initial grade of security adopted was too high (the range
is 1—13) and even the subscribers could not quite capture the
signals. New chips were needed in each decoder and American
consultants had to coordinate the exchange process, during
which no subscription was charged and no new ones were sold.
Now, the grade two level that was adopted still makes piracy
difficult, but the subscribers seem to be free of problems.

According to this same source, this is just one of a series
of stories of the early days of TVA, involving bad
management, misuse of the company funds and corruption. The
Choice of decoder was no less awkward, even though TVA led an
industry agreement for the adoption of a common model, which
Would allow the use of one unique decoder by subscribers of
multiple companies. After prolonged studies, as described in
the previous chapter, the option for General Electric's TOCOM
meant the early retirement and substitution of each one of
the thousands of Zenith decoders used by Canal+, while an

Oversized order of about 200,000 new sets is said to have

 

225

been bought. And these numbers also include remote controls,
which TVA provides free of charge, unlike most American cable
systems, which rent them to customers.

There were, indeed, many problems to be solved before the
company could really start operations. Among these initial
(difficulties that TVA had to face was a legal suit brought by
the French channel Plus (+) regarding the unauthorized use of
the name and the logotype by Canal+ (l991i). In fact, this
anonymous source mentioned that the company almost went
t>ankrupt at one point, due to the purchase of a huge fleet of
cars for technicians, together with gas stations and repair
shops, which raised the company's fixed assets to unbearable
levels. Fortunately, most of these problems never reached the
subscribers — or the press — leaving TVA the chance of
restructuring itself with new staff members and the
importation of Abril's aggressive marketing.

On May 1991, the sale of subscriptions was suspended while
the product was redefined and a more efficient sales and
installation structure was put in place. Three packages were
Offered to the subscribers: the UHF system, with TVA Filmes
(movies) and TVA Esportes (ESPN); the SHF system, with TVA
Noticias (CNN), TVA Supercanal (news potpourri) and TVA
Classicos (TNT); and a complete package, with both systems
(Comodo, 1991). The approximately 25,000 subscribers of
Canal+ did not pay the installation fees and received a 30

Percent discount on their renewals, while new subscribers

226

were attracted by a $1.5 million launching campaign in Sao
Iaulo (Anderaos, 1991b).

Among other promotions, a colorful program guide was
distributed to various restaurants, a luxurious showroom was
set up in the richest neighborhood of Sao Paulo, and some of
Sharp's point-of-sales also helped sell subscriptions. The
target was to have 30,000 subscriptions by the end of
£3eptember 1991, 45,000 by the end of the year and one million
vvithin five years (Schwartsman, 1991b). On July 24, 1991, the
sale of new subscriptions restarted with rather unique
financing characteristics. While a house resident could pay
something between $500 and almost $3,000 in January 1992 (See
Table 8), different options were offered to apartment
residents, who were led into convincing their neighbors to
subscribe so that they all could enjoy significant
installation discounts. If three to six apartments subscribe
within the same building, their discount on the installation
fee is ten percent. Between seven and ten, the discount is 20
percent; between 11 and 60 it is 50 percent, and for more
than that it is free.

If new subscribers are later added in the same building,
the others are reimbursed and the new ones pay only for the
initial subscription (which includes the price of the
decoder). Contrary to Canal+ marketing, TVA does not offer
COllective decoders in buildings; each subscriber has his own
decoder (19910). The monthly rates vary around $30 or, in the

Case of UHF package, just enough to rent at least ten

 

227
Table 8 - Prices of TVA packages

 

’7 unr SKF uar+snr

——"

Subscription-I-Decoder

House 508 842 906
Building
Individual* 2,223 1,906 2,732
All Apartments 2,271 3,630 4,797
Installation 1,826 1,508 L535

 

—7; The subscription and installation costs are shared by
IDuilding residents. Values are equivalent to dollars in
CTanuary 1992.

Source: TVA Showroom salespeople. Sao Paulo, January 1992.

videotapes in a large rental store (199ly). The “salty"
prices, however, have not seemed to diminish the public
interest for TVA, as demonstrated by the initial results of
the free preview.

On June 9, 1991, TVA started experimental broadcasting and
a free preview followed, which mixed on UHF channels 24 and
29 the programming of all TVA's five channels for 12 to 14
hours daily (6 to 12 A.M.). In the first day of free preview,
TVA received 800 calls, which led to 300 subscription
reservations by the end of the week (19910). The five-channel
Package was the most popular one sold in TVA's first weeks,
COrresponding to 52 percent of sales. The UHF option had 40
Percent of sales. and the SHF option only eight percent
(199ly).

The relatively low demand for the SHF option can be

eXplained by the transmission difficulties described in the

 

 

.i
I!”

228

previous chapter, the language barriers (since the
programming is in English, Spanish or Italian) and, to an
extent yet to be calculated, the poor appeal of the
programming. In regard to this latter possibility, a
saleswoman at the TVA showroom commented that the company had
been installing the CNN channel alone in some flat-service
apartment hotel condominiums, which usually house foreign
executives temporarily doing business in Sao Paulo. She also
added that multinational companies have developed the habit
of transferring subscriptions among foreign employees coming
to and going from Brazil (saleswoman, 1992).

The positive results of this free trial period resulted in,
among other reasons, a delayed official start, from the
forecast date of September 1 to the 15, 1991, when the
signals were scrambled at exactly 12 P.M. By that time, the
payoff was expected to come 70 percent from sales of
subscriptions and 30 percent from sales of advertising space
(Americano, 1991). With different advertising policies for
each channel, by August TVA had already conquered advertisers
like General Motors and Brahma (beverages), besides the in-
hOuse ads of Sharp (Santomauro, 1991). Until mid-1992, the
Very rare commercials that could be seen were in between the
movies shown on TVA Filmes.

The expectation is that these numbers will grow with the
expansion of the system to the rest of the country. The area
Covered by TVA now corresponds more or less to the inner

borders of metro Sao Paulo, but it already has the right to

 

229

transmit to another 16 cities. In Rio de Janeiro (UHF
channels 48 and 58) and Curitiba, where Canal+ used to
operate, too, experimental broadcasting started in March 1992
and it was planned that scrambling would begin in April
(Moreira, 1992).

According to Program Director Giancarlo Civita, the next
cities to be reached are Porto Alegre (Rio Grande do Sul -
£30uth), Brasilia (Federal District) and Belo Horizonte (Minas
(;erais - Central West). The affiliates or branches in these
cities will receive the NTSC stereo signals via satellite,
but the Pal-M standard is used to broadcast locally. Except
for TVA Filmes and TVA Supercanal, which are edited in $50
Paulo and retransmitted through two full transponders of
Brasilsat, all the imported signals are captured directly
from PanamSat.

By May 1992, the balance of operations for TVA and its
approximately 750 employees (who include 200 technicians, 200
administrative workers and 100 program producers) were fairly
good, considering the great economic crisis impoverishing the
Country. Even though investments had reached $30 million and
TVA was said to be spending even more on the purchase of
three half-transponders at Brasilsat II, about 34,200
Subscribers were conquered and the forecasts were bright. By
the end of the year, TVA expected to have 100,000 subscribers
in Sao Paulo, 30,000 in Rio de Janeiro and 10,000 in

Cliritiba. That is, if the recession does not get worse. In

230
that case, the target numbers would have to be reduced by 30

percent (Moreira, 1992).

