Globo Comunicaç

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Globo Comunicação e Participações S.A.

Avenida Afrânio de Melo Franco 135
Rio de Janeiro, Rio de Janeiro 22430-060
Brazil
Telephone: (55) (21) 2540-4444
Fax: (55) (21) 540-1037
Web site: http://www.globo.com.br

Private Company
Incorporated: 1982
Employees: 7,841 (TV Globo only)
Sales: BRL 5.56 billion ($2.31 billion) (2005)
NAIC: 511120 Periodical Publishers; 511130 Book Publishers; 512110 Motion Picture and Video Production; 512191 Teleproduction and Other Postproduction Services; 512210 Record Production; 512240 Sound Recording Studios; 515120 Television Broadcasting; 515210 Cable and Other Subscription Programming; 517510 Cable and Other Program Distribution; 518111 Internet Service Providers; 518112 Web Search Portals

Globo Comunicação e Participações S.A. is the leading media group in Brazil. It controls Brazil's leading broadcast television network, leading cable-television operator, and leading pay television programmer. Rede Globo de Televisão, or Globo TV Network, the Globo group's main company, has long dominated Brazilian television and is the largest commercial television network outside the United States. Globo also controls Brazil's second largest publisher of books and magazines, produces films, and has several subsidiaries involved in various aspects of the sound-recording and music industries. It also holds a stake in the nation's leading Brazilian satellite direct-to-home television distributor, a controlling interest in the second largest Brazilian printing company, and a half-share in a film-programming service sold to subscription television operators in Brazil.

Most Globo television programs can be found on the Internet through interactive sites provided by Globo. com, Globo's Internet division. Globo is both horizontally and vertically integrated. TV Globo produces, for example, three-quarters of its programs and promotes the recording artists of the music subsidiaries, while Editora Globo S.A., the publishing subsidiary, does the same in its magazines. Similarly, the printing company prints the majority of Editora Globo's magazines. Globo is under the leadership of the three surviving sons of Roberto Marinho, founder of the enterprise, and is indirectly wholly owned by the Marinho family and certain relatives of the Marinho family. It is part of Organizações Globo, an even more diversified media concern that also includes a portfolio of newspapers and a radio network.

Roberto Marinho, Globo's founder, is sometimes called the "Citizen Kane" of Brazil. Unlike William Randolph Hearst, who unsuccessfully ran for mayor and governor of New York and sought the presidency of the United States—or Silvio Berlesconi, who used his media empire to betcome premier of Italy—Marinho was an uncharismatic figure who operated from behind the scenes. Nevertheless, he exercised at least as much influence over Brazilian politics as two similar Latin American media moguls over their countries: Emilio Azcárraga Milmo in Mexico and Gustavo Cisneros in Venezuela. The family empire that he created includes not only information and entertainment enterprises but also finance companies, shopping centers, cattle ranches, and manufacturers of bicycles, furniture, and microelectronic equipment—in all, about 100 companies.

A MEDIA EMPIRE: 1925–1995

Irineu Marinho, Roberto's father, was a reporter who founded his own daily newspaper but later lost control of it. He launched O Globo, a Rio de Janeiro daily, in 1925. Only three weeks later, he died, leaving the paper in the hands of his oldest son, Roberto, a 20-year-old university student. Characteristically, Roberto did not make himself editor-in-chief until 1931, first throughly training himself as a reporter and editor. O Globo grew to become, at times, the most-read newspaper in Brazil and still ranks as Rio de Janeiro's leading daily. Marinho launched his first radio station in 1944 and developed it into a national network. He entered the magazine and book publishing business in 1957 under the name Rio Gráfico Editora.

Strongly conservative, pro-business, pro-American, and fearful of communism, Marinho welcomed the overthrow of Brazil's elected president in 1964. He was an enthusiastic supporter of the military governments that ruled the nation until 1985, in spite of their censorship of the media. With funding and technical help from Time-Life Broadcasting Inc., he opened a television station in Rio de Janeiro in 1965. He soon added stations in São Paulo and Belo Horizonte. The modernization of Brazil's telecommunications system and favorable government treatment enabled the fledgling Globo network to expand, by 1972, into Brasilia, the capital, and Recife, a principal city in northern Brazil, giving it truly national reach. Globo became, in terms of audience, the largest network in 1970. By 1980 the network had 36 affiliates, including 6 partly owned by Globo—and by 1985, 46. TV Globo distinguished itself from the competition by rejecting dependency on U.S. programming and harnessing Brazil's own talents to produce its own programs, hiring many of the nation's best entertainers, actors, writers, and directors. By 1980 the network was winning 60 to 90 percent of the nation's viewers.

