WILL A YANQUI PARTNER MAKE TV AZTECA A PLAYER?
When Ricardo Salinas Pliego bought two television networks from the Mexican government for $640 million last year, one of the assets he acquired was the stylized eagle that is the logo for TV Azteca. Now, Salinas has added another bird to his collection: the NBC Inc. peacock.
The Azteca alliance with the U.S. TV network, announced in mid-May, could feather both nests nicely. Salinas' highly leveraged media company will get access to reams of programming and expert technical assistance. It could also get a sorely needed cash infusion. And Azteca will provide a platform for NBC's expansion into Latin America.
"TRULY EXPLOSIVE." With the Azteca deal, NBC becomes the first U.S. company to brave the broadcast market south of the border. The network says it is attracted by Mexico's TV audience of 80 million viewers and what it sees as huge opportunities in the wake of NAFTA's passage. "We put Mexico up there with China and India as one of the truly explosive growth markets," says Tom Rogers, president of NBC Cable & Business Development.
While no money has yet changed hands, the deal gives NBC the right to acquire 10% of Azteca's stock for $120 million by yearend and increase that investment to 20% over three years. But executives close to the network say it may wait a few years before deciding to purchase an equity stake.
It will take more than the famous peacock to impress Azteca's competitor, Grupo Televisa, Mexico's own behemoth. With three national networks and a 90% share of the Mexican ad market, it has a virtual lock on Mexican television. Its more than 42,000 hours of programming and its interests in publishing, radio, and recording make it the largest Spanish-language entertainment conglomerate in the world.
Faced with a mature broadcast market in the U.S., NBC and its rivals are seeking growth overseas. But the surge southward so far has been mostly in pay TV. MTV, the Discovery Channel, TNT, and Fox are all broadcasting in Spanish to Latin America's wealthy subscribers. NBC climbed aboard last year with its 24-hour news service, Canal de Noticias. The network also paid $23 million for a 56% stake in Europe's Super Channel. And NBC's Rogers says the network plans to expand its cable business-news service, CNBC, to Latin America and Asia.
LOSING TIMIDITY? For Salinas, the alliance means valuable knowhow from NBC. Before he bid for Azteca, the closest Salinas had come to the TV business was selling sets in his family's national chain of Elektra electronics stores. The deal could also help cure Azteca's problem luring advertisers, as NBC adds Mexico to the global and regional packages it offers prospective buyers. Until now, Salinas has had trouble overcoming advertisers' skepticism that he would ever reach his goal of 25% audience share. While Azteca's average prime-time share on its two channels is up to about 15%, it's not enough. The big advertisers "have a relationship with Televisa, and they're worried about losing it," says Joel Angeles, media director at DMB&b advertising agency in Mexico City.
But if NBC can help Azteca boost its ratings, advertisers may lose their timidity. TV accounts for about 65% of the total $1.8 billion in Mexican ad spending last year, compared with 35% in the U.S., and real spending is expected to grow about 15% this year. With advertisers competing to win the hearts and minds of the 60% of Mexicans under 25, there's plenty of room for another player in Mexican TV. With Azteca, NBC wants to be sure it's there first.Elisabeth Malkin in Mexico City, with Mark Landler in New York