5.3.3 GloboSat — Competition comes from the sky

On the same day that TVA started its experimental
loroadcasting, Globo TV transmitted announcements throughout
the whole day asking people not to subscribe to any pay
1:elevision system before getting to know GloboSat's services.
(the advertising piece was called “Don't subscribe to anything
vwithout seeing it" (Delmanto, 1991) and, while it was a clear
sshow of force to slow the competitor's growth, it was also a
s;ign of the Globo Group's indecision regarding pay
trelevision. Like Abril, in 1988 Globo had received
concessions for UHF pay channels in Rio de Janeiro and Sao
Paulo, but by mid-1992 had not presented any sign of an
Opening date. On the contrary, director Anténio Athayde of TV
Paulista Metro, channel 19 of Sao Paulo, maintains total
Secrecy about the station's plans (Fernandes, 1990).

Surprisingly, the actions of Globo favored instead the
JJaunching of the DBS—like services of GloboSat, which were
rust even anticipated by the legislation of 1988. GloboSat was
not formally allowed to operate or sell subscriptions in
4A41gust 1991, but GloboSat's competitive efforts did not wait
for any approval to start distributing flyers and brochures
about its system to condominiums and houses in Rio and Sao

Paulo (Delmanto, 1991). In fact, the decision to anticipate

231

such promotions from September to August was based on some
previous legislative changes that finally cleared the way for
the new service. The National Secretary of Communications
confirmed that GloboSat provides a service that does not
require government authorization.

A presidential decree of July 18,. 1991 ruled on the so-
called “special services of satellite communication" —
including the transmission of data, television and certain
telephone signals — but there are still no specific norms for
each service. Since the norms are what are legally needed to
define how the applicant should proceed, GloboSat did not
Ilave to apply for any authorization. According to the present
legislation (of 1962) regarding the use of satellite
transponders, the renters are free to use them as they want,
without any interference from the government (1991q).

GloboSat uses regular low-powered C-Band satellite
transponders to deliver four channels to parabolic antenna
owners within the Brasilsat II satellite footprint. In spite
Of the delay in comparison to TVA, the system was under
implementation for quite a while. Newspaper articles report
that the president of Globo Group, Roberto Marinho, provided
the capital and also rented four transponders long before the
Company was formed, paying $400,000 per month for them. In
this manner, he not only secured the existence of his future
Service, but precluded any prospective competitors from
Starting operations before at least two years, when the new

Brazilian satellite will be launched (Apolinario, 1991).

232

The other equal partners of Horizonte Comunicacées, the
managing company created in 1982, are José Bonifacio de
Oliveira Sobrinho (known as ”Boni”) — vice-president of Globo
TV for 24 years — and Joseph Wallach (Delmanto, 1991).
Wallach was the representative from American Time-Life that,
in 1966, lent $3 million to Globo newspaper to create its
television network. Naturalized as a Brazilian citizen, for
15 years he was the Financial and Administrative Vice-
President of Globo.

In 1981 Wallach left Globo and returned to America, but
Marinho is said to have called him back, waving GloboSat as a
gift (Serapicos & Sastre, 1991). The news of that time
highlights the huge initial investments of Marinho in his
effort to bring Wallach to the company, while he was involved
in some other successful enterprises. In 1985, Wallach
organized the Telemundo in San Diego, a Spanish language
network, with broadcasting in Miami, New York, Los Angeles,
San Francisco, Chicago, Houston and Puerto Rico (Apolinario,
1991).

It was not a surprise, therefore, that many credited
Wallach for the aggressive marketing that characterized
GloboSat from the beginning, while Boni and Marinho remain
distant from the company operations. Wallach's teaser spot,
aimed at reducing the impact of TVA's free preview, also
attracted subscribers to GloboSat, which started reserving
subscriptions on July 1, 1991 — even before an actual

programming package could be made available. Thus, when the

233

experimental broadcasting started, at noon of October 26,
1991, the public interest was already high. In the first
three weeks of subscription sale in November, about 10,000
new viewers were quickly added (Moreira, 1992).

The target for GloboSat was to sell 70,000 subscriptions in
the first year and 500,000 within four years (Silva, 1991).
Considering the elitism of the system and industry estimates
that there are only 160,000 parabolic antennas installed in
the whole country (in 1992), these may seem very optimistic
goals. The sales manager for Sao Paulo, Renato Silva, agrees
that most subscribers are from class AA, living in the rich
condominiums of selected neighborhoods (See Table 9), but
says that GloboSat intends to serve most of Latin America and
that it has been installing new antennas at discount rates
for many subscribers (Silva, 1992).

In fact, what has restricted the company's operations to a
few cities in the Southern cone of Brazil is only the
capacity of selling, installing and maintaining the equipment
necessary to receive and decode the satellite signals — a 3.6
meter parabolic antenna, a decoder, a modulator for each
channel. and coaxial cables. The approximately 900 people
(150 technicians and 150 administrators in Sao Paulo, plus
600 others in Rio de Janeiro) who presently compose the staff
of the company have become insufficient to service the
increasing demand that includes, for example, rich farmers in
the Central West region, who are not reached by the signals

of any regular station (Silva, 1992).

234
Table 9 - GloboSat subscriptions

 

Per city
70% Sao Paulo
30% Rio de Janeiro and Southern region

Per residency

50% Condominiuns

40% Residence Hotels
10% Houses

 

Source: Estimates provided by Sao Paulo Sales Manager, Renato
Silva, interviewed on January 22, 1992.

Renato Silva explained that a group of fifteen American
technicians from various equipment providers participated in
the creation of the company as consultants. Besides its own
maintenance crew, twelve other companies were recruited as
representatives. The plans for 1992 included the opening of
an office in the state of Minas Gerais and many cooperative
contracts with Globo TV affiliates, which will handle sales
and installation in other regions of the country. In the war
for subscribers, the press has repeatedly compared GloboSat
and TVA, but the conclusion is always left to the two percent
of the population that Wallach recognizes as targets (Sastre,
1991).

The most common criticism of GloboSat is related to its
commercialization. While TVA sells both individual and/0r
collective subscriptions in hmildings, with their simpler
receivers and compact decoders, GloboSat only sells the

latter kind. Manager Silva confirms that the subscriptions to

235

buildings used to require an absolute majority (every
resident would have to agree to subscribe), but there are
plans to sell subscriptions in cases where at least 50
percent of the residents agree. The reason is simple; the
installation of a rather big parabolic antenna on the top of
a building demands the approval of all residents, who will
have to bear the extra municipal taxes associated with it.
The tiering is also different. All of GloboSat's four
channels are present in its five different packages,
distinguished by the number of outlets installed (See Table
10), instead of by channels offered, like TVA. The range of
installation prices varies from $3,000 for a single outlet to
$7,000 for multiple outlets, allowing many TV sets to
simultaneously tune different channels. A TV guide — much
less fancy than TVA's — remote control and maintenance
services are included in the monthly fee, which ranges from

$35—20, depending upon the number of subscribers in the

system.

