Mexican Ops, Nets Square Off

Mexico City-Mexico's leading wireless-cable operator, MVS Multivisión S.A., has threatened to block commercials on panregional networks by the end of this month, marking the latest episode in a bitterly fought duel between programmers and operators over the country's pay TV advertising market.

"We are not blocking any advertisements at the moment, but maybe we'll resort to that if negotiations don't produce a solution," Multivisión vice president Ignacio Rodriguez said. Ad blocking would begin if a solution is not found by the end of June, he added.

The latest offensive by Multivisión follows a series of wrangles between Mexican operators and panregional programmers over how to manage Mexico's advertising market following new rules governing the pay TV sector as a whole.

Local operators complained that commercial spots-which programmers can now transmit directly into Mexico from abroad-are passing unchecked and unmonitored.

Previously, some networks used Multivisión's downlinking facility-paying the company for the service-in order to abide by government regulations that required ads to originate domestically. Since the rules were changed, the operators said, ads that violate Mexican content laws are being transmitted, putting cable licensees at risk of being fined or even having their licenses withdrawn over violations concerning obscenity.

Panregional programmers have said they are more than happy to discuss monitoring advertising content. But they added that talk about content is a facade for the real issue: the battle for advertising dollars.

"Everyone in the industry in Mexico recognizes that the content issue is a smoke screen for other, larger issues," said Mary Pittelli, president and chief operating officer of industry trade group TAP Latin America.

Those larger issues center around how to divide the six minutes per hour of advertising time that are allocated to pay TV networks in Mexico.

According to programmers, operators want to keep all of those minutes to themselves-an allegation Multivisión and other operators denied emphatically.

But from either perspective, operators are clearly angry at what they perceive as the steady erosion of their advertising market by the panregional channels they accuse of undercutting their rates.

"Panregionals are selling too cheaply and killing our advertising market," said Ernesto Vargas, president of Multivisión parent company MVS Televisión S.A.

This stormy polemic provided the backdrop to a May 21 skirmish that saw Mexico City MSO Cablevisión block ads running on all panregional networks it carries.

Those ads were subsequently reinstated a few weeks later, when programmers agreed to be legally responsible for the content of their spots. But the episode clearly whipped up ill will among programmers, which alleged that the cablers are bullying them.

"There are better ways of resolving this issue than putting a gun to your head," ESPN International Inc. vice president of worldwide advertising sales Michael Fox said.

Some programmers are considering legal action against Cablevisión for tampering with their signals, although no specifics have emerged yet.

One programming executive, requesting anonymity, said it was clear from a letter Cablevisión sent to programmers prior to the ad-blocking episode that commerce, and not content, was the issue.

The letter outlined three options for programmers if they wanted to avoid blocked ads, the source said. "They were either, 'Hand over all of your advertising minutes,' 'Make us your sole ad-sales representative in Mexico' or 'Pay us a $2.4 million bond every month,'" the executive said, describing the letter as "extortion."

Cablevisión executives have been repeatedly unavailable to comment on this issue.

Clearly, the relationship between operators and programmers in Mexico has been severely strained, but there are now attempts to resolve things.

Pittelli said TAP is working on "developing guidelines for advertising content for Mexico, which we hope to use as guidelines for the rest of the region."

TAP chairman and general manger-and senior vice president for Discovery Networks Latin America/Iberia-Enrique Martinez added, "We need to create an appropriate mechanism to correct any errors" in the transmission of advertising content.

Meanwhile, the threats and counterthreats continue.