Analysis: Argentina’s “Media Law” and how it will affect Grupo Clarin

Last week, the Argentina Supreme Court ruled in favor of the constitutionality of the Audiovisual Communication Services Law (LSCA) 26522/09, known as the "Media Law".

Translated by Candice Carmel

The new law that regulates the country’s broadcasting services was passed four years ago. Since then, Grupo Clarin has been challenging the law’s constitutionality in the courts, claiming it suppresses freedom of the press and affects the group’s economic sustainability.

Foto: Daniel Go. Bajo licencia CC.

Foto: Daniel Go. Bajo licencia CC.

The new law sets a limit on the number of media licenses that can be held by a single company, among other regulations, in an effort to prevent monopolies. This forces Clarin to divest itself of properties in order to comply with the law.

The constitutionality of the audiovisual services law was endorsed by six of the seven judges on the Supreme Court: Ricardo Lorenzetti, Elena Highton de Nolasco, Enrique Petracchi, Carmen Argibay, Juan Carlos Maqueda, and Raul Zaffaroni. Judge Carlos Fayt cast the lone dissenting vote.

In its ruling, the Supreme Court stated that "Grupo Clarin’s right to freedom of expression is not affected, as it has not been established that the licensing regime imposed by the law jeopardizes [the company’s] economic sustainability. Sustainability cannot be equated to profitability."

Sustainability cannot be equated to profitability

As for affording it the chance to be a critical voice in the mass media, the Court stated that "it is not acceptable that only an economy of scale, such as that currently owned [by Grupo Clarin], will ensure sufficient independence to constitute a critical voice. There are numerous small or medium-sized media that exert a critical role and, conversely, there are large media concerns that are condescending of whatever government is in power at the time."

Plurality of voices

Foto: Andrew Plumb. Bajo licencia CC.

Foto: Andrew Plumb. Bajo licencia CC.

The Argentina Supreme Court determined that the law passed and enacted by the Argentine Congress, which is the country’s legislative branch, not only does not attack freedom of expression, but favors it. The Audiovisual Communication Services Law gives non-profit institutions (such as NGOs, religious organizations, etc.) the opportunity to hold media licenses, as well as guarantees the plurality of license ownership by limiting the number of licenses that can be held.

"Freedom of expression, from a collective aspect, has the goal of protecting public debate by giving ample opportunity of expression to the various segments that represent society. [The idea] is to strengthen a deliberative democracy in which everyone can, on an equal footing, express their views and in which dominant voices cannot be permitted," stated the Court.

Article 45 of the law sets the maximum limits that may be held by any one group: 24 cable licenses; must not exceed coverage of 35% of the total population or subscribers; may not hold more than one content signal, cable license, or broadcast TV license at the local level; three local licenses, one content signal for radio and broadcast TV licensees; and one proprietary signal for cable licensees.

What it means for Grupo Clarin

Grupo Clarin far exceeds these limits, which means it will have to submit a plan to comply with the law and divest itself of properties.

After the ruling, Clarin released a statement that said it "respects the Court’s decision" but would not rule out taking its case before international courts.

After the ruling was announced, the group's shares plummeted 20.83% on the London Stock Exchange and also lost 5.76% of their value on the Buenos Aires Stock Exchange on the same day.

Grupo Clarin’s current situation

HOW IT AFFECTS CLARIN
1.A group may only hold up to 10 radio and broadcast TV licenses nationwide. Clarin has 12: four TV channels (Canal 13 in Capital Federal, Canal 12 in Cordoba, Canal 10 in Bahia Blanca, and Canal 7 in Bariloche) , plus eight AM and FM radio stations (including Mitre and FM 100).
2. A cable station and TV station may not be owned in the same location.
3. A cable operator may own only one proprietary signal. Clarin owns TN, El Trece Satelital, TyC Sports, Quiero, Rural, and Metro, among others.
4. A single cable operator may only provide coverage in 24 locations. Cablevision services 158 cities.
5. A single group’s reach may not exceed 35% of the national population. The AFSCA states that Clarin’s radio stations in eight cities reach more than 42% of the population; while Canal 13 and its broadcast TV channels in other provinces reach 39%. Its cable TV operations encompass 237 licenses and 59% of all subscribers, according to the AFSCA.

Nationally

License limits: Grupo Clarin may not hold more than 10 radio (AM and FM) and broadcast TV licenses countrywide. Clarin currently has 11 broadcast TV licenses: four TV channels in Capital Federal (13), Cordoba (12), Bahia Blanca (7), and Bariloche (6). It also holds eight radio licenses: two AM stations that operate under the name of Radio Mitre in Buenos Aires and Cordoba, and five FM stations in the same cities, plus Mendoza, Bariloche, and Mar del Plata.

In order to comply with the 10 license-limit, it would need to part with only one of its properties, which can be either TV or radio.

One of its options is to choose between Channel 13 in Buenos Aires, and Channel 12 in Cordoba, or to keep its Cablevision properties in both cities.

