ABS-CBN INT'L: FOLLOWING PINOYS ABROAD

Manila, August 11, 2003 (STAR) By Margaret Jao-Grey  - When Kris Aquino announced she and co-host Korina Sanchez might be in the United States late this year to tape some of their "Morning Girls" daily show, ABS-CBN International (NA) received lots of calls for the specific dates.

"The response was amazing even if nothing has been firmed up," said Rene Encarnacion, senior vice-president for international operations of ABS-CBN Broadcasting Corp. and managing director of ABS-CBN Global Ltd.

ABS-CBN International is one of four subsidiaries of Global, which is, in turn, a wholly owned subsidiary of ABS-CBN Broadcasting.

With access to 25% of total Filipino-American households, ABS-CBN International accounts for 70% of gross revenues generated by Global.

"The North American operations used to account for 85% of total revenues but that has happily dropped as we follow Filipinos abroad. There are Filipinos working in every country in the world except Bhutan," said Encarnacion.

Using a market yardstick of between 50,000 to 70,000 households, each household made up of five to six people, Global has presence in Asia-Pacific, the Middle East, and Europe. In Asia, the company works with local partners. It services Saudi Arabia and the United Arab Emirates through subsidiary, ABS-CBN Dubai; and England, Germany and Italy through another subsidiary, ABS-CBN Europe.

"The Filipino-American market is so huge, thereís still a lot of penetration to do. Just maintaining our 25% market means weíre already growing. This is not a transient market; they are in the US for good and they have large disposable incomes," said Encarnacion.

Bundling

Entertainment accounts for 65% of Globalís product mix. The company maintains four channels, which are either directly beamed to the homes of subscribers or by satellite. These channels are segmented by content, offering 24-hour news, the best of Channel 2 shows, and Philippine movies as well as sports and culture.

Global pays royalties to ABS-CBN Broadcasting and its content-producing subsidiaries. It also sources other suppliers of content, such as the Philippine Basketball Association. Global holds the international broadcast rights for the PBA games.

In a classic bundling strategy, the company has built on its existing relationship with customers to push non-entertainment products, all of which are billed through one cable statement.

"The nature of technology opens so many opportunities. We have become a distribution one-stop for everything from entertainment to courier services to retailing Philippine-made products to our customers. Itís a convenient pipeline that other Philippine media companies have not yet fully exploited," said Encarnacion.

Global also sells pre-paid US-to-the-Philippines cards which offer 60 minutes to 100 minutes of telephone use. The cards are offered to retailers for private labeling or sold in-house under the brand name, Sarimanok.

Armís length

Global was incorporated in the Cayman Islands last year, although its North American subsidiary has been in business for the past nine years. Consolidating ABS-CBNís international operation is part of the strategy to sell Global shares through an initial public offering two or three years from now. Part of the proceeds will pay off the $25 million advanced by ABS-CBN Broadcasting, mainly to put up the transmission infrastructure.

"We have an armís length relationship with our parent company. Itís important that we show we can and have been going it alone," said Encarnacion.

The company generated in excess of $40 million in gross revenues in 2002, accounting for close to 70% of total revenues generated by all ABS-CBN subsidiaries. On a consolidated basis, subsidiaries accounted for 20% of ABS-CBNís total revenues in 2002.

Money-makers

This year, Global sees a 20% growth in gross revenues and a 30% growth in subscriber base through the three-pronged strategy of better programming, more non-entertainment products, and improved customer relationships.

For one, programming for the American market will no longer be targeting solely first generation immigrants but their children and their grandchildren as well.

"The first generation of Filipino-Americans are nostalgic about the Philippines and they want to keep abreast with what is happening back home. The second and third generation understand and accept their Philippine heritage but they have their own distinct buyer preferences in terms of, say, what kind of music they want to listen to. We want to secure more programs developed by Fil-Ams for Fil-Ams," said Encarnacion.

For another, programs such as "Balita Middle East" developed for foreign audiences may soon be shown in the Philippines because of their relevance to Filipino viewers. "Balita Middle East", which has a segment where overseas Filipino workers can interact with their families in the Philippines, is the second highest rated show in the 24-hour cable news channel, ANC.

From a wider perspective, Global intends to balance its revenue stream and be less dependent on the American market. It formally launches ABS-CBN Europe in Italy this month. It is also asking itself whether or not it makes sense to continue its partnerships in Japan or Australia, which have been delivering on their bottom line commitments.

At the end of the day, Globalís future direction will be dictated by the vision set by ABS-CBN Broadcasting chairman Eugenio Lopez III: "We are a content provider, not just a media group."


Reported by: Sol Jose Vanzi

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