Table 10 — GloboSat's Tiering

 

Kit Number of Outlets Price(dollars)
1 1 3,000

2 2

3 3 to

4 4

5 multiple* 7,000

 

* Each TV set has its own decoder, allowing different channels

to be watched simultaneously.
Source: Personal Interview with GloboSat Sao Paulo Sales

Manager Renato A. V. Silva on January 22,. 1992.

236

Thus, in many cases, price differentiation strategies do
not apply to this war. Even though estimates were published
that GloboSat would cost five times more than the other
subscription systems through UHF and SHF (Apolinario, 1991),
the satellite system can be advantageous, especially in some
buildings. The second most controversial issue in the
Brazilian pay television war is the quality of the signals
delivered to subscribers. TVA's use of higher frequencies
(UHF/SHF) is accused of suffering heavy interference from
obstacles in the cities. While GloboSat's transmissions use
even higher frequencies (K band), they are supposed to be
clearer, as they come directly from the sky, with fewer
plausible obstacles (Cappia, 1992).

On the other hand, GloboSat is accused of using half of a
transponder for each channel, which implies the need for more
powerful receiver antennas. As mentioned before, Horizonte
Comunicacc‘Ses has four transponders at Brasilsat II, used in
the following manner: one full transponder for its news
channel, one transponder and a half for the other three
channels, and one full transponder and a half vacant. The
company's abundance is justified by plans of a future fifth
channel and security procedures; that is, in case one
transponder fails another one can substitute for it.
Nevertheless, most of the press recognized it as a
monopolistic action to avoid competition (Andrade, 1991;

Apolinario, 1991) .

237

The GloboSat advantage is based on the use of satellites,
vital tools for every modern communication system of broad
range, and on the presentation of a good programming lineup.
In essence, it looks exactly like TVA's, with a channel for
sports, another for movies, news and shows. But the two
decades of know-how that TV Globo has accumulated have
certainly contributed to a more national accent. Unlike TVA,
which purchases a complete programing package that is ready
to transmit, the GloboSat programming is defined by the
company, which purchases programs one by one from a variety
of producers and syndicators. The purchase decisions at
GloboSat are made by Brazilian professionals, who promise to
offer variety of programming, so that the best events are
never transmitted at the same time (Andrade, 1991).

This local character was stated from the beginning, with a
policy to fill at least 25 percent of the transmissions with
national shows and events (Carvalho, 1991). The foreign
programs have also been converted to Portuguese, and the
company estimates that 90 percent of them are either dubbed
or subtitled. From a studio built in Rio de Janeiro, where
all the shows are put together, the signals are uplinked
through its own ground station and, even though they are not
in stereo, there is a potential for it in the future.

The news channel is called GNT (GloboSat Noticias) and
transmits 16 hours of news from a variety of sources, like
Visinews, TWTN, BBC (London), Eurovision, the three American

networks and even CNN. Some of the latest advertising for

238
GloboSat emphasizes the offer of CNN bulletins, on which TVA

holds a monopoly for integral (24-hour) transmission, but not
for the simple use of images or short news casts, as most
television networks in Brazil do. Every morning it presents a
financial program with the indexes in the major international
stock markets (1991g). Brazilian professionals anchor the
bulletins, and each full hour is scheduled to have a five-
minute bulletin with national and international news produced
by Globo TV crews. Paulo Francis, a well-known Globo TV
correspondent based in New York, is also scheduled to have a
program interviewing some international personalities.

The sports channel transmits 16 hours a day, and besides
soccer, the national game, many international competitions
are covered, through contracts with several sources,
including ESPN. GloboSat's research, however, indicates that
the Brazilian elite appreciate only a handful of ESPN shows
and concentrated on tennis, water and winter sports. Instead
of hosts, the Top Sport channel uses animated vignettes and
narration off camera (Rito, 1991a).

Telecine is the 24-hour movie channel and, like TVA,
GloboSat negotiated contracts in 1991 with several large
American distributors, snufli as Columbia, Warner, Paramount,
and Metro Goldwin Meyer. Independents like Orion, Savern, and
New World, besides 150 Brazilian productions, were also
scheduled (Rito, 1991a). In order to fill 12 sessions a day
(every other hour a new movie), GloboSat is counting on Globo

TV's library of 10,000 movies, for which permanent rights

239

have already been purchased. Since the company is not selling
advertising space in this first phase, the intervals are
filled with interviews, curiosities and news from an
exclusive correspondent in Hollywood (Silva, 1992).

The 18 hours of variety shows on the MultiShow channel
include programming for the Japanese, German and French
colonies in Brazil. The programs from ZDF (Germany), NHK
(Japan) and Anthene 2 (France) are presented with the
original sound 'tracks. and. subtitles (Rito, 1991a). Old
European movies and “cult" cartoons, like “The Simpsons" and
“The Adams Family" are also scheduled, but the constant
variation of programs on this channel indicates its tendency
to be the laboratory for GloboSat productions and special
imports (Rito, 1991b). For example, the Venezuelan soap opera
”Cristal," one of the highest successes in the Latin American
market, was bought by Globo Films in December 1990 and was
presented by GloboSat (Rito, 1991b). With 200 chapters, it is
aired daily between 7 and 8 P.M., not competing with the
Globo TV primetime soaps. The producers of ”Telecurso", a
secondary educational program transmitted by Globo TV very
early in the morning, are scheduled to produce a similar
program, dealing with subjects of interest to the elite
subscribers, like how to ride a jet ski (Sastre, 1991).

By May 1992, such programming, supported by an investment
of $40 million, had conquered about 16,000 subscribers — and

the competition is just starting (Iori, 1992).

240

5.3.4 PluralSat — Television's European accent

Since December 1991, GloboSat has not been alone in the
Brazilian skies. Through transponder 11 of Brasilsat II,
PluralSat programming is offered 12 hours a day to anyone
interested in German and French affairs. The lineup consists
of shows, movies and documentaries of German channels ZDF and
ARD, besides French channels Antenne 2, FR3, TF1, Canal+, La
Cinq and M6. The signals were not scrambled until March 1992,
but superintendent Marcio Rebello says that the prices are
$70 semi-annually for houses and $860 for buildings (Moreira,
1992). More information about PluralSat was not available
during this study, but its focus on the German and French
colonies in Brazil hardly represents strong competition for

the other systems.

5.3.5 TV Alpha — Bring me your elite...

The association of brothers Lauro, director of Bandeirantes
TV (1991n), and Walter Fontoura, director of the O__Globo
newspaper, in the Pira Som & Imagem company conquered the
concession of UHF channel 50 of Sao Paulo in 1988. But Walter
quickly sold his share of the enterprise to his brother, who
has been struggling ever since to launch the pay-service TV
Alpha. Lauro Fountoura initially invested $3.2 million and
planned to be the first to start operations in November 1989.

