Why Wall Street Sees Cash in Cuban TV
A group of influential Wall Street dealmakers are betting that Americans have such an appetite for Cuban television – everything from sports, to music to even some government propaganda—that they’re planning to distribute the island’s TV programming to viewers in the U.S., the FOX Business Network has learned.
The investors, led by former Perella Weinberg restructuring star Michael Kramer, plan to air Cuban media content through a new channel, the CubaNetwork. It will distribute both Spanish and English broadcasting of Cuban “Television… documentaries, music and music programs, cultural content, live sports and sports related documentaries… movies and plays,” according to internal company documents.
Keith Bass, the network’s chief executive, described the new channel as “the first significant public to private partnership between Cuba and a U.S. Company.”
The distribution deal with Cuban government officials was signed in October, after about a year of negotiations. He declined to provide financial details, but said the investor group paid a significant sum of money, well into the millions of dollars, for the programming rights.
Bass added that he has met with officials from major cable and satellite operators to craft distribution deals, and if all goes according to plan, programming will be available by April 2016. Revenue from distribution deals will be split with the Cuban government and represent the majority of the network’s profits.
“We have exclusive rights to the bulk of the Cuban television and media programming,” Bass said, adding that while the network will be officially located in Hollywood, the plan is to open an office in Havana, Cuba’s capital.
Cuban media is relatively obscure; it consists of five separate television channels, and several radio stations such as Radio Havana, all of which are government controlled and largely unknown outside the country. The most popular programs include soap operas, known as “telenovelas” and various sports programming such as Cuban baseball. Bass said the CubaNetwork will air both current content and new original content; one plan is to have a morning show similar to those in America.
In July, President Obama announced that the U.S. government will reopen diplomatic relations with Cuba after more than 50 years— the first step toward ending an economic and trade embargo with the country that began after rebels led by dictator Fidel Castro overthrew the government of Fulgencio Batista and sided with the Soviet Union during the cold war.
While many trade restrictions still exist, Bass said that telecommunications was one of the few areas of business that can take place between the two countries immediately.
“The new relationship allows us to actually pay television producers in Cuba to produce new content,” he added. “We didn’t need government approval.”
A state department spokesman had no immediate comment. Nor did a spokeswoman for the Cuban embassy in Washington.
The sanctions against Cuba are codified in six laws, and legal experts are divided as to whether the President can unilaterally circumvent these regulations through executive privilege, or whether he needs Congressional approval to end the embargo.
But Jodi Bond, vice president of the Americas for the International Division at the U.S. Chamber of Commerce, said Obama, in re-establishing diplomatic relations between the two countries, issued a special “carve out” provision to allow telecommunications and information technology business between the two countries. Bond said she has met with Cuban officials recently and that major businesses like Google (NASDAQ:GOOGL) and Sprint (NYSE:S) are either looking or in the case of Sprint, have already cut deals to do telecom business with the Cuban government.
She described the plans for the CubaNetwork as “rather significant” and a “big deal” since most of the media in the country has been closed to outsiders; the Cuban government has heavily censored media coming into the island as well. “There used to be a time when the government would actually block out the images of Cuban major league baseball players during broadcasts, but that’s changing,” Bond said.
Something like the CubaNetwork “just has never been done before…they have their own TV personalities that relatively few people in the U.S. know about,” she added.
One unknown is the appetite by an American audience for Cuban-specific programming. Spanish language television programming is dominated by two networks, Telemundo and Univision, which has tapped into the growth in the Hispanic population with its own programming such as soap operas and news broadcasts in Spanish.
But Bass said the CubaNetwork’s appeal is broader; he’s also looking to introduce the Cuban culture and society to an English speaking U.S. audience who may want to travel to Cuba either on business or for leisure, which is why some programming will be broadcast strictly in English, and Spanish with English subtitles.
The network is also likely to face some criticism from pro-democracy Cuban-American groups, who continue to oppose the Castro regime, now led by President Raul Castro, Fidel’s younger brother, for its well-documented, record human rights abuses. Presidential candidate and Florida U.S. Senator Marco Rubio, whose parents fled Cuba after the revolution, recently told Fox News "You have two tyrannies - one in Iran, one in Cuba - both receiving significant concessions from this president [and] the most powerful and important country in the world,” referring to the nuclear arms deal between Iran and the U.S. that the president pushed without the full support of Congress, and Obama’s efforts to re-establish ties with Cuba.
Rubio has vowed to reverse Obama’s new Cuban efforts until democracy is restored to the country; a spokesman had no immediate comment.
“The hardliners will say any programming out of Cuba will be a bunch of propaganda," Bond said. “But a lot of Cuban Americans also are coming to understand times are changing and they're more open” to engagement.
Bass told FOX Business that he is cognizant of the ramifications of airing pro Castro news broadcasts in the U.S. and for that reason, most of the programming will focus on cultural issues, travel and sports.
“We’re looking at a lot of things other than the political side,” he added. He also plans on offering video content over the internet.
As reported by FOX Business Network, Kramer, one of Wall Street’s best known dealmakers in the field of corporate restructurings, was ousted from Perella Weinberg earlier this year amid a long-running management dispute with the boutique investment bank’s managing partners Joseph Perella and Peter Weinberg. Both sides have filed lawsuits; Kramer contends that he was improperly denied tens of millions of dollars in compensation and the firm breached his employment agreement; Perella Weinberg said Kramer violated his non-compete clause when he sought to create his own firm.
Since then Kramer has continued to do restructuring work through his new firm, Ducera Partners. One of his most recent deals includes representing bond holders in the restructuring of Puerto Rico’s troubled finances.
His role in the CubaNetwork is separate from his restructuring practice, and involves what he described as a personal stake in Caribbean Broadcasting Network, which distributes English and Spanish language programming in Puerto Rico and the U.S. Virgin Islands. Bass described the CubaNetwork as an “affiliate” of Caribbean Broadcasting.