VZCZCXYZ0003
RR RUEHWEB

DE RUEHBU #0350/01 0851728
ZNR UUUUU ZZH
R 261728Z MAR 09
FM AMEMBASSY BUENOS AIRES
TO RUCPDOC/USDOC WASHDC
RUEHC/SECSTATE WASHDC 3400
RUCNMER/MERCOSUR COLLECTIVE

UNCLAS BUENOS AIRES 000350 
 
SIPDIS 
SENSITIVE 
 
USDOC FOR 4321/ITA/MAC/OLAC/ROSEN 
STATE FOR ECON WHA/BSC 
 
E.O. 12958: N/A 
TAGS: ETRD ECON WTRO AR
SUBJECT: ARGENTINA: PROPOSED AUDIOVISUAL LAW COULD CHANGE MEDIA 
LANDSCAPE AND AFFECT UNITED STATES COMMERCIAL INTERESTS 
 
Ref: BUENOS AIRES 335 
 
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Summary 
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¶1. (SBU) On March 19, 2009, the Government of Argentina (GoA) 
announced a draft bill for a new Audiovisual Law which will affect 
the broadcasting, content, and multimedia industry in Argentina. 
The bill, if/when passed, is expected to replace the existing 
Broadcasting Law 22275, published by the Military Government in 
¶1980.  The basis of the draft law appears to most adversely target 
cable operator Clarin, which in the GOA's view has a monopoly in the 
sector.  While U.S. firms could benefit from more customers for 
their signals, the bill contains negative elements such as the 
creation of a registry of all foreign networks, a 60% quota for 
local Argentine programming, and a requirement that all advertising 
be produced in Argentina.  Negative tax implications for U.S. firms 
may also surface, but due to the bill's vagueness, companies will 
need to make further analysis and receive clarification.  There will 
be a 90-day period for comment, a standard practice in many 
countries but far from the norm in Argentina.  This cable should be 
read together with reftel, which examines the political and press 
freedom aspects of the bill.  End Summary. 
 
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Audiovisual Law Given High-Profile Release 
------------------------------------------ 
 
¶2. (SBU) On March 18, President Cristina Fernandez de Kirchner 
presented a draft Audiovisual bill in a public and highly partisan 
ceremony held in the capital of Buenos Aires Province, La Plata. 
The ceremony was attended by high-level government officials and 
members of the diplomatic community, including U.S. Ambassador 
Wayne, who were invited by the government,(reftel). 
 
¶3. (SBU) Local media industry players agree that, on first read, the 
bill would broadly affect the broadcasting, content, and multimedia 
industry in Argentina, specifically with regard to the entry of new 
players through the issuance of new licenses and competition, new 
tax structures, and the requirement for private media networks to 
share space capacity.  Interestingly, there will be a 90-day comment 
period, a standard practice in many countries but far from the norm 
in Argentina.  This will delay congressional consideration for the 
bill until after mid-term elections proposed by the GoA for June 28. 
 
 
------------------ 
Winners and Losers 
------------------ 
 
¶4. (SBU) The current dominant cable operator in Argentina (Clarin's 
Cablevision and Multicanal) seems to be the target of the GOA 
initiative designed to break up the power of this multisystem 
operator (or MSO) and exert a greater level of control over how the 
programmers (the channels known as networks or signals) do their 
business.  Industry contacts expect that the Law will allow public 
service companies such as Spanish-owned Argentine telecom major 
Telefonica the opportunity to offer Triple Play (voice, TV, 
internet) audiovisual content/broadcasting.  If implemented, 
measures designed to achieve goals to increase access for social 
benefit and create demand for Argentine programmers and advertising 
production companies will influence the way U.S. media companies 
operate in Argentina. 
 
¶5. (SBU) For example, U.S. programmers such as HBO, CNN, Cartoon 
Network, MTV, Nickelodeon, Discovery channels, and many others are a 
growing and integral part of the Argentine telecommunications 
industry, investing over $800 million in infrastructure and 
technological facilities; generating more than 2000 direct jobs and 
6500 indirect positions; and promoting local production and products 
that are in turn exported throughout Latin America and the world. 
 
--------------------------------------------- 
All Foreign Networks to Register in Argentina 
--------------------------------------------- 
 
¶6. (SBU) During a March 20, 2009 meeting with Television Association 
of Programmers (TAP) officials, Emboffs were able to clarify that 
according to the new proposal, all foreign cable channels will need 
now to be registered locally, in effect making them local public 
service entities and consequently subject to laws governing this 
sector.  TAP officials - representing 30 pay-television channels in 
Latin America - speculated that this is the direct result of 
Argentine company Multicanal's unsuccessful attempt several years 
ago to initiate legal proceedings against HBO.  Due to the fact that 
HBO was not registered locally, Multicanal had no basis for serving 
 
the company.  Under this new provision, all foreign entities would 
need to register locally, holding them subject to Argentine Law -- 
and to GoA influence.  The GoA would also have greater ability to 
regulate prices for cable TV.  With local cable prices already 
considered extremely low in comparison to markets worldwide (on 
average, a consumer can have access to 70+ channels for 
approximately 70 Argentine pesos or 23.00 dollars per month), 
industry sources argued this will likely reduce U.S. cable company 
long-term profitability in this market. 
 
¶7. (SBU) While many U.S.-based content providers are already 
registered in Argentina, HBO and Discovery currently do not have 
registered subsidiaries in Argentina.  TAP officials indicated that 
in past meetings with COMFER, Argentina's FCC equivalent, they have 
asked to be allowed to register their members such as HBO and Disney 
through the Association   TAP representatives said they fear that 
forcing companies to register in Argentina would provide the GoA 
much greater power and authority over programming content. 
 