The programming plans were to stay on the air 20 to 24 hours

241

a day, transmitting subtitled original versions of foreign
channels in stereo for a class A public, between 35 and 40
years old (Mageste, 1989). In the beginning of 1990, however,
Lauro announced new plans: Alpha was scheduled to start
experimental broadcasting in May and subscription sales in
July. At that point, he had already spent $1.2 million on
equipment, like a sophisticated Rhode Schwartz transmitter,
and had $750,000 available in liquid capital, plus $500,000
for a launching campaign. His idea was to start with ten
hours on air, adding blocks of four hours in the following
phases.

The programming would basically come from BBC Europe — a
bundle of English channels that BBC 1 and BBC 2 sold to
twelve other European countries —- and ‘would gradually
increase from eight hours daily to a maximum of 18 hours,
representing 75 percent of the schedule (Marsiaj, 1990b). The
contract with BBC would involve concerts, ballets and other
shows, besides two important news bulletins to be broadcast
simultaneously with London at 5 and 9 P.M. (London time)
(Pimenta, 1990).

The 25 percent of the programming generated in Brazil would
be composed of a guide to services (especially leisure) in
Sao Paulo, and foreign movies like “Quo Vadis" and ”A vida de
Verdi," which had already been purchased (Pimenta, 1990)
(Marsiaj, 1990b). The insertion of commercials was limited to
four intervals of two minutes for each hour of programming,

and Lauro promised the introduction of the brand-exclusivity

242

concept in Brazil. In practical terms, it means that Alpha
would only advertise one brand of each product (Pimenta,
1990). The monthly fee was estimated in NCz$18, taking
advantage of the apparent boost of the economy caused by the
last government changes in the economy. The expectation was
to have between 25,000 and 50,000 subscribers in the first
year (Fernandes, 1990), and about 82 employees worked hard in
the 450-square-meter studio to start operations in 1990
(Pimenta, 1990). Lauro had joined Abril in the choice of a
common decoder brand, General Electric's TOCOM, and the
Bogner antenna was provisionally located in the corner of
Avenida Paulista and Rua da Consolagao, with transmission
power of 316 kW (Picillo, 1989).

The decline of the economy by late 1990, however, deeply
affected TV Alpha's plans. In 1991, Lauro announced that he
had invested $800,000 to set up the station and $2 million
more were needed to close the contract with BBC. Since then,
very little news has been published about TV Alpha, and its
future is still unclear. By the time of this study, Lauro
Fontoura was said to be signing a contract with Bandeirantes
TV for an operational agreement that would let him use the
network's installations, engineering facilities and even the
programming (1991b). Aiming at the créme de la créme, the
elite of the elite, the TV Alpha project may have lacked the
necessary public and financial support to realize better

prospects.

Chapter 6

Audience Segmentation

...since so little of your
message is going to get
through anyway, you ignore the
sending side and concentrate
on the receiving end. You
concentrate on the perceptions
of the prospect. Not the
reality of the product (Ries &
Trout, 1981, p.9).

At the heart of market segmentation is the concept that
viewers/consumers are too complex and differentiated to be
treated as a single mass while, at the same time, homogeneous
enough to be classified into small groups. The trick seems to
be identifying the variable (or combination of variables)
that characterizes a specific group and differentiates it
from others. Kotler arranges such variables in four large
categories: geographic (region, city, density, climate),
demographic (age, sex, family size, family life cycle,
income, occupation, education, religion, race, nationality),
psychographic (social class, life style, personality) and
behavioristic (purchase occasion, benefits sought, ’user
status, usage rate, loyalty status, readiness stage, attitude
toward product) (Kotler, 1986).

The television segmentation promoted by the cable networks in
the United States segmented viewer groups using a combination

of demographic and behavioristic variables (See Table 1).

Since the network's coverage is national and psychographics

243

244

Table 1 - American cable networks per variable

 

 

Network Category Variable

ESPN Behavioristic Enthusiastic attitude
toward sports

CNN Behavioristic Benefit of news sought

Nickelodeon Demographic Age group

MTV Behavioristic, Enthusiastic attitude

Demographic toward music (12-34 age)

Nashville Behavioristic Enthusiastic attitude
toward country music

Discovery Behavioristic Education as benefit

Lifetime Demographic W0men group

Weather Channel Behavioristic Weather as benefit

Headline News Behavioristic Benefit of news sought

A&E Behavioristic Enthusiastic about arts

VH-l Behavioristic, Enthusiastic attitude

Demographic toward music (25-45 age)

Financial News Behavioristic Economy news as benefit

Black Entertainment Demographic Race group

Learning Channel Behavioristic Education as benefit

Travel Channel Behavioristic Tmavel information as
benefit sought

Consumer News Behavioristic Shopping news as benefit

Sports America Behavioristic Enthusiastic attitude
toward sports

Nostalgia Demographic Over 45 year old group

Comedy Channel Behavioristic Comedy as benefit sought

Galavision Demographic Nationality, language

 

Source: Constructed by the author, based on Kotler's

definitions in Kotler, P. Principles_ofiMarketing.

(3rd.Ed.)

Englewood Cliffs, Prentice-Hall, 1986.

were more or less implicit in the demographic variables,

these categories have apparently not significantly influenced

the American segmentation process.

In the American situation,
is defined by two features:

certain time) and composition (demographics).

explains Ien Ang,

size

the audience

(number of viewers at a

In Desperately

245

Seeking._ihe.Audience, Ang relates the development of the
American rating system and the segmentation process:

The growing emphasis on demographic information ...
was a direct consequence of the advertisers' wish to
advertise their products to specific market segments — a
development which has had a major impact on American
network. television. since 'the late 19605... Through
demographics the television audience is streamlined by
neatly slicing it up in substantive segments, each of
which consists of presumably well-organized, serialized
viewers displaying dependable viewing behavior.
Sometimes, typical characteristics are assigned to each
segment which conjure In; nicely contained

subjectivities, formalized in so-called psychographics
(Ang, 1992, p.63).

The patterns provided by the demographic-psychographics
cross—data analysis enable broadcasters and advertisers to
“develop simple practical truths," about the viewing and
consumption behavior/preferences of each niche of television
audiences. But as demographic numbers change, the “truths"
should be expected to change, too. In this sense, the numbers
in the United States suggest very different conclusions than
the Brazilian numbers (See Table 2). America's population is
almost twice that of Brazil. It is older, more educated and
very much richer. The economy is more stable in America, with
lower inflation and a more even distribution of wealth, which
means a larger consumer market and justifies the expanded
communication base.

