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Can Televisa Conquer The U.S.?


When Emilio Azc?rraga Jean took over the family media business seven years ago, investors worried that the then-29 year-old scion might just be a lightweight. But today, at the helm of Grupo Televisa, Mexico's leading broadcaster and the world's largest media company, Azc?rraga is proving he is a media exec to be reckoned with.

Just ask A. Jerrold Perenchio, the powerful chairman of U.S.-based Hispanic media giant Univision Communications Inc., which gets most of its programming from Televisa. Three years ago, Azc?rraga decided to play hardball with Perenchio, fed up with what he believed were the paltry payments Televisa was receiving for its highly rated soap operas and variety shows. The two companies were locked into an exclusive programming deal that runs to 2017, but Azc?rraga still stood up to his American partner to negotiate higher royalties. Next, the National Football League, eager to make its sport more international, felt Azc?rraga's bite. Last year he yanked NFL games -- including the Super Bowl -- off the air in Mexico for the whole season after a 35-year run because he felt Televisa was overpaying for the broadcast rights. On Aug. 12 the league and Televisa announced they had finally reached a new pact, starting with the NFL's Sept. 9 season opener. No terms were released, but Televisa execs were clearly pleased with the deal.

Azc?rraga can afford to throw his weight around. After all, as the world's premier producer of top-rated Spanish-language programming, Televisa can deliver Hispanic eyeballs to TV sets at a time when marketers are clamoring for that audience's fast-growing economic clout. Today, Azc?rraga is among the most closely watched media execs in the world.

His ambitions are grand: He wants to go beyond providing content to others and create a North America-wide Spanish-language media empire comprising broadcast, Internet, publishing, and live events. "For me, the ideal thing would be to do a Televisa-Univision [merger], but if we put together Televisa and [another] American partner, I'd be happy with that, too," Azc?rraga said in an interview in his Mexico City office overlooking the network's sleek news studios.

GO-IT-SLOW APPROACH

So serious is Azcárraga that he says he may even do a Rupert Murdoch -- winning U.S. citizenship to get around federal rules restricting foreign ownership of U.S. broadcast properties. That would allow him to launch a bid to control Univision should Perenchio ever loosen his grip. At the same time he's aware he must build Televisa's market value before paying out huge sums that might upset the very investors he has worked hard to win over.

Yet a go-it-slow approach could leave him empty-handed, given the pace of competition for the red-hot Hispanic media market, whose audience of 40 million in the U.S. has an estimated $650 billion in buying power. Aggressive players such as Telemundo Communications Group Inc., owned by media giant NBC Universal, are moving in, too. Two years ago, NBC paid $2.7 billion for Telemundo and is investing $150 million annually in programming. "Telemundo is a growing threat," acknowledges Televisa executive vice-president Alfonso de Angoitia. Televisa's programs are the "oxygen" for Univision, Telemundo President James McNamara says, "clearly for us the competition is Televisa...not Univision." And even TV Azteca (TZA), Mexico's distant No. 2 network, stepped in three years ago with its fledgling U.S. network, Azteca América. Two years ago, Viacom (VIA) made an offer for Univision but was rebuffed.

THE BIG PRIZE

Even as he dances gingerly with Univision, of which Televisa owns 10.7%, Azcárraga has teamed up with another entertainment giant, Clear Channel Communications Inc. (CCU), based in San Antonio, which has said it's interested in making a bigger push into Hispanic radio. In a joint venture, Televisa and Clear Channel stage live sports and entertainment ventures aimed at Hispanics. It costs little to bring up the three soccer teams Televisa owns or its star actors for live events with big sponsorships. Last year they staged 80 shows in the U.S., and they'll do around 150 this year.

To help scout opportunities, Azcárraga, sitting on $1 billion in cash at Televisa, has a tight group of trusted advisers, including Bernardo Gómez, 37, a high school friend who oversees Televisa's news programming, sales, and planning, and de Angoitia, 41, architect of Televisa's financial restructuring.

But for all the smallish deals, Univision, with its 70% market share among U.S. Hispanics, is still the big prize. Azcárraga knows that Perenchio, who bought the company in 1992 with Azcárraga's father, Emilio Azcárraga Milmo, and with Gustavo A. Cisneros, chairman of Venezuelan network Venevisión, has no intention of relinquishing control, at least for now. What's more, Televisa is in no position to launch a bid now, its executives say. Although it earned $320 million on $2.1 billion in 2003 revenues, vs. Univision's $155 million in profits on $1.3 billion in sales, Televisa's market cap of around $6.8 billion falls short of Univision's $11.1 billion. "For the time being, it doesn't make a lot of sense for Televisa shareholders to think about doing a combination with Univision, because [their ownership] would be diluted," says de Angoitia.

Still, Azcárraga is focused on improving relations with Perenchio after years of feuding. He became vice-chairman of Univision's board and regularly dines with Perenchio, who at 73 is twice his age. Perenchio, unable to attend Azcárraga's Mexico City wedding in February, hosted a dinner for the newlyweds at his Beverly Hills mansion in May.

What makes Azcárraga think Televisa can stay on top? "Televisa's advantage is that it has the content," he says. By owning distribution in the U.S., such as a broadcast network or local TV stations, Televisa would have greater leverage yet. Still, Azcárraga insists he's in no rush to become a U.S. citizen. He's not yet ready to disrupt his family life to spend half his time in the U.S. for five years to qualify, he says. If he sees another competitor moving in for the kill, though, he wouldn't hesitate to move full-time into his South Beach Miami apartment. But for now, he's invading Hispanic America, one deal at a time.

By Geri Smith in Mexico City


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