Grupo Televisa SAB (TLEVICPO) is stepping up dealmaking to reach one of the fastest growing U.S. audiences: Latinos with a taste for drama.
Televisa’s president of content, Jose Baston, said the company is currently in negotiations to develop exclusive shows for video-streaming provider Netflix Inc. (NFLX:US) Last year, Televisa distributed the highest grossing Spanish-language film of all time in the U.S., “Instructions Not Included.” About 3 million viewers watched last year’s finale of “Devious Maids,” a Lifetime drama based on a Televisa format.
Televisa is tapping into the U.S. Hispanic community, estimated to make up a fifth of the country’s population by 2025, as the company becomes the target of Mexican regulators for reaching more than 70 percent of broadcast audiences there. Televisa already provides Netflix users in Latin America with more than 3,000 hours of content, including the soap operas it helped popularize over the past 50 years.
“There’s not enough content yet that’s directly aimed at them,” said Phil Contrino, chief analyst at BoxOffice.com. “You’re not really worrying about crossover potential because there’s enough of an audience there. Slapstick comedy with very serious melodrama, it connected. It’s what the audience wants.”
Most of Televisa’s content in the U.S. is aired by Univision Communications Inc., the largest U.S. Spanish-language broadcaster that calls itself “the Hispanic heartbeat of America.” The network draws higher ratings than its direct competitors like NBC’s Telemundo and Ricardo Salinas’s Azteca America.
Last year, Univision averaged about 1.8 million prime-time viewers aged 18 to 49 during the July sweeps, beating out English broadcasters including CBS Corp. and 21st Century Fox for the first time, according to Nielsen data. The sweeps season is when ratings help determine advertising prices.
In 2010, Televisa acquired a 5 percent equity stake in Univision and debt that could be converted into an additional 30 percent stake. The deal gave closely held Univision the right to show Televisa’s programs on digital pay-TV services and on the Internet, and Televisa was able to start collecting higher royalty payments for licenses to the programs. The stake is valued at as much as $3 billion.
While several banks have pitched Univision on an initial public offering, no decision has been made, Televisa Executive Vice President Alfonso de Angoitia said on an call with analysts in October.
“It’s a very well thought-out strategy,” Valeria Romo, an analyst with Banco Monex SA, said in a phone interview. “The Hispanic market’s purchasing power in the U.S. is getting stronger all the time and it’s good for diversification.”
A Televisa press official declined to comment on the company’s strategy in the U.S.
Televisa’s licensing and syndication business -- which includes royalties from Univision and Netflix and for content exported around the world -- generated 1.4 billion pesos ($107 million) in the first quarter, a 10 percent jump from a year earlier.
Advertisers have also taken notice.
For Spanish-speaking broadcast networks in the U.S., advertising revenue rose 9.7 percent to $1.4 billion last year, compared with a 2.2 percent drop for English networks, according to researcher Magna Global. That represents huge potential for revenue growth for Televisa, Romo said.
Televisa is expanding its U.S. presence while it seeks more options for growth after a telecommunications bill proposed by President Enrique Pena Nieto promotes competition in Mexico’s highly concentrated TV market. Under the bill, Televisa would have to publish its advertising rates and stand by them regardless of who the customer is. Regulators have also said the company must offer two of its channels for free to pay-TV carriers.
Last year, the company generated about 95 percent of its revenue in Mexico, data compiled by Bloomberg show.
Televisa shares rose 1.3 percent to close at 86.94 pesos in Mexico City. They have risen 10 percent this year, while Mexico’s benchmark IPC index has fallen 2.9 percent.
As more than 800,000 U.S.-born Hispanics enter adulthood in the U.S. every year, Televisa has been preparing to serve a market of second-generation Hispanics. About 82 percent of Hispanics prefer to consume news media in English, said Mark Hugo Lopez, Director of Hispanic Research at Pew Research Center.
Televisa is not alone in jockeying to reach that market. Univision has been a long-time competitor of NBC’s Telemundo and also faces new rivals such as MundoFox, a Spanish-language network that’s a joint venture between 21st Century Fox Inc. and RCN Television SA.
Last year, Walt Disney Co.’s ABC and Univision launched Fusion, a cable-TV channel that targets English-speaking Latinos with news and lifestyle programming.
Advertising spending on Hispanic media in the U.S. reached $7.9 billion in 2012, almost three times more than in 2003, according to Advertising Age’s research.
“While there was a lot of prejudice before about what Hispanics could afford, advertisers have now realized that there’s a market there and they all want a piece of it,” said Lucila Vargas, a professor of Latino Media Studies at the University of North Carolina at Chapel Hill.
“Devious Maids” is an example of how Televisa’s programming in the U.S. now seems to approach a more general market, while remaining culturally Hispanic, Vargas said.
“It resonates,” Vargas said.
Inspired by Televisa’s telenovela “Ellas Son ... la Alegria del Hogar,” “Devious Maids” was produced by ABC Studios, along with Marc Cherry, actress Eva Longoria and Televisa. A second season premiered on Lifetime this year.
Televisa signed a production deal with Sony Pictures Television to produce 12 dramatic series over five years, the Financial Times reported yesterday. The TV shows, to be initially shown in Mexico and later internationally, will also funnel programming into the Hispanic market in the U.S., the report said.
Soap-opera star Eugenio Derbez was featured in and directed Televisa’s hit Spanish-language film “Instructions Not Included.” The movie was partially financed and distributed by Pantelion Films, a partnership between Televisa and Lions Gate Entertainment Corp. (LGF:US) that was started in 2010 to target Hispanic moviegoers in the U.S.
Hispanics in the U.S. are more likely than any other ethnic group to go to the movies, visiting theaters an average of six times a year compared to three times for Caucasians, according to data from the Motion Picture Association of America. The U.S. and Canada generated $10.9 billion in box-office sales in 2013.
“They’re very passionate movie-goers,” said Contrino of BoxOffice.com. “It’s only natural that Hollywood is now going to cater content specifically made for the them to better capitalize on their interests.”
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