What the Televisa, Univision Deal Means | Adweek What the Televisa, Univision Deal Means | Adweek
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What the Televisa, Univision Deal Means

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Saban and Televisa deal man and evp Alfonso de Angoitia developed a good working relationship and were the lead negotiators on Tuesday's deal, according to a source.

In January 2009, Televisa and Univision reached a settlement over royalty payments.

The content-rights disagreements had major implications for the Spanish-language media titans as both lean heavily on the programming arrangement. Televisa supplies Univision with a bulk of its prime-time content, including its telenovelas, which always have been a strong ratings draw, even though Univision also has started producing its own content.

Azcarraga Jean on Tuesday called the deal with Univision "a highly attractive strategic platform for the continued distribution of our content in the U.S. marketplace, our most important media marketplace outside of Mexico."

Saban said the agreement "fully aligns the interests of Univision and Televisa for the long term as both companies work to further serve the substantial growth opportunities in Spanish-language media in the United States."

And Uva told The Hollywood Reporter: "There is intrinsic value in these two companies working much more closely going into the future, particularly as it relates to how do we best service the needs and interests of the U.S. Hispanic community."

Standard & Poor's credit analyst Heather Goodchild said that for Univision, the deal "alleviates risks surrounding the company's advantageous contract with Televisa, which we believe supports its strong audience ratings, revenue and high [operating cash flow] margins."

She added that higher royalty payments "could be more than offset by the potential digital revenues." Plus, securing long-term content from Televisa also could reduce Univision's "need to invest in in-house programming capabilities, which we regard as having uncertain returns."

The Univision network reached a ratings milestone during a week at summer's end when it beat the English-language broadcast networks among adults 18-49.

Its often youthful audience is likely to continue growing as Hispanics are expected to again be the fastest-growing demographic group in this year's U.S. census.

For last week, Univision was the No. 5 broadcast network -- beating the CW -- in overall primetime among total viewers, where it averaged 4 million, and adults 18-49 (2.2 million).

Barclays Capital analyst Michel Morin estimates that Televisa could receive about $450 million in royalties from the new arrangement in 2017, up from $150 million in 2010 and his previous 2017 estimate of $250 million.

The companies expect the deal to close during the first half of 2011. Wall Street cheered it, driving up Televisa shares 13.7 percent to $21.51. Entravision Communications, the largest TV station group of Univision and Telefutura affiliates, also saw its shares jump 10.4 percent to $2.12. Univision is privately held.

One issue that concerned some on Wall Street was how the companies came up with the price tag for the deal, which implies an equity value of $2.6 billion for Univision. The company went for $12.3 billion plus $1.4 billion in debt in its buyout several years ago.

Observers said the extended Televisa-Univision relationship could be seen as a negative for NBC Universal's Telemundo, Univision's main U.S. rival.

Georg Szalai reported from New York; John Hecht