Moreover, many variables in the Brazilian market are
dichotomized. Instead of a large middle class, as in America,

there is a small rich group, a small middle class, and a

246

Table 2 - Selected Statistics

 

Area
Population
Language
Religion
Protestants
Catholics
Jewish
Ethnicity
White/Hispanics
Black
Asiatic
Native
Mulatos
Pop. growth
Pop. distribution
Pop. density
Age
0-14
15—59
60+
Income per capita
Social class
A
B
C

Gross National Product

(GNP)
GNP growth

GNP percentages from

Industry
Services
Commerce
Agriculture
Inflation
Labor
Industry
Commerce
Services
Public Services
Female workers
Unemployment
External debt

Birth rate(per 100 hab)
Mortality (per 100 hab)
Life expectancy (years)

Men
Women

United States

9,372,614 Km2
246,113,000 (88)
English

53%
40%
4%

83%
11.7%
1.57%
0.6%

0.9% (84)
73.9% urban (85)
26.2 hab./Km2

21.5%

61.8%

16.7% (87)
$18,430 (87)

$4,486 trillion
(87)
3.8% (88)

18.9%
17.6%

2.1% (87)
3.7% (87)

15.7%
20%
19.9% (87)

44.3% of total

6.2% (87)

$368.2 billion (87)
153 (88)

94 (88)

72
78.9 (86)

Brazil

8,511,965 sz
147,404,375 (89)
Portuguese

93%

54.77%
5.89%

38.45%
2.48% (70-80)
76.2% urban (90)

17 hab./Km2
41.5%

57%

6.6% (85)
2,437 (88)
6%

20%

30% (92)
$351.9 billion
(33)

0.3% (88)
26.5%

13.2%

13.8%

9.3% (86)
933.62% (88)
27.6%

26.3%

28%

46.9% (85)
33.5% (85)
3.9% (89)
$100.4 billion (89)
286 (85-90)
79 (85-90)
62.3

67.6 (85-90)

247
Table 2 - Selected Statistics (Cont'd)

Child mortality 102 (87) 632 (85-90)
(per 100 birth)
Illiteracy 4.5% (80) 17.6% (88)
Telephones 122,203,000 (86) 7,892,387 (87)
subscribers terminals
Newspapers 1,646 daily 279 daily
Per 1000 hab. 266 issues (87) 62 issues (86)

 

Source: AlmanaguelAbrilll990. sao Paulo, Editora Abril, 1990.

large portion of poor people in Brazil. The regions of the
country are also more diverse. While the South and Southeast
regions have stronger European influence and a very
industrialized economy, the North and Northeast are
particularly influenced by African cultures and have
economies based on agriculture. Naturally, the first regions
— especially the sac Paulo-Rio de Janeiro axis — are richer
than the others and concentrate most of the population (See

Figure 1), communication industries and advertisers.

Regions of Brazil

Population
E North 6 %
Northeast 31 95
E Southeast 42 96
South 15 96
m Centralwest 7 95

 

Figure 1 - Population of Brazilian regions in 1990.
Source: AnnarioiEstatistieo_dolBrasil.:_1989[90.

248

Remarkably, eight percent of the Brazilian population alone
accounts for 62 percent of the national consumption of goods
and services, while 65 percent of workers make less than $650
per month. In "High Tech Alienation in Brazil," Omar S.
Oliveira cites‘ :

Between 1960 and 1980, the wealthiest ten percent of
Brazilian society increased their earnings from 39.6
percent to 50.9 percent of the total, while the poorest
half saw their participation slashed from 17.4 to 12.6
percent ... The majority of Brazilians live under
precarious conditions. For example, more than half of
all homes have no electricity, 79 percent no
refrigerators, 71 percent no running water, 85 percent

no sewage, and 60 percent of the population is either
illiterate or semi-illiterate (Oliveira, 1992, p.8).

Such disparities within the Brazilian market are reflected
in an apparent tendency to use social class rather than taste
or psychographics in the television segmentation process
(Bourdieu, 1984). The use of social class has variously been
criticized for either being too narrow (Almeida &
Wickerhauser, 1991) or not very useful in segmentation
(Kamakura & Mazzon, 1991). Researchers in the United States
and Brazil have worked hard to develop a classification
scheme to further segment the target market, known as the AIO
(Activities, Interests and. Opinions) or 'VALS Framework
(Values and Lifestyles). Nonetheless, Brazilian broadcasters
have traditionally defined the audience in terms of social

class, and much of the theoretical research and associated

* When compared to other sources, Oliveira's numbers seemed rather

questionable and should be cautiously considered.

249

literature on program choices of TV audiences employs the
concept.

Indeed, the third table in chapter three indicated how the
use of the media can be inferred by social class. Reading
materials and FM radio stations seem to be used more by the
higher classes, while AM radio talk shows are preferred by
lower classes. Television network SBT is the second option of
the lower classes (after Globo), and Manchete the alternative
for the higher classes. Overall, however, television is the
most pervasive medium in Brazil, appreciated by all classes.
Thus, even though the product (audience) delivered by
Brazilian television to advertisers presents significant

disparities from the American one, calling for different

segmentation categories — psychographics instead of
behavioristics — both systems reach the majority of the
population.

Brazil had 28 million TV households in 1991 compared to 92
million of the United States (19919) (Yuster, 1992).According
to Oliveira, more than 73 percent of the Brazilian households
now have television sets, in spite of prices around $300 for
a small color set, which are much beyond the typical worker's
buying power (Oliveira, 1992). In fact, television has long
been the main form of entertainment for the masses. It has
become commonplace to indicate that women, children - and
lower classes - are heavier viewers (See Figure 2), but
television is still the cheapest leisure option for these

demographic groups.

250

TV Consumption
“12 Hours per target

 

hours
4

3"54 3h43 3h44

    

   

0 . ;. ‘ ‘ . ’ ' Z . . , _ ' . . . . . . . ,
Children (2-14) Adults (25+) Women (2+) C (2+)
Youngsters (15-24) Men (2+) AB (2+) DE (2+)

Figure 2 - Brazilian TV consumption per demographic groups.

Source: IBOPE (Instituto Brasileiro de Opiniao Pfiblica e
Estatistica), AIP Base - SP/RJ, 1990.

Hoineff explains that "thanks to a permanent social crisis
that keeps the population at home, the television daily
absorbs eight hours of the children's time and almost all of
the leisure time of the adults" (Hoineff, 1991). Even without
buying power to consume the products and services advertised
on television, the lower classes constitute an important
audience. In ”A questao do pfiblico de TV no Brasil: reflexées
sobre a pesquisa Lintas," Bolafio cited in 1987 a survey
conducted by the Brazilian research company Marplan in eight
of the largest national markets which concluded that up to 88

percent of the households of social class D and E have TV

251

sets, while the percentage grows to 90 percent in class C’.
"This happens in a country where classes A and B (less than
25 percent of the population) are responsible for more than
88 percent of the consumption," he explains (Bolafio, 1988).
Oliveira presents some more recent numbers and raises a
question:

Only ten percent of the Brazilian workforce make more
than $200 a month, and a mere one and a half percent
above $600. The marketing contradiction becomes obvious:
If only ten percent are able to engage in some sort of
consumption, why design television schedules that fit
the lower classes? (Oliveira, 1992, p.10).

Besides the ideological answers discussed in previous
chapters, Oliveira proposes some pragmatic reasons for mass
television in the Brazilian scenario. After all, “they [the
lower classes] do engage in some sort of mass consumption
(soap, soft drinks, beer, small radios, watches, etc.)" and
compose the larger share of the audience, whose total numbers
dictate advertising prices. Globo's rates, he suggests, are
"among the highest in the world, an average of $500 per
second because it has consistently held more than 80 percent*
of the audience during primetime" (Oliveira, 1992).

The total audience is still the main element that indicates

the competitive position of the TV networks, but it has

become increasingly more difficult to explain why car makers,

 

 

 

*

The so-called ABA/ABIPEME (Associacao Brasileira de
Anunciantes/Associacao Brasileira de Pesquisadores de Mercado) criteria
divides classes from A to E according to the number of points
individuals sum for the predetermined social value of income and

education, besides the ownership of several household utensils.