TV Globo was transmitting 20 hours a day in 1985, with 80 percent of the material generated internally. Although its fare included sports, variety shows, series, and miniseries, the starring role in its lineup consisted of the telenovelas it showed in prime time: episodes of a story line that continued for months. The telenovela (called, in Brazil, simply a novela) did not originate in Brazil, nor was Globo the first Brazilian network to adopt it. However, Globo, which began producing tele-novelas in 1965, swept the field because Marinho hired the best people to mount them and built a state-of-the-art studio to make the product worthy of their efforts. Very little was left to chance. Marinho commissioned pollsters to determine public reaction to different characterizations and situations, enabling, for example, writers and producers to "kill off" certain characters and replace them with actors who had more charisma. By the mid-1980s, Globo was featuring three hour-long te-lenovelas, six evenings a week. As early as 1970, they were being sold to television stations abroad. They proved a hit in other parts of Latin America, and even in Africa, Asia, and Europe. By 1988 the telenovelas were being exported to 128 countries. (U.S. English-language networks were not interested, however, maintaining that their viewers would not accept dubbing or subtitling.)

TV Globo sandwiched the network's half-hour news program, "National Journal" (introduced in 1969), around the two main telenovelas, enabling Marinho to reach a mass audience with his views on public policy. He briefed his staff in advance on how to treat sensitive topics and followed up with comments, suggestions, and complaints. After military rule ended in 1985, Marinho skillfully cultivated the civilian presidents who followed. The communications minister, an ally, canceled major government contracts with the Brazil unit of Japan's NEC Corp., enabling Marinho to acquire operating control of this financially weakened communications-equipment manufacturing unit. By 1987 Marinho was a billionaire, according to Forbes, but Globo suffered embarrassment for its close ties with President Fernando Collor de Mello, who resigned in disgrace in 1992 because of corruption scandals.

COMPANY PERSPECTIVES

As a communication group, our paramount commitment is to the public interest and the truth. Within our core competence—information and entertainment—we are fully aware of our responsibility of generating and satisfying knowledge demands and contributing for the development of a well-informed and politically conscious society.

Globo continued to expand in this period. In 1985 it acquired Telemontecarlo, a network aimed at French and Italian viewers that won 10 percent of the Italian viewing audience but was sold in 1994. In the early 1990s it bought 15 percent—the maximum allowed for foreign investors in broadcasting—of the Sociedade In-dependente de Comunicação (SIC) television network in Portugal, and its programming helped make SIC the nation's leading network. Globosat Programmadora Ltda. was established in 1992 to develop pay television programming in Brazil. Globo Cochrane Gráfica e Editora Ltda. was established as a joint venture with R.R. Donnelley Latin America LLC in 1991.

ENTERING NEW FIELDS: 1995–1999

By the mid-1990s Marinho was nearing 90 and no longer capable of managing his empire; he died in 2003 at the age of 98. Leadership passed to his three surviving sons, and they, in turn, hired a team of professional day-to-day managers in 1998 so that they could concentrate on strategic planning. They were determined to forestall Globo's rivals by entering every field of telecommunications. Globo, in 1995, joined with Rupert Murdoch's News Corp., Mexico's Grupo Televisa S.A., and Tele-Communications Inc., the largest cable TV operator in the United States, to provide direct-to-home satellite television service to all of Latin America. (The latter two were later replaced by Liberty Media International, Inc.) Globo also was investing heavily in its subscription television units, which included not only Globosat but also Globo Cabo S.A. (later Net Serviços de Comunicação S.A.), which became the leading cable television distributor in Brazil. Globo also founded an Internet portal, Globo.com. It spent $455 million to build state-of-the-art digitalized studios for TV Globo and other entertainment units at Projac, Rio de Janeiro, where the production center covered about 1.5 million square meters.

Since Globo was a private enterprise, it was difficult for outsiders to assess its organizational structure and finances, but the Brazilian business magazine Exame made an attempt in 1996, based on copies it had obtained of the enterprise's bank-loan applications. These documents indicated that "Organizações Roberto Marinho," which had no legal existence, was divided into two great branches employing 12,500 people. One branch, controlled by Marinho and his three sons, consisted of television, radio, and newspaper holdings. The other, under a holding company named Globo Co-municações e Participações Ltda. (Globopar), controlled 31 companies engaged in activities such as telecommunications, subscription TV, books and magazines, recordings, real estate, and finance. Each branch represented about half of Globo's estimated $2.4 billion in annual revenue, with TV Globo alone accounting for $1.06 billion, 72-per-cent-owned NEC do Brasil for $640 million, and Editora Globo—the magazine and book unit—for $200 million. The organization's real estate holdings, in additions to the Projac complex, included shopping centers in São Paulo and São José dos Campos; Rio Atlântica Hotel, a five-star hotel in Rio de Janeiro; and apartment and office buildings.

With regard to the communications and entertainment properties, the TV Globo network consisted of its five stations and 86 affiliates, with its signals reaching all but seven of Brazil's 4,491 municipalities. The network accounted for 76 percent of all advertising dollars spent in the television media. O Globo was one of the four largest and most influential newspapers in Brazil. Editora Globo, which was turning out 200 books a year and publishing 45 magazines, was 70 percent owned by the Marinho family, through Globopar. Two-thirds of Globo's publications were being printed in Brazil, with the principal Brazilian printer being Globo Cochrane. Globopar's holdings included the recorded music companies Sigla-Sistema Globo de Gravações Audiovi-suais Ltda. and RGE. Globosat was the largest supplier of programs for cable TV in Brazil, while Globo Cabo was in charge of their sales and publicity.

