Goldman Sachs famous BRIC category has stimulated large-scale investments in Brazil, says media mogul Roberto Civita.
Roberto Civita is chairman and CEO of The Abril Group, one of Latin America's largest and most influential communications companies. Founded in 1950 by Roberto's father, Victor Civita, the company today employs approximately 6,000 people and had sales last year of $1 billion.
The Sao Paulo-based Abril Group publishes nearly 100 magazines, including its flagship Veja, launched by Roberto Civita in 1968 and now the world's fourth largest news weekly. Veja, well-known for its success in exposing political corruption in Brazil, has been instrumental during the past year in bringing about the resignation of President Luiz Inacio Lula da Silva's inner circle.
The Abril Group, which completed the acquisition of two book publishing houses in 2004, is the leader in Brazil's textbook market. It pioneered pay TV in Brazil and currently offers digital TV, broadband Internet and VoIP services, and MTV as a broadcast channel. Civita, who became chairman of the company in 1990, has established alliances and partnerships with international groups ranging from Viacom and Disney to Hearst, Time, Playboy, Gruner + Jahr and Hachette. In May 2006, The Abril Group sold a minority stake to South African media group Naspers.
At the recent Wharton Global Alumni Forum held in Rio, Civita spoke on "The Role of the Press in an Emerging Economy." Civita, who was born in Milan and earned his undergraduate degree from Wharton, talked with Knowledge@Wharton about corruption in Brazil, old media vs. new media, the U.S.'s obsession with quarterly earnings, the importance of education and the coming tide of investors, among other topics.
Knowledge@Wharton: It seems like the media in emerging economies have done a good job of exposing political corruption. Have they been as good at exposing business corruption, and are there examples of that?
Civita: I can't really speak about what is going on in other emerging economies such as Russia, India, China and so forth. What I can say is that in Brazil, the media has focused mostly on corruption in government. This corruption in government is not just at the federal level. It is not just at the executive branch. We have been very actively involved in exposing corruption at the executive, legislative and sometimes even the judicial level, and at the federal, state and municipal levels as well. This is a pervasive problem. It is not a problem concentrated, let's say, in the federal government. These scandals, which have been uncovered by the press and by the federal police -- our equivalent of the FBI -- frequently involve businesses. But it's not corruption in business; it's corruption between business and the government. As far as I can remember, we have not had any stand-alone business scandals.
Knowledge@Wharton: In some emerging economies, like India for example, there are sometimes scandals of insider trading, stock rigging and so forth. Have you had examples of those kinds of scandals in Brazil that have been exposed by the business media there?
Civita: Minimal -- nothing to get excited about. There are occasional [instances of] insider trading, and occasionally the stock market authorities point a finger. But we are underdeveloped on the business scandal front. Remember, we haven't gotten to where you are yet.
Knowledge@Wharton: When we talk about business scandals in the U.S., we use what almost amounts to code words for the worst examples of corruption, words such as Enron, WorldCom and Tyco. You don't have those kinds of scandals?
Civita: I am sure that we do. I'm sure, for example, that there are people tinkering with balance sheets. But I don't think we have people tinkering with balance sheets of the publicly held companies, the companies that are on the stock market. [In that area], I think things are going very well in Brazil. What I don't know is what the family-owned companies are up to. Frankly, this has not been an issue yet.
Knowledge@Wharton: The print media, especially in the U.S., seems to be on the decline. More and more people are getting their information from the Internet. Some categories of advertising also, such as classified advertising, seem to be migrating to the Internet. Could you explain the situation with regard to Brazil? Do you find the same decline of print in Brazil? And what is happening with new media there?
Civita: First of all, broadcast television and radio in Brazil -- the so-called 'old media' -- are still booming. The press is not growing, but it is not declining. Now if you say print media, you have to be very careful. There are many types of print media. I would say roughly, for your audience, that the more segmented the media -- for instance, in our case, the more segmented the magazine, the more specialized it is, the more it does something very specific that only specialized magazines can do -- the less it has been affected up to now by the Internet. The broad-spectrum media tends to be more affected than the more tightly focused. I'm talking, for example, about fashion magazines, car magazines, science magazines and travel magazines. These have not yet been affected at all. They are growing and prospering. The general print medium, for instance newspapers, will be hurt more in terms of their classified advertising than they have been in circulation. I would say that there is a long horizon left for print still. I wouldn't say that it is going to be a growth sector overall, for sure. But I would say that there are still opportunities for specific print media. And there is certainly going to be very profitable print media for many, many years. I'm not talking about growth. There is an obsession in the U.S. with growth. [Everyone] is focused on growth. If you look at ROI, if you look at profitability and if you look at the relatively small demands for capital, print is a very exciting area. But if rapid growth is what you're looking for, I would say invest in other places.
