GMA EXECS ADMIT DESIRE TO BECOME NO.1 CAUSED THEM TO INCUR HUGE PROFIT DROPS IN 2011!

GMA-7 is controlled by the Duavit, Gozon and Jimenez families. The Gozon group, represented by GMA chairman Felipe L. Gozon, had admitted in the past that the company could be sold for “the right price.”

The sale of GMA-7 to the PLDT group nearly happened in 2001 with the signing of a memorandum of understanding. Duavit said agreements had been reached on the price for a majority stake of the firm, but the deal fell through because of issues encountered by the buyer that were not related to price.

But conditions could be right this time around.

GMA 7 recently announced that its 2011 net income plummeted 39 % to P1.72 billion from P2.82 billion in 2010, as advertisers cut back and operating costs went up.

“Our net income took a beating,” admitted Ronaldo P. Mastrili, GMA 7 vice president of finance. “We experienced the lowest net income level of the past 5 years in the 4th quarter of 2011.”

Advertising revenue dropped 9 percent to P13.08 billion, while operating costs jumped 8 percent as GMA launched GMA News TV to blunt competitive inroads in news.

Ratings game
Duavit said competitive pressures drove costs up:

“The spending was driven by the desire to win in the national ratings last year.”

GMA 7 cited a 3.1-point lead in household audience share over rival ABS-CBN and an 18.6-point lead over newcomer TV 5, according to media ratings firm Nielsen TV Audience Measurement.

Duavit rejected suggestions to emulate TV 5 by pirating big talent to attract more advertisers. “The norm was that the stars created the program and the network was measured in terms of who its stars were,” he said.

“We prefer to see it the other way around—that it’s the programs that make the stars and the network that creates the programs and the opportunities,” he said.

Spending cuts
GMA-7 plans to reduce programming costs and trim capital expenditure from nearly P896 million in 2011 to P650 million for 2012.

Two new stations are planned in the Ilocos and Bicol regions. The rest of the funds will be to upgrade towards high definition programming.

Despite posting lower profits, rival ABS-CBN has set a higher budget for expansion this year to diversify its revenue stream and ensure future growth.

Last week, company officials reported that profits fell nearly a quarter in 2011, from a net of P3 billion in 2010 to P2.4 billion in 2011, following an industry-wide drop in earnings from massive spending cuts by big advertisers.

A one-time gain from the sale of a stake in Sky Cable Corp., coupled with the company’s more diversified revenue stream helped save ABS-CBN from a worse decline, officials said.

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