* In fact, the audience ratings for TV Globo's primetime averages

between 40 and 50 percent.

252

for example, should advertise their $30,000 cars for TV
viewers with the low purchasing qualifications just
described. Illustrative is the example of the SBT network,
which holds the second-largest audience share in the country
with a very lower, lower-middle class lineup. In spite of its
positive ratings numbers, SBT did not make significant
profits in its early days because the profile of its audience
did not attract the higher quality advertisers. SBT had to
convince them that its public does consume their
goods/services before it could start drawing their
advertising.

The value of a higher qualified audience, on the other
hand, also remains undetermined. TV Manchete, which claims an
upper-class audience, has the lowest revenues of all networks
(See Table 3) and an outstanding debt around $50 million. In
1990, it made $100 million and spent almost the same amount
without a program hit above the ten percent audience share
(1991p). While the misfortune of Manchete could also be
explained by simple bad management, it constitutes evidence
that simply abandoning the secure ratings system for the lure
of a "better" (more qualified) audience may not always be the
smartest strategy.

The inclusion of the large lower classes in the ratings may
preclude those ratings from reflecting advertising
effectiveness; and the quality of the audience does not

always determine television profitability. Nevertheless, high

253

 

 

Table 3 - Brazilian networks' revenues - 1989
Network Revenues (in millions)
Globo 596
SBT 152
Bandeirantes 78
Manchete 50

 

Source: "Os amigos na TV". Sao Paulo, Veja, June 26, 1991.

ratings and upper-class audiences remain the name of the
game. In the analysis of Ang, "as long as the map works, the
industry will not bother to look for more ‘realistic' maps."
In other words:

...the concrete practices and experiences of actual
audiences are irrelevant for the industry so long as the
information delivered by audience measurement is
uncontested and perceived to be adequate. Therefore, the

gap will only be problematized when the streamlining
process tends to slacken (Ang, 1992, p.67).

Evidence of the recent widening of the gap between audience
measures and real individuals was given by the Brazilian
survey agencies' disagreement about the size of the upper
classes. In 1992, the institutes LPN/Burke and Marplan
rejected the traditional measurement system that indicated
that 11 percent of the population were in the upper classes
and proposed a more convincing four percent. The association
of survey agencies (Abipeme - Associacao Brasileira de
Pesquisadores de Mercado) embraced the proposition, but the
advertisers' association (ABA - Associagao Brasileira de

Anunciantes) did not. Thus, for Abipeme, the wealthy

254

Brazilians total less than six million, while ABA and some
dissenting survey agencies — including the major ratings
intitutions IBOPE (Instituto Brasileiro de Opiniao Pfiblica e
Estatistica) and Nielsen - prefer the total of 16 million.
The official reason for their dissent was the impossibility
of working with smaller statistical proportions for the upper
classes (the margin of error would be too large), but
observers like Straubhaar point out that the reduction would
negativelv affect their TV clients (Straubhaar. 1992).

The Brazilian government's survev agencv (IBGE — Instituto
Brasileiro de Geografia e Estatistica). on the other hand.
gualifies as upper class onlv those with more than twentv
base salaries (which varies with inflation) and includes less
than two percent of the p0pulation — 2.9 million people. The
Brazilian branch of Citvbank. interested in working onlv with
clients with monthlv incomes above $1500. found an even more
restricted market. Its survevs indicated a total of just 1.5
million people in the whole countrv (1992d).

Since some 44 percent of the population constitutes the
lower classes D and E (Lima. 1992). it would be natural. for
the television industrv to emphasize the more popular
programming. which is designed to appeal to the lowest common
denominator. With onlv one TV set in a tvpical household of
these social classes. the maioritv of the audience makes
watching television a familv activitv. The programs must
attend to the interests and tastes of a heterogeneous group

composed of children. their parents and even grandparents.

255

To fragment the family' unit. of ‘viewers by 'bailoring
programs to individual tastes collides, therefore, with the
fact that the majority of the audience cannot watch
television in an individualistic manner — there simply is not
another TV set for differing tastes. Only 45 percent of the
TV households in Brazil have a second TV set, compared to 65
percent in the United States (Yuster, 1992) Further market
segmentation for the lower classes thus seems to be an
impossible task. Contrasted with this is a 1991 study by
IBOPE in $80 Paulo (See table 4 for summary). Results of the
study showed that in the richer classes (A, B and C), the
average is one person to one TV set, making the consumption
of television programming more individualized. In the poorer
classes (D and E), the average is four people to one TV set,
thus making consumption of television programming typically a
family activity.

The same study also revealed that it is only during 55
minutes per day (13 percent of the total time higher-class
households are dedicated to viewing television) that two or
more sets are turned on at the same time; this is more than
half the time the second set is on. In only 40 percent of
these occasions, 22 minutes, are the sets tuned to different
channels. The secondary set represents, therefore, a
potential new market for a different kind of programming, one
targeted to the more affluent social classes (Lima, 1992).

In 1982, Walter Clark, widely credited with making TV Globo

a success, articulated such market segmentation strategy in

256
Table 4 - IBOPE survey

 

Area: Metro Sao Paulo

Sample: 234 households with 1 or more TV sets.
Date: Performed between February 18-March 3, 1991.
Conclusions:

: 90% of households (HH) turns on the TV at least once a day.
. In one week only 2% of BB never turns on the TV and in two
weeks the percentage falls to zero.
- 45% of HH with TV sets have more than one set.

81% of the sets are color.
- The average time of exposure to TV is seven hours per HH,
spread throughout the day in the following manner:

 

 

Time of day Exposure to TV
Between 6 and 12 45 minutes
Between 12 and 6PM ‘ 2 hours
Between 6 and 12AM 3h45

After 12AM 30 minutes

 

Class is not a significant variable in TV consumption. The
number of hours per day is equal to classes AB, C and DE with
variations according to the days of the week.

The time of exposure to TV is directly connected to the
class and age of the housewives, as in the following chart:

 

Heavy User AB, young 5.2% of HH belong to this
group, which corresponds

to 11.3% of sample

Light User AB, young Mostly concentrated on

this DE, young group

 

The children either watch too much or too little,
concentrated on the two extremes of the curve.

The number of TV sets in a HH is considered when defining
classes. The sets are divided across classes in the following
manner:

 

 

glassmmflmwyfi__ Percentage

A, B 67 (more than one set)
C 30

D,E 1

 

In the richer classes, the average is one person to one TV
set and the consumption is more individualized, while in the
poorer classes, the average is four persons to one TV set and
the consumption is collective.

257
Table 4 - IBOPE survey (cont'd)

The HHs with more than one TV set (45% of the total) are
exposed seven hours a day on average to television, but only
five hours and a half (78%) are generated by the principal
set. The remaining one hour and a half (22%) is generated by
the other sets.

During only 55 minutes (13% of the total time such HHs
dedicate to TV) two or more sets are turned on at the same
time—and this is more than half the time the second set is
on. In only 40% of these occasions, 22 minutes, the sets are
tuned to different channels.