Knowledge@Wharton: Are there any audiences that your various platforms are not reaching in Brazil that you would like to reach? And how would you go about reaching them?
Civita: You have to remember that my company is not only in print, we also do MTV in Brazil, we do pay TV, we are launching Wi-Max and so forth. Abril is not exclusively a print company. It began as one. We are the biggest magazine publisher in Latin America and we are the biggest book publisher in Latin America as well. But we are also very active now on the Internet and on broadcast television. What I am looking at for the future is how the Internet is going to develop as a business, not as a phenomenon. It's an extraordinary phenomenon which is changing the world. But from the media point of view, what kind of business can you turn it into? From the traditional information and news and entertainment side, I would say that's the big challenge. The big problem and the big opportunity is that 97% of children in Brazil are in school right now. That's something like 35 million school children at this point. But they are not learning well. The system is not functioning. Therefore, they are not coming out of school as readers. They are not even coming out of school as well-informed or well-prepared citizens. And this is the big challenge for the media and for education in Brazil. It's a huge challenge.
Knowledge@Wharton: So, in other words, [you want] to somehow reach these kids while they are in school, to use some tools, such as the Internet ...
Civita: First we have to teach them to read and to do math. Then we have to get them to enjoy it. And actually the platform doesn't really matter. I think of reading as a necessary part of civilization. I'm not talking about paper and ink. I'm talking about reading, understanding what you read. The future may not be paper and ink; it doesn't matter. The important thing is that we maintain the capacity to read, to write, to think, to understand, to digest, and to analyze; otherwise we are not going to have a sustainable developed country.
Knowledge@Wharton: As far as efforts go to reach this young audience of 35 million who are still in school, and for whom reading is important, though paper may not be, are you and other members of the Brazilian media making use of emerging technology platforms like mobile telephony? Very often you will find that in countries where the Internet infrastructure is not very robust, the mobile telephonemarket is growing very fast and also becomes a source of providing content. Is that happening in Brazil at all?
Civita: Yes. We have 92 million mobile phones in Brazil. More and more people are using these mobile phones for more and more things. So, many of our magazines and many of our sites are developing material specifically for the mobile phone. But I really don't expect mobile phones ever to be used for deep analysis. It's for very short stuff. It's more for entertainment, watching soccer matches or pretty girls, listening to music, or watching your favorite band or whatever, rather than for understanding what is happening in the Middle East or on the political and economic fronts.
Knowledge@Wharton: What about podcasting? Is that taking off in Brazil as well, the way it has in the West?
Civita: It's here and I assume it's blossoming, but I don't know how to turn it into a business.
Knowledge@Wharton: As you know, Brazil has been in the international limelight, especially after the famous Goldman Sachs BRIC [Brazil, Russia, India and China] report came out [in 2003, stating that the economies of these four countries will grow so fast that by 2050 they will surpass those countries that are currently the richest in the world]. How is that report changing the kind of business stories that are coming out of Brazil? And what do you think will be the biggest stories that journalists will be covering in the next few years but which they are not covering now?
Civita: This has been important for Brazil because, all of a sudden from the Brazilian point of view, we are comparing ourselves with the growth rates of India, China and Russia. Our news and business magazines have been using this to say, 'We have to change this and we have to improve that; we have to do this and we have to do that. In order to not lose the race, we have to grow faster' and so forth and so on. So it is nice to have this. This is very stimulating for us and it gives the responsible press many opportunities. We did a special issue on China in Veja a couple of weeks ago that had 97 editorial pages. We sent a whole team of reporters, editors and photographers to China and did what I think is the biggest and best special issue on China that has ever been done, anywhere. We did India, too. Three of our magazines have gone to India and have done India properly. In other words, we are using the BRIC classification to [ask], 'Where do we have things to learn from them and where are they behind us?' So we stop comparing ourselves with the developed countries and now compare ourselves with the developing countries. This is very useful for us and I am grateful to Goldman Sachs. The other story that is coming is this: The investors are coming. There is a lot of money pouring into Brazil. I was reading this morning about 10 different investment funds -- U.S. and international investment funds -- that have recently come into Brazil with $2 billion to invest. This is new. There are IPOs happening. There are lots of companies that are going public. The big ones that were going to do this have done it and now the medium companies are starting to do it and there is money for that. In other words, the capital markets are benefited by this phenomenon. This is a good time to be an entrepreneur in Brazil.
This article is based on a longer interview. Republished with permission from Knowledge@Wharton (http://knowledge.wharton.upenn.edu), the online research and business analysis journal of the Wharton School of the University of Pennsylvania.