Convergence calls; when Claxson Interactive Group set up joint headquarters in Miami and Buenos Aires, the idea was to use Miami's location as a hub for Latin America. Unforeseen was how effective Miami could be as a gateway to US and European markets - Claxson Interactive

South Florida CEO, Oct, 2003 by Rochelle Broder-Singer

The idea of convergence has been central to Claxson Interactive Group ever since it was formed in 2001, when the properties of Ibero-American Media Partners--principally the Cisneros Television Group--were merged with trans-Latin Web portal El Sitio. In one fell swoop, the merger created a company with television production capabilities on the one hand, and Internet broadcast capabilities on the other. When broadband applications finally hit Latin America, the thinking went, Claxson would be ready to cash in.

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That philosophy has not changed, but it has been augmented. While cable TV production jobs formerly in Miami have been moved to Buenos Aires, taking advantage of lower costs there, the Miami-based staff that sells Claxson's programming to US and European customers has been beefed up. Claxson has also expanded The Kitchen, its Miami-based broadcast-services facility which provides language dubbing and captioning, post-production, uplink and other services for both Claxson and outside clients, much of it aimed at US consumers.

"The US Hispanic market is growing at a huge pace, and to understand that development you have to be here in Miami," says Claxson CEO Roberto Vivo-Chaneton. Vivo says his long-term strategy for Claxson is to penetrate the English-speaking US market, while continuing to serve Latin American markets, and to expand the company's European penetration outside of Spain and Portugal.

The firm's current holdings include pay television channels covering 14 entertainment brands in 26 different markets, 20 digital music channels, and broadcast television and radio stations. Content for those channels comes from original programming produced by Claxson and from programming acquired from outside companies, some of it originally produced in other languages and converted to Spanish, Portuguese or English.

Vivo aims to have more original programming on Claxson's channels in the future. "We are now producing content in all the countries in Latin America and in Miami, but increasingly, as we focus on the US Hispanic market and the Mexican market, we are considering producing more content in Mexico and in the US," he says.

The expansion into markets outside of Latin America had been contemplated well before the merger, says Vivo, but certainly difficult economic times in the region have made the need ever greater. In 2002, NASDAQ-traded Claxson lost US$138 million on revenues of US$75 million. Between a 49 percent drop in subscription revenues for its cable channels, a 16 percent drop in advertising, and foreign exchange losses from the Argentine devaluation, revenues fell some 30 percent from the previous year.

This year, including the fourth quarter of 2002, Vivo says the financial position has improved dramatically through debt restructuring, cost reductions (including reducing the number of cable channels Claxson offers) and moving production to Argentina. "The last three quarters have been profitable," he says. "We expect this quarter also to be profitable."

The media convergence conglomerate has also re-thought its Internet strategy. El Sitio, once an ambitious pan-Latin Web portal, nearly collapsed when its advertising revenue model proved entirely unprofitable. Now down to just 20 employees, from a peak of 600, it's developing a platform for delivering video-on-demand and interactive gaming services, for Claxson or for other companies. "Being a media company, as broadband access will increase significantly in the next few years, it will become an alternative delivery platform for content," he says. It's platform that transcends language, and Claxson has had interest from companies in the US and Europe, as well as Latin America.

Regardless of whether media convergence is a hit for Claxson, being international is its future. "And the aura of being a company based in the US, like it or not, has a positive implication," Vivo says. That's not just abroad or in the US, but in Latin America, too. "When you go deep into the reactions of the different countries, if you're in Argentina and you go into Brazil, you're more like competitors than partners," he says. "If you come from the US, well, you are a gringo, but ... there is a smaller degree of difficulty."

Being "neutrally" based has another advantage for Vivo, an Uruguayan at the head of a company that has its roots in Argentina, and a major owner (The Cisneros Group of Companies) from Venezuela. He feels it's important to have a pan-regional workforce if you're going to be a pan-regional company. In Miami, he's able to do that. In the top echelons of management alone, Vivo counts Chileans, Uruguayans, Venezuelans and Argentines. And they all feel at home.