Grupo Clarí

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Grupo Clarín S.A.

Piedras 1473
Buenos Aires, C.F. C1140ABK
Argentina
Telephone: (54) (11) 4309-7500
Fax: (54) (11) 4309-7200
Web site: http://www.grupoClarín.com.ar

Private Company
Incorporated: 1999
Employees: 7,000
Sales: ARS 1.84 billion ($623.73 million) (2003)
NAIC: 322122 Newsprint Mills; 323110 Commercial Lithographic Printing; 323111 Commercial Gravure Printing; 511110 Newspaper Publishers; 511120 Periodical Publishers; 512110 Motion Picture and Video Production; 515112 Radio Stations; 515120 Television Production Broadcasting; 515210 Cable and Other Subscription Programming; 517212 Cellular and Other Wireless Telecommunications; 517410 Satellite Telecommunications; 518111 Internet Service Providers; 519110 News Syndicates

Grupo Clarín S.A., a privately owned Argentine holding company, is the leading media group in the Spanish-speaking world. Its principal holdings are Clarín, the Buenos Aires-based daily newspaper whose circulation is the largest in the Hispanic world, and Multicanal S.A., one of the two companies that dominates cable television in Argentina. Grupo Clarín also owns, or has a share in, other newspapers and magazines and a news service; a printing plant and a newsprint manufacturer; television channels and radio stations; cellular mobile telephone service; film and sports-TV production; and an Internet service provider and search engine. By these means the group enters each day the homes of at least three out of every four Argentines.

Rising to Highest Circulation in the Hispanic World: 1945–85

Roberto Jose Noble was a lawyer who served in Argentina's Congress and as a provincial-government minister before leaving politics in 1939 to become a rancher. Six years later, with an initial investment of $1.6 million, he founded a Buenos Aires tabloid newspaper, which he named Clarín (Bugle). Noble sold his ranch to buy the rolls of newsprint that at this time were as valuable as precious metals. The paper sold 60,000 copies on its first day. Populist in tone, it emphasized local news, sports, and entertainment.

Clarín first appeared as Juan Perón was rising to power to become Argentina's authoritarian leader. Although the paper declared itself free from ties to any traditional political group, and Noble's official biographer later wrote that Noble was antiPerónist, Clarín and other papers are said to have engaged in self-censorship to avoid Perón's anger. The paper backed the Perónist nationalist position of government support for Argentine industry. The Perón regime intimidated the press through its control of labor unions and by the curbs it imposed on newsprint in 1948. After it shut down La Prensa in 1951, it turned this opposition daily over to the nation's labor federation. La Prensa 's middle-class readers then deserted the paper in droves, many of them gravitating to Clarín, which also picked up much of La Prensa 's lucrative classified advertisements.

Clarín continued to advance after Perón's fall in 1955. In 1960 its own building on its own downtown Buenos Aires lot was erected for Clarín. It rose to become the paper of highest circulation in Buenos Aires in 1965 and, two years later, added a color press and a Sunday magazine, which it also supplied to provincial newspapers. Noble died in 1969 at the age of 66. His widow, Ernestina Herrera de Noble, succeeded him as publisher.

Despite its large circulation, Clarín is said to have been on the verge of bankruptcy when, in 1971, Herrera de Noble turned to Rogelio Frigerio, the head of the political group Movement for Integration and Development. According to one account, Frigerio's allies rescued Clarín with $10 million in contributions, and for the next decade it hewed to the party's line, which centered on government aid for national infrastructure and industrial development. On Frigerio's advice, Herrera de Noble brought in Héctor Magnetto, who took charge of the newspaper's finances, and two of Magnetto's associates, José Antonio Aranda and Lucio Rafael Pagliaro. These four still controlled the paper, and the additional media properties of Grupo Clarín, in 2004.

Throughout a period of military rule (1966–73), followed by a second Perónist period (1973–76) and another military dictatorship (1976–83), Clarín again tread softly. Since military censorship made it virtually impossible to write candidly about politics, Clarín filled its paper with more and more soccer news, lurid crime stories, and entertainment. It even generated its own news by sponsoring events such as movie festivals, chess competitions, and marathon races. In 1977, however, the paper and two other Buenos Aires dailies succeeded in securing their own newsprint supply, and they opened their own paper plant the following year. By 1979 Clarín was selling an average of 500,000 copies a day and about 770,000 for the Sunday edition, with distribution in all parts of Argentina. It also had a large lead over its rivals in classified advertisements. In 1980 the enterprise had sales of about $300 million and was the 26th largest in Argentina. The same three newspapers founded the news agency Diarios y Noticias (DyN) in 1982. By 1985 Clarín had the highest circulation of any newspaper in the Spanish-speaking world—a lead it maintained in subsequent years.

Multimedia Colossus in the 1990s

The next decade saw the enterprise convert itself into a multimedia corporation. Under the presidency of Carlos Menem, Argentina began selling numerous state-owned enterprises, including two Buenos Aires television stations. After a law that prohibited newspapers from control of other mass media was repealed, Clarín, in 1990, purchased a Buenos Aires television station, Channel 13, which was losing $20 million a year but ranked second in viewers. In the same year the company bought its first radio station, Mitre (soon adding an FM station as well), and established a subsidiary named Arte Radiotelevision Argentino (Artear) for its radio and television properties. By 1997 Radio Mitre was Argentina's largest station.

In 1991 Clarín began broadcasting and distributing the broadcasting of sports events for television. The following year it purchased a fledgling cable television venture, Multicanal S.A., and in 1993 it established two cable channels: one for news 24 hours a day, the other to show old movies and television shows. Clarín, in a joint venture with the French publisher Hachette Filipacchi, launched a women's magazine, Elle Argentina, in 1994. (Clarín bought Hachette's share in 2001.) It took a stake in the same year in Compania de Telefonos del Interior S.A. (CTI), which was starting a cellular mobile-telephone service.

With so many new ventures on its plate, the enterprise was reorganized under the name Grupo Clarín in 1995. In that year its revenues passed $1 billion, with print media now accounting for less than half of the total. The company garnered another $276 million in cash when, in 1995–96, it sold 55 percent of Multicanal (which now had 550,000 subscribers and was proving highly profitable), to Telefonica International S.A. and CEI Citicorp Holdings S.A. These partners provided not only capital but also financial expertise. Magnetto and his collaborators were uncomfortable with sharing power in Multicanal, however, and the partnership broke up in 1997–98 by means of a complex web of purchases and sales. CEI and Telefonica became proprietors of a rival venture, Cablevision S.A. Clarín also was bracing for competition from direct-satellite television by partnering with others to offer direct-to-home digital television in Argentina.

Grupo Clarín was also busy in its traditional area of print journalism. In 1996 it introduced Ole, Argentina's first sports daily newspaper, and the following year it joined Cimeco S.A., a consortium, to acquire regional newspapers. Clarín and rival La Nación were partners in Cimeco, which purchased 85 percent of two large provincial newspapers, Los Andes of Mendoza and La Voz del Interior of Córdoba, for $170 million. In 1998 Clarín introduced a children's magazine called Genios.

Grupo Clarín became a power in sports telecasting by its majority stake in a firm that owned Argentina's main sports cable channel, TyC Sports (established in 1994), the premium channel TyC Max, and rights to telecast basketball, volleyball, auto racing, boxing, handball, ice hockey, and all weekend matches of Argentina's professional soccer league. The contract for the latter was good through 2006, with an option through 2014. Clarín also had half-ownership of another company holding the rights to telecast championship tournaments of Argentina's professional soccer league and the most important South American competitions. Through Patagonik Film Group S.A., the group was participating in producing films to be distributed throughout Latin America.

By 1998 Grupo Clarín was reaching three out of every four Argentine homes. Its eponymous newspaper had the highest circulation in the Hispanic world, and Multicanal was the largest cable system in Latin America, with a network covering Buenos Aires and the principal cities of eight provinces. The AM and FM radio stations each rated as the most listened-to ones in Buenos Aires. Channel 13 still ranked second among over-the-air television stations; its highest-rating program was a Sunday evening soccer review produced by TyC. Through Prima S.A., a subsidiary founded in 1997, Ciudad Internet was Argentina's second largest Internet service provider. Prima's holdings also included a broadband-access data network. Grupo Clarín also held half of Audiotel, a search engine.

Company Perspectives:

Every day Grupo Clarín faces up to its commitment to offer honest and independent communications, exercised with professional integrity, to give its audiences a comprehensive and up to date vision of reality. . . . The objectives of the Group are to employ leading edge technology in order to widen the range of information, cultural and entertainment options available and to promote Argentine talent in the context of globalization.

Harder Times in the New Millennium

These gains came at a price—namely a debt that had reached $1.4 billion. Despite its growth, Multicanal had fallen into the red because of the interest it had to pay on its debt of $780 million. The various media—newspapers, magazines, radio, television, cellular phones, and the Internet—did not add up to an integrated whole, even though the group was formally incorporated in 1999 as Grupo Clarín S.A., a holding company encompassing its 18 business units. Each unit continued to operate independently under separate management, although a corporate management group was established to oversee the group's finances, human resources, and new businesses. Near the end of the year Clarín sold an 18 percent interest in the group to Goldman, Sachs Group, Inc. for $500 million. In addition to the capital gained, Clarín was planning to use Goldman, Sachs as a way to take the company public and tap the U.S. equity market. In LatinFinance, Lisa Wing quoted a Goldman, Sachs executive as saying, "Clarín is a long-term investment for us. Even after the company goes public, we will hold the shares."