The HHs with VCRs are 33% of the total sample. Their
distribution per class is:

 

 

Class Percentage
A 80

B 60

C 31

D,E 1

 

Each HH watches an average of 26 mdnutes a day (weekdays)
of VCR, corresponding to 5% of the time dedicated to TV. On
weekends this percentage rises to 15% with an average of one
hour a day.

Half of the HHS don't turn on the VCR for one week, but
those that do, turn it on more than four days a week.

Of the TV HHs, 21% has at least one set with remote
control. The class division in this case is:

 

 

Class Percentage
A 71
B 36
_C 13

 

In the HHs with remote control, the channel is changed each
14 minutes, which means 4.2 changes per hour. In the HHs
without remote control, the channel is changed three times
per hour or once every420 minutes.

Source: IBOPE

raw words: “The dummies that make television in this country
have not yet realized that the non-attended public is the
class A, capable of sustaining alternative programming, with

their high acquisitive power" (Pinto, 1982). The chase for

258

the higher classes and the trade of size for quality audience
seems, indeed, to constitute a new phase of the Brazilian
television segmentation, in which the incipient signal-
distribution technologies have come to play an active role.
The success of MTV-Abril in attracting large advertisers in
spite of the lack of an audience measurement in its first
days, and very low ratings confirm it.

At this point, the social class variable assumes two
different aspects. One aspect of class is economic capital,
the lack or abundance of disposable income, which determines
who can afford the expensive new Brazilian pay-television
systems. The elitism of these systems was outlined in a
Marplan survey of June 1991 among the subscribers of the
defunct Canal+. About 504 households out of a total of 20,000
subscribers in Sao Paulo were contacted over the telephone
and their answers clearly denoted a very wealthy group (See
table 5). Such a conclusion should come as no surprise, since
the American pay-TV also took a very elitist character in the
19703. The president of CBS network at the time, Arthur R.
Taylor, took advantage of that fact to attack the growing
competitor:

One in every four American families has an income
under $5000 a year; but the best information available
to us indicates that only one in eight families that
subscribe to cable television has an income below that
level. More than one family in every three has an income
of $7000; but among families that buy original sports
and movies on cable television, only one in nine has an
income under $7000. These comparisons suggest that the

economic discrimination inherent in pay television has
already begun (Taylor, 1975, p.334).

259

Table 5 - Marplan survey of STV audience in Brazil

 

89% of the families belong to class A, while the remaining

11% belong to class B.

45% of the households earn a monthly family income above

$2,500.

On average, the STV is watched by three persons in each

household.

53% of the audience is 30+ years old.

STV is watched more by men (57%) than women (43%).

35% of the men are owners or partners in their businesses.

25% have positions as directors or managers.

32% are liberal professionals, with emphasis in Engineering.

59% have completed a university degree.

90% use credit cards.

71% are members in recreational clubs.

56% of the homes have swimming pools.

47% have beach homes.

36% have country homes.

18% have private drivers.

10% have a boat or yacht.

66% had been in foreign countries (mainly USA and Europe)
in the previous year.

STV is watched on average 1.7 hours a day during the week

and 2.3 hours on weekends.

Source: ”Jornais fazem campanha para atrair anfincios". Eolha
de_Sl_Paulo, February 11,1991. p.10.

Another aspect of class is cultural or educational capital;
that is, a group's taste, choice of television content, is
largely determined by the educational or cultural attributes
of membership in the group. Less obvious than economic
capital, cultural capital relies on education and family
background to determine who is content or discontent with
mass audience programming (Bourdieu, 1984). Even though the
elite's dissatisfaction with broadcast television demands
further study and quantification, the willingness of the
higher classes to tune to what can be characterized until now

as foreign television is certainly greater. Straubhaar's

260
theory of assymetrical interdependence and cultural proximity
seems to confirm this statement:
Upper classes tend to be more internationalized in
their tastes, thus more likely to seek and be affected
by foreign programs than lower middle and lower

classes, who more often seem to prefer national
broadcast TV programs (Straubhaar, 1991).

And Oliveira goes on to say that:

Through cable [and any other new system for that
matter] there is a direct access to First World
programming, which. may enhance the already strong
identification the rich have with the North ...
Brazilian elites have adopted [an] international and
universal lifestyle importing massively to sustain
international patterns of consumption. From May to
October 1990, Brazil imported $595.3 million of
superfluous items (Oliveira, 1992).

The relationship between the richer classes and the foreign
programming is also determined by a language barrier. Since
the majority of the programs offered by Brazilian pay-TV are
spoken in their original language (or subtitled, which does
not help those without fluent reading skills), an expensive
foreign-idiom education may be necessary to understand the
programs.

Moreover, the knowledge of a language can be very important
in the daily activities of the top jobs held by the higher
classes. Illustratively, most of the major English schools in
Brazil have started to offer American television programming
as a supporting learning tool. First, the schools installed

the big satellite dishes to capture AFRTS or CNN, but more

recently they have opted to a subscription of UHF/SHF TVA

261

services, which include the early services. In a study about
the uses and impact of cable TV in the Dominican Republic,
Straubhaar detected the same language gap:

The reasons for wanting cable TV given by those who
have it tend to reveal an instrumental motive, learning
English, and a: cultural. motive, getting' access 'to
foreign culture ... the largest group (35%) [of
respondents] said it was for their children and the next
largest group said it was to learn English (14%). Other
reasons were to have greater variety in programming, to

see foreign programs, get more information and see more
movies (Straubhaar, 1989).

While reasons for subscribing in Brazil were not available
for this study, programmers believe that foreign programs in
their original sound track will attract some of the largest
immigrant groups in the country. The choice for the Italian
network RAI's programs within the TVA schedule, for example,
was based on the fact that Sao Paulo houses an Italian
community larger than Milan's. Outside Italy, by the way, the
Italian-speaking population in South America is larger than
in Europe; about 50 percent of Argentine inhabitants come
from Italy (Marsiaj, 1990a). PluralSat services, on the other
hand, have selected programming from the main French channels
to attract some of the estimated 200,000 French people living
in Brazil (Moreira, 1992).

Besides nationality, other variables could be used in the
segmentation of the Brazilian television market. The Audience
Research Director of IBOPE in Sao Paulo, Ana Lficia D'Império
Lima, reminds us that many segments of the audience remain

unattended or poorly served even now. While there would be no

262

point to an ethnic programming division, she believes that
some demographic groups deserve more attention. The children
between two and 12 years old, she says, are generally treated
as one group, while they actually present very diverse
behavioristic peculiarities and demand different programming.
Between 14 and 19 years old, the teenagers that are eagerly
hunted by American television stations have also been
neglected in many ways by the Brazilian networks, which
apparently assume that "teenagers don't watch TV."

An article in Visio magazine suggests that programmers
could not be more mistaken. According to IBGE (Instituto
Brasileiro de Geografia e Estatistica), 30 million of the 155
million habitants of Brazil in 1990 were youngsters between
10 and 19 years old, whose main leisure habits are watching
television and practicing sports (Vianna, 1990). Further
research by MTV-Abril confirmed that this public consists of
a very attractive consumer group, consuming for example eight
million sneakers and 35 million pairs of jeans every year
(Lobo, 1991). The problem, explains Lima from IBOPE, is that
segments like MTV's, even though statistically significant in
demographic terms (the public within MTV's target age group
is 46 percent of the total population), are restricted in
social-economic terms. ”MTV is directed to the contestant
character of teenagers. Their problem is that they usually
lack another TV set to protest," she says (Lima, 1992).

