Market Insight

Argentine media watchdog forces break-up of Grupo Clarín, biggest media conglomerate

February 19, 2014

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Argentina’s largest media conglomerate, Grupo Clarín must break up its operations, the country’s media watchdog AFSCA (Autoridad Federal de Servicios de Comunicación Audiovisual) has ruled. The break-up is required for complying with the state media law passed in 2009. This law limits the number of broadcast licenses to ten from the previously allowed 24; it requires an equal split of broadcast airwaves between the private sector, the government and NGOs, and limits TV networks’ viewing share to 35% of Argentina’s total TV audience. It also regulates the distribution of advertising via private channels and leaves government advertising unregulated.

Under the AFSCA plan, Grupo Clarín will have to split its TV, radio and print operations into six units in 180 days, with a deadline in August 2014. Grupo Clarín and Supercanal, a smaller cable operator, are the first of many media companies to have the break-up of its company approved. The plans for other media companies are still under investigation by AFSCA.

Our Take

The AFSCA ruling on Grupo Clarín is a bid to fight media concentration. Yet, the ruling has economic side-effects. It will make 2014 a difficult year for the advertising industry in Argentina. The structural changes of Grupo Clarín will accelerate the shift of advertisers from traditional media to digital due to the resulting uncertainty in the traditional media ecosystem. Online advertising will grow at 28.4% in 2014 and continue to grow double-digit at 20.6% compound annual growth rate (CAGR) between 2013 and 2018, excluding inflation rates compared to a total media 2013-2018 CAGR  of 7.2%. From just 8.5% share of total media spending in 2013, online will account for 15.3% of all advertising by 2018.

Significant changes in traditional media advertising revenue will not however be observed until 2016 as most inventory is sold far in advance, particularly for TV, keeping growth rates high in 2014. Presidential elections will boost ad spend in 2015 and maintain ad revenue increases. However, from 2016 IHS expects to see a slowdown in ad growth in TV, radio and newspapers to 4.1%, 6.5%, and -2.1% respectively. The increased control of the government over media companies will also result in sharper spikes in advertising revenue during election years (2015 and 2019) looking forward.

The imposed break-up of Grupo Clarín is a cause for concern for other Latin American media conglomerates such as the Brazilian Globo organisation. However, it is important to note that the two companies differ in one significant way: whereas Grupo Clarín projected a generally anti-government bias, Globo historically always supports the incumbent party in power. This is likely to protect the Brazilian conglomerate from unfavourable media law reform such as the one imposed in Argentina.

 

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