Cable - Pay TV

Grupo Clarin can only hold one proprietary cable signal. It currently owns the cable signals of Todo Noticias, Volver, Quiero Música en Mi Idioma, Metro, and Magazine, and also has a stake in TyC Sports and Canal Rural.

Under the law, a media group can hold up to 24 licenses nationwide. According to information released by the Audiovisual Communication Services Authority, the Hector Magnetto-led group has 237 pay TV licenses.

The law also states that "the multiplicity of licenses may in no case involve the possibility of providing services to more than 35 percent of the total national population." The AFSCA, the agency charged with applying and enforcing the new law, estimates that the media group’s radio operations service 41.88 percent of the country’s population, while its broadcast TV operations reach 38.78 percent, and its Pay TV services cover 58.61 percent—which means it exceeds the limit in all cases.

Internet services

Regarding its divestment options, Grupo Clarin stated that "this is unprecedented elsewhere in the world" and that the group "provides Internet access through its cable TV network, which means 134 cities would be left without service, thereby favoring telephone companies, which control 55 % of the Internet access market."

Internet cable TV service is one of the points Grupo Clarin is expected to pursue in its court fight, claiming that applying the pay TV license limits on a network that also provides Internet services is a very complex issue that leads to other questions, such as: What law will be applied to its Cablevision network? Will it be the Media Law and its 24-license limit, or the Telecommunications Law (instituted by Dictator Alejandro Lanusse in 1972), which does not set limits on those types of licenses (necessary for providing Internet and telephone services)?

To this end, La Nación published a very clear infographic about Grupo Clarin’s options and the limitations placed by the Audiovisual Communication Services Law.

 [ Graphic Translation] 

How the law impacts the group’s makeup - Number of licenses held by the company and how many it should be left with after the Supreme Court decision

Grupo Clarin´s Shareholders: GC Dominio 71% - Noble, Magnetto, Aranda, and Pagliaro.  Stock market 20% - 8% of these stocks are held by the State.  GS Unidos 9% - Indirectly controlled by American businessman Ralph Booth.

According to Article 45 of the law: License limit: 24(One per municipality, each of which may extend to neighboring localities of lesser population) / License limit: 10 AM & FM radio and broadcast TV licenses nationwide. Clarin exceeds the limit by one license. (Even if these limits are met, under no circumstance may a company or private individual exceed a reach of 35% of the nationwide population or its cable TV subscribers.) / License limit: 1 pay TV license, regardless of whether a broadcast TV, radio, or cable TV operator

Martin Sabbatella - President, AFSCA: What the government expects: The “procedure to comply” that was initiated before 7-D will be applied to Grupo Clarin, according to Martin Sabbatella, President of the AFSCA. This procedure involves taking inventory of all licenses, executing their appraisal, and preparing a call for bids for their sale to new licensees.

Hector Magnetto - CEO, Grupo Clarin: Company options; If the AFSCA moves forward with the compulsory procedure, the company plans to appeal to the courts, arguing that when the procedure was started, the law that applied to the group’s case was not yet in effect. It will ask to be granted the same period of time given to other media groups exceeding their license quota that have yet to comply with the measure.

Clarin, in pesos

According to a report submitted by Clarin to the Buenos Aires Stock Exchange in October 2012, Cablevision and Fibertel (the group’s pay TV services and Internet businesses) generate 89.9% of Clarin´s profits. Coming in a distant second, with 7.7% of the group's profits, are the group’s print media holdings—its eponymous Clarin newspaper, along with La voz del interior, sports daily Olé, Muy, La Razón, and Los Andes newspapers; magazines Ñ, Genios, Elle, and Pymes, among others; and its Papel Prensa - Editorial Tinta Fresca printing companies.

 Source: Ámbito Financiero

 [ Graphic Translation] 

 

Multimedia Profits

Categories

Net Sales*

% of total

Net Earnings**

% of total

% Profits on Sales

Cable TV & Internet(Cablevision and Fibertel)

5,510.3

67.7

1,833.1

89.9

33.2

Printing & Publications(graphics media, Papel Prensa, publishing  & printing houses)

1,721.80

21.1

157.5

7.7

9.1

Content production & distribution(Radio & TV)

981.0

12.0

41.8

2.1

4.2

Digital content and other

266.0

3.2

6.9

0.3

2.6

Sub-total

8,479.1

2,039.3

24.0

Elimination

(337.2)

-

-

Total

8,142.0

2,039.3

25.0

*In $ millions

**Before interest, taxes, depreciation and amortization

Source: Grupo Clarin report submitted to the Buenos Aires Stock Market, October 2012

 

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Editorial Staff (@portada_online)

Portada is the leading source of news and analysis on the Latin Marketing and Media space. Credibility is our biggest asset: The Portada team is very passionate about producing high-quality independent content that helps drive forward the Latin Marketing and Media space.
El equipo editorial de Portada se apasiona por elaborar contenidos de alta calidad. La credibilidad es nuestro mayor activo. La misión de Portada es ayudar a profesionales de negocios y medios a comprender y alcanzar a consumidores latinoamericanos, del mercado hispano de EE UU y España.

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