------------------------------------- 
National Ownership and Content Quotas 
------------------------------------- 
 
¶8. (SBU) According to the proposed law, a 60-percent minimum content 
quota for local Argentine programming will be established.  Industry 
experts have stated that compliance will be nearly impossible if 
consumers are to maintain current channel and content variety.  As a 
result, one TAP official noted that the local-content quota of the 
draft law is unlikely to move forward, as the Argentine populace 
enjoys foreign programming and has grown accustomed to watching many 
foreign shows at nearly the same time that they are released in 
their domestic markets.  Shows such as "American Idol" and "Lost" 
are televised in Argentina approximately one week after airing in 
the United States. 
 
¶9. (SBU) Local analysts agree that the draft law's limitations on 
foreign ownership of media broadcast companies is a straightforward 
attempt to propel new domestic players into the market. 
Nevertheless, COMFER officials had previously indicated that such 
local ownership provisions would not affect the locally incorporated 
subsidiaries of U.S. companies already in Argentina such as 
Viacom/MTV, Turner Broadcasting, Fox, and Disney, as they may be 
considered legal Argentine entities registered in Argentina.  It is 
not clear how this proposal would impact U.S. companies such as HBO 
and the Discovery Channel, who currently do not maintain locally 
incorporated subsidiaries. 
 
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All Advertising to be Produced in Argentina 
------------------------------------------- 
 
¶10. (SBU) The proposed law stipulates that all advertising must be 
produced in Argentina.  The consensus of local analysts is that this 
could have a very negative impact on programmers who receive content 
from satellite feeds.  While Turner and Disney already rely on a 
significant amount of advertising that is produced locally, as TAP 
officials explained, cable advertising is not local in nature as it 
is generally produced for numerous markets, if not worldwide, 
thereby making this requirement unrealistic.  In addition, 
compliance with this provision is complicated by the fact that 
Argentine advertising firms could not handle the market demand 
created by this provision.  With advertising representing 50% of all 
cable TV revenues, if this provision is not altered, U.S. firms 
could face a serious challenge to local market profitability. 
 
-------------------------------------------- 
Twelve Minutes Per Hour of Cable Advertising 
-------------------------------------------- 
 
¶11. (SBU) Under the proposed law, cable operators will be allowed to 
maintain a maximum of twelve minutes per hour of advertising.  This 
provision is, in fact, a major win for companies such as Turner 
Broadcasting that had feared the bill would reduce advertisements 
significantly.  Pressure on the GoA to reduce the allotment of pay 
television advertising time is reported to have come from the 
non-cable operators who have seen cable advertising sales grow 
significantly for several years while seeing their own advertising 
sales decrease. 
 
-------------- 
Tax Provisions 
-------------- 
 
¶12. (SBU) TAP officials expressed confusion over tax provisions in 
the proposal that are vague and would be subject to regulation.  For 
example, in a departure from the current law, programmers must pay 
tax on gross revenues of the previous year, can only deduct expenses 
 
incurred in Argentina, and would require the foreign programmer to 
set aside a percentage of their revenue for Argentine programming. 
 
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Soccer and Direct TV 
-------------------- 
 
¶13. (SBU) Under the proposed law, the ownership and sale of soccer 
broadcasting rights would be significantly amended - no small detail 
in this soccer-crazy country.  Now, the most important, and arguably 
the most profitable soccer match of the week ("el clasico") will be 
transmitted by open-air channels rather than via paid TV due to 
"public interest" considerations.  This proposal has a direct impact 
on the interests of U.S. investors, including Direct TV, which are 
majority shareholders in the company TRISA that has exclusive rights 
from the Argentine Football Association (AFA) to sell soccer matches 
and other important sports events.  According to TRISA, this single 
game, akin to the "game of the week," represents almost 40 percent 
of their revenues from Pay TV operators, a percentage of which they, 
in turn, pay to AFA.  Representatives of TRISA and Direct TV have 
already approached the Embassy with their concerns, but will need 
more time to analyze the contents and respond to us with their 
reaction. 
 
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Comment 
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¶14. (SBU) Just hours before President Kirchner announced the new 
draft media law, she thanked MTV/Viacom for investing in Argentina 
at the opening of their new MTV office in Buenos Aires.  Two hundred 
MTV/Viacom employees develop content for their Spanish-speaking 
audiences.  The new legislation contains elements that could reduce 
the likelihood of such investments in the future.  But it could also 
have procompetitive effects that help some U.S. firms.  The 
industry's initial take is that the bill is not an attack on U.S. 
interests, but rather an effort to weaken the Clarin Group's 
dominant market position.  As a result, the proposed law could have 
the indirect effect of creating more opportunities for U.S. 
companies by breaking up a dominant cable outlet and creating new 
customers such as those offering triple-play and other new ways to 
deliver pay TV to households. 
 
¶15. (SBU) TAP executives tell us that there was a "sigh of relief" 
among their members, as the overall bill does not seem to be as 
harmful as many thought or as past drafts promised.  Emboffs will 
continue to meet with TAP and U.S. channel reps to gain insight into 
potential opportunities for and challenges to U.S. media interests 
that may arise as the implications of the proposal are better 
understood.  One thing is clear: the business of pay television 
programming is based on the regional transmission of satellite 
signals, making local content requirements extremely damaging to 
U.S. pay television programmers. 
 
WAYNE