The children, women and the illiterate that supposedly

watch more television and would constitute sure target niches

263

for the new segmented television stations in Brazil are,
nevertheless, incapable of paying for a more tailored
programming. In tflua United, States, cable networks like
Nickelodeon, Lifetime and The Discovery Channel seem to
attend to their respective groups, but in Brazil they cannot
afford to pay a subscription nor even probably consume enough
to justify advertising-supported schedules. For the near
future, therefore, further segmentation seems to be
restricted to the upper classes and, while the poorer
majority of the Brazilians are likely to keep watching the
traditional mass networks, a significant drainage of upper-
class viewers to pay-TV is possible. As soon as the national
pay-TV systems become able to insert local commercials in the
foreign program schedule, it is possible that the advertising
investments will be realigned so as to redirect luxury
product spots to the elite pay-TV. Without the elite audience
and their advertisers, the low-brow standards, some observers
say, will become more pervasive. Despite all these possible
scenarios just described, the takeover of the elite segment
by pay-TV is probably going to assume unpredictable forms,

with unknown consequences...

Chapter 7

Conclusion

The major purpose of this research was to present an
overview of recent Brazilian developments in the television
industry and to examine the impact of the new television
distribution technologies in the growing segmentation of the
market —ta phenomenon that previously occurred in the United
States.

From the start, a few hypotheses were made, which demanded
confirmation. Initially, it was necessary to prove that the
general theories of market segmentation and positioning, as
proposed by Kotler, Ries and Trout, could be applied to the
television industry. The thesis unders test was that
television marketing strategies are moving away from a mass
target audience, toward more focused targets, whose reduced
size is compensated by a higher empathy with the programming
and advertising. In the course of this study, the evolution
of both American and Brazilian systems have been reviewed
through a marketing perspective and many signs of such move
were identified as follows.

In the original mass marketing environment, an advertiser-
controlled television delivered single formula lineups to a
very eager and complacent mass of audience. As the novelty of
the "radio with images" vanished, however, a more mature
audience called in the 19605 for more diversity to attend

their rising and diverging expectations. With the support of

264

265

audience surveys, the product-differentiated environment
entered the 19805 with the impossible challenge of offering
everything to everybody.

New television programming of limited public interest
required more channels and transmission time than
broadcasters could offer, and new signal distribution
technologies came to the rescue. Gradually, the audience was
segmented by technology access, programming interests and
consumption behavior, provoking a rupture in the mass
audience media concept represented by broadcasting
television. The dominance of the three large American
networks (NBC, CBS and ABC) has declined, as cable networks
introduced lineups better suited to specific audience niches.

And even though broadcasters still hold the largest share
of the advertising investments, cable systems have proved
that small audiences can be profitable: -. as long as
advertisers are convinced that this specific audience can be
more easily convinced to consume. The whole television
business has suffered the impact of thinking small. Stations
have increasingly selected shows that attend to audience
niches not served by their local competitors, and the break
even ratings have dropped significantly. The American
networks have fought the Financial and Syndication Rules to
participate more on the lucrative production and syndication
side of the industry, while seeking the lost mass audiences

in the global level.

266

A second thesis was based on the premise that Brazilian
television tends to follow at a distance the trends
experienced by its American counterpart, and therefore should
present a similar segmentation trend. The first signs of a
segmentation process have been evidenced in the Brazilian
television by the decline of Globo TV's quasi-monopoly, and
the more frequent attacks from competitor networks targeted
at the upper and lower classes. But there is much more to it,
as new companies introduce a variety of signal distribution
technologies. The two industries were compared to highlight
the problems the Brazilian entrepreneurs can expect and to
suggest clues for the future of the recently-born companies.
Indeed, the resemblance between the industries can be seen in
common difficulties, like the lack of UHF receivers, and
solutions, such as the option for segmented programming. On
the other hand, the Brazilian companies have introduced
significant adaptations to the American example. While
Brazilian cable television is stalled by government policies,
just as it happened in the United States, direct broadcast
satellite services — which are contemporaneous to cable in
Brazil — seem to have a greater potential in Brazil than in
America. However, since most of the new companies have based
their operations on the satellite, the better reception for
one technology over another may not constitute an issue in
Brazil. The new companies are national distributors of
imported programming and, with the help of the satellite, can

deliver it nationwide to UHF, MMDS or cable systems.

267

the satellite, can deliver it nationwide to UHF, MMDS or
cable systems.

In fact, the Brazilian adaptation of the American
television segmentation process is more likely to present a
wider variety of technologies competing in the major local
markets. While cable's early growth in the U.S. has placed it
in a position to even block the development of competing
technologies, such as it happens with DBS, the
contemporaneity of the systems in Brazil assure each one a
significant initial segment of the market. The real issues,
therefore, are the sources of programming to fill the
expanded broadcasting hours suddenly made available and the
public demand for the new channels, which will ultimately
define the survival of the companies — and the systems. Since
there is practically only one company operating within each
technology, a company failure may doom the system as well, in
which case the market perceives the problem as intrinsic to
the technology. Until late 1992, however, most new television
channels in the market were enjoying a steady growth, despite
the general economic difficulties in Brazil; an exception is
made for open UHF TV Jovem Pan, whose owners have abandoned
it. Among the pay-TV systems, viability has been associated
with the national debate about the real size of the upper
classes, a relativelly small group in Brazil that is able to
pay for extra television leisure. In social terms, these
systems have also been criticized for offering imported

programming to the elite and increasing the social

268

stratification in a country where the poor majority may be
increasingly exposed to a low-brow free TV, while a small
rich group enjoy foreign television.

But, as the numerous interviews conducted for this study
suggest, the Brazilian scenario is in the midst of a dynamic
transition from a tightly controlled television system to one
with many more voices. At this point, and with the amount of
information made available, it is impossible to predict the
feasibility of each system in Brazil. TVA's subscription
television is battling GloboSat's DBS in almost every corner
of the large metropolitan centers, and this war is just the
tip of an iceberg of international interests in the Brazilian
market. According to Ries and Trout, this is the moment of
decision, when future leaders act first and better than
competitors. To act better, in this context, may mean
avoiding the dependence on foreign lineups and investing in
international co-productions — a philosophy mainly practiced
by GloboSat and MTV. If the Brazilian economy recovers and
the subscriber base is expanded, and if cable television
keeps growing in the form of SMATVs or CATVs, then program
producers will someday be jmtaa better business position in

Brazil.

Appendix

269

Currency Exchange

270

 

Date

January 8, 1990
October 10, 1990
June 20, 1991

September 15, 1991

1 dollar is equivalent to

NCz$630 (cruzados novos)
Cr$92 (cruzeiros)
Cr$300.80 (commercial rate)

Cr$473

 

Source: Various newspaper articles. Unless noted, calculation
was based on unoficial rates.

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