By Anthony Harrup
MEXICO CITY--U.S. television studios are worried that a new
telecommunications and broadcast law in Mexico could cost them
millions of dollars in lost revenue under a draft proposal that
would transfer half of their available advertising time to
distributors such as cable and satellite television companies.
The measure, if confirmed, would affect planned investments in
programming for the Mexican market and lead to higher subscription
rates for Mexican viewers, said Gustavo Pupo-Mayo, chairman of the
Television Association of Programmers Latin America, a Miami-based
trade group that represents content producers such as Time Warner,
Walt Disney Co. and 21st Century Fox.
An article in a draft version of a new telecommunications and
broadcast law that President Enrique Peña Nieto is expected to
submit soon to Congress requires that half the available
advertising time on pay television systems be allotted to the
system operators.
The draft isn't final and could undergo changes.
Mr. Pupo-Mayo said the trade association considers the measure
to be confiscatory and a violation of several provisions of the
North American Free Trade Agreement relating to equal treatment and
intellectual property rights. Providers of pay-television content
rely on both subscription fees and advertising revenue to maintain
the quality of their offerings, he said.
Already, pay-television systems in Mexico have less available
time for commercials than broadcast channels, and are restricted to
144 minutes of commercials for 24 hours of programming. Typically,
the channels provide their own advertising for those slots.
Commercials on free-to-air broadcast channels can cover 18% of
transmission time.
The measure could potentially cost U.S. content producers around
$950 million in lost revenue across Latin America in the five years
through 2018, the Latin American Multichannel Advertising Council
estimates. Pay television accounts for 12% of Mexico's roughly $3.1
billion in annual television advertising revenue, according to the
council.
Mr. Pupo-Mayo said the Television Association of Programmers,
whose members provide content through 120 channels in Latin
America, was hopeful the article would be eliminated from the final
version of the bill.
A spokesman for Mexico's communications ministry said late last
week that there was no set date for the bill to be sent to
Congress.
Mexico's cable industry association, Canitec, wasn't available
for comment.
The new telecommunications and broadcast legislation follows
constitutional changes made last year that shake up the industries
with the aim of increasing competition and expanding coverage of
broadband and pay-TV services through lower end prices for
consumers.
Pay television is among the fastest-growing of the
telecommunications services in Mexico, after mobile broadband. The
number of subscribers to cable and satellite TV grew 13% last year
to 14.6 million, according to regulators.
Fox and parent 21st Century Fox Inc. until last year were part
of the same company as The Wall Street Journal.
Write to Anthony Harrup at anthony.harrup@wsj.com
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