Multicanal, now with 1.4 million subscribers and a 43 percent share of Argentine homes wired for cable, was considered worth nearly as much as Grupo Clarín itself. Few countries anywhere had taken to cable television as had Argentina, where people considered it an essential utility, like water and electricity. Cable television, in more than 60 percent of all homes, was among the highest in the world in market share for TV viewing. Clarín's cable unit had ambitious plans to develop its digital broadband capacity in order to offer voice data services to its Internet subscribers and the content of its newspapers, television channels, and film productions for premium channels and pay-per-view events. Digital broadband also carried with it the possibility of interactive television, video on demand, and telephonic services in a now deregulated marketplace.

The reality proved quite different. Argentina's economy failed to break out of recession, and as a consequence many of Multicanal's subscribers found themselves not only unable to take on added services but to pay the average $32-a-month cost for basic service itself. In order to reduce its own operating costs by $330 million a year, the cable company cut 15 percent of its staff and dropped some channels from its offerings. By mid-2001 one bank analyst forecast a 60 percent chance that Multicanal would default on its debt before the end of the year, and Standard & Poor's dropped its credit rating to five levels below investment grade. The company survived the crisis by floating $144 million in two-year bonds and selling its 4 percent interest in DirecTV Latin America LLC for $150 million.

The inability of the Argentine government, in January 2002, to make payments on its debts resulted in the devaluation of the peso and pushed many companies into default on their own debts. Multicanal missed payments in February and announced that it was "deferring" $138 million in coupon and principal payments. Its $680 million in dollar-denominated debt—about 65 percent of parent Grupo Clarín's total—now had been effectively more than tripled because of the decline of the peso to about 30 cents on the dollar. To add insult to injury, by March 2003 Multicanal had lost 18 percent of its subscribers (982,000 at the end of 2003) compared with only 9 percent for rival Cablevisión, indicating that the latter's subscribers were more affluent and creditworthy than the former's. In December 2003, however, Multicanal won support from some creditors for an offer to buy back its bonds at 30 percent of their face value or to trade them for new securities. In the same year Agea Diario Clarín restructured its $408 million in debts.

Grupo Clarín's revenues came to ARS 1.84 billion ($623.73 million) in 2003, a 24 percent increase over the previous year but a far cry from its peak of ARS 1.74 billion in 1998, when the peso was at parity with the dollar. Agea Diario Clarín (the two wholly owned newspapers plus Genios ) accounted for 30 percent and Multicanal for 28 percent. Artear, the radio and television business, accounted for 12 percent; the newsprint business for 9 percent; Artes Gráfica Rioplatense (Agr), the printing subsidiary, for 5 percent; Cimeco, the regional newspaper alliance, for 4 percent; Ciudad Internet for 3 percent; and other properties for 9 percent. The group earned ARS 695 million (about $235 million) in 2003 after a loss of ARS 1.1 billion (about $375 million) in 2002. Multicanal returned to profitability after losing ARS 938 million (about $318 million) in 2002. By one ranking, Agea Diario Clarín was second in the nation in profit margin in 2003, and Agr was fourth.

Agr was printing newspaper supplements, magazines, telephone books, and circulars for supermarkets and commercial chains. It also offered prepostal services, distribution, and finishing of documents. The group's other graphic holdings, as of 2002, included Elle Argentina, 75 percent of La Razón, 37 percent of Papel Prensa, one-third of Cimeco, and 25.6 percent of the news agency DyN. The audiovisual holdings, in addition to Multicanal, Artear, Radio Mitre, and its sports events units, included all of channel 7 in Bahia Blanca, Buenos Aires, 85 percent of channel 12 in Córdoba, 82 percent of Prima Argentina and Prima do Brasil, half of Audiotel, and 30 percent of Patagonik Film Group.

Principal Subsidiaries

Arte Gráfico Editorial Argentino S.A.; Artear S.A. (98%); Artes Grafica Rioplatense S.A.; Multicanal S.A. (94%); Prima S.A. (82%).

Key Dates:

1945:: Roberto José Noble founds Clarín in Buenos Aires.
1965:: Clarín becomes the newspaper of highest circulation in Buenos Aires.
1969:: Noble's widow, Ernestina Herrera de Noble, succeeds him as publisher.
1985:: Clarín now has the largest circulation of any newspaper in the Hispanic world.
1990:: The company buys the second largest television channel in Buenos Aires, as well as a Buenos Aires radio station, which grows to become Argentina's largest.
1992:: Clarín takes a stake in a cable television network, Multicanal.
1995:: Now Grupo Clarín, the media giant has annual revenue surpassing $1 billion.
1997:: Grupo Clarín founds Ciudad Internet, an Internet service provider.
1999:: Grupo Clarín incorporates and sells an 18 percent share to Goldman, Sachs Group, Inc.
2002:: Struggling Multicanal, the cable-TV subsidiary, "defers" payments on its sizable debts.
2003:: Grupo Clarín returns to profitability.