More About Cuatro Media’s Closing…

Cuatro Media, the publishing company with office in New York City and Buenos Aires, Argentina, which last week closed down its operations has been a victim of the current economic and financial crisis, insiders tell Portada. These are the main reasons for the company’s demise (in declining order of relevance).

1) Decline in Advertising Revenues. Since 2005 Cuatro Media had a license, through an agreement with News Corp. owned Fox PanAmerican Sports, to publish Fox Sports en Español in the U.S. Hispanic market and Latin America. The magazine was introduced in 2006 and published as an insert in the main Hispanic newspapers nationwide. Its circulation was 750,000. Altough the magazine had gotten 2009 support from important advertisers like State Farm and McDonald’s, the free fall of automotive advertising together with heavy decline in spending in other men oriented ad categories just made the publication financially unviable. Break even for Fox Sports en Español the magazine lies around $3.5 million, a sales level the publication had reached in 2007. (Read at the bottom of this article a press release from Fox Sports en Español regarding the future of its print magazine*).

2) Funds owed by Venezuela’s El Nacional de Caracas. Approximately 60% of Cuatro Media’s revenues came from the publication of books and other supplements in the Children (e.g. Abrete Sesamo), health and beauty (Weight Watchers Diet), sports (e.g. Barca Toons) and education-scientific (Enigmas del Mundo) categories. These books and editorial supplements were mostly distributed through Latin American newspapers and magazines, who bought the content from Cuatro Media. El Nacional de Caracas, a Cuatro Media client, has been owing Cuatro Media $1.5 million for quite some time. The failure to recover the monies owed origined serious cash flow problems to Cuatro Media leaving no other alternative than to shut down the company. (Cuatro Media is considering to take legal measures to recover the debt.)

Savoy Capital, a Houston based private investment firm led by Frank Lorenzo, and Fort Worth, TX, based LKCM Luther King Capital Management were Cuatro Media investors. Both funds were the company’s financial backers and held more than 60% of Cuatro Media’s stock.

3) Fixed Costs-Structure (not a reason for the closing but a negative factor). Cuatro Media had a relatively high cost structure, even though the company employed the bulk of its labor force in Buenos Aires, Argentina. Still, the number of full time employees, more than 30, could have been smaller, particularly taking into account tough conditions imposed by Argentina Trade Unions.

4) Lack of a strong Digital Platform (not a reason for the closing but a negative factor). Since its incorporation in 2005, Cuatro Media’s main bet was on an uptake of Advertising in the Hispanic magazine market. That is why it acquired the license to publish Fox Sports en Español. With the 2009 economic crisis, Hispanic print advertising budget have been heavily hit, perhaps even more than general market print budgets. The Hispanic online advertising market is growing, even during 2009. Cuatro Media did not have a strong digital platform for any of its products, therefore not permitting it to have its share in the growth of the digital media market.

It has to be said that the overall size of the Hispanic digital media market may still be too small to have made a difference on Cuatro Media’s P&L.

* Fox Sports en Español announced it has ceased publishing Fox Sports en Español Magazine with Cuatro Media, Inc. The network is in active discussions with potential new partners to re-launch its national print publication in the coming months. “Although we are temporarily going on hiatus while exploring other partnerships, it is important to note that our brand's relationship with both advertisers and consumers across multiple media platforms is stronger than ever. We look forward to quickly picking up where we left off,” said David Sternberg, Executive Vice President and General Manager of Fox Sports en Español.