KEY DATES

1925:: Roberto Marinho inherits ownership of the Rio de Janeiro newspaper O Globo.
1944:: Marinho launches his first radio station and later develops it into a national network.
1965:: The first Marinho-owned television station begins operations in Rio de Janeiro.
1970:: Globo has become Brazil's leading television network, in terms of audience share.
1980:: Globo commands 60 to 90 percent of Brazil's television audience.
1988:: Globo's wildly popular telenovelas are being shown in 128 countries.
1995:: Globo joins a consortium to provide direct-to-home satellite TV in Latin America.
1999:: Annual revenues of the Globo organization are estimated at $2.8 billion.
2002:: Globo declares a moratorium on payments to service about $1.4 billion in debt.
2005:: Creditors agree to refinance $1.23 billion in bonds and bank debt.

Organizações Globo also controlled home video and DVD companies, and movie production company Globo Filmes, which was founded in 1997. In 1999 it established TV Globo International, distributed by satellite and, with a channel in Portuguese, aimed at Brazilians living abroad. That year the enterprise introduced a high-speed broadband service for Globo Cabo's subscribers. A year later, TV Globo introduced its first reality show, produced by Endemol Globo, a company in which it held a half-share. Another holding was Livraria do Globo S.A., a bookstore chain. Organizações Globo's revenues came to $2.8 billion in 1999, and the family's holdings were conservatively valued at $6.4 billion.

GLOBO IN THE 21ST CENTURY

By late 1999, however, Organizações Globo was in financial trouble, after Brazil's economy fell into recession in 1998, forcing it to devalue its currency, the real, in January 1999. This, in effect, made it more difficult to service its heavy dollar-denominated debts, and the real continued to sink in value against the dollar. Wall Street analysts began looking askance at Globo's finances, forcing the enterprise to abandon some of its cellular phone ventures and to sell nearly 10 percent of Globo Cabo to Microsoft Corp. in 1999 for $126 million. In 2000 it sold 30 percent of Globo.com to Telecom Italia S.p.A. for $810 million.

In late 2002 Globopar declared a moratorium on payments on its debt, which came to about $1.4 billion, mainly incurred by the cable and satellite enterprises. To reinforce the bottom line, Globo now sold some of its peripheral businesses, including a bank, a construction company, and its majority stake in NEC do Brasil. In 2004, it sold a 37 percent stake in cable company Net Serviços to a Brazilian company owned by Telefónos de México, S.A. de C.V. (Telmex) for $370 million. Globo-par won approval for its restructuring plan from the holders of all six of its bond issues, who agreed to exchange debt for new securities or cash. This was completed in April 2005, when creditors agreed to refinance $1.23 billion in bonds (80 percent) and bank debts (20 percent).

Shortly after this restructuring, in August 2005, TV Globo and Globopar were merged into an entity named Globo Comunicação e Participações S.A. Broadcast television revenues represented more than 75 percent of the entity's total 2005 revenues on a consolidated pro forma basis. The Globo television network, consisting of the five Globo-owned stations and 118 affiliated ones, held 59 percent of the national viewership in prime time. Globo was producing about 88 percent of the prime time programming and about 74 percent of all the programming it broadcast. Globosat, the most important source of Globo's content and programming revenues, was the leading provider of pay television programming for cable multiple system operators and satellite television distributors in Brazil. Globo also controlled 51 percent of the voting shares of Net Serviços, the largest multiple system cable operator and pay television distributor in Brazil, which was also a leading provider of broadband Internet access through its Virtua service. It also held a 40 percent stake in Sky Brasil Serviços Ltda., the leading satellite distributor of direct-to-home pay television services in Brazil. Sky Brasil historically obtained all of its programming from Globo's licensing subsidiary, Net Brasil S.A., until a 2004 agreement modified its role to that of providing only Brazilian programming to Sky Brasil. Approval, expected in 2006, of a merger between Sky Brasil and DirecTV Brasil, would reduce Globo's stake in the merged enterprise to 28 percent.

Editora Globo, the publishing arm, was the second largest magazine publisher in Brazil in terms of circulation and advertising revenues. Its titles included Época, the second-largest newsweekly, Quem, the third-largest celebrity title, and the Brazilian edition of Marie Claire. Globo Cochrane, now 81 percent owned by Globo, was printing more than 140 magazines. Globo Filmes, between 1995 and 2005, produced or co-produced 9 of the 10 top-grossing Brazilian movies. Sigla and RGE were producing soundtracks connected to Globo's telen-ovelas, series, and shows. A third music subsidiary involved the sale of compact discs, DVDs, and other similar items, but most of its assets were sold in 2005. The Marinho newspaper and radio interests remained outside reorganized Globo, which recorded very healthy net income of BRL 1.97 billion ($817.72 million) on net revenues of BRL 5.59 billion ($2.31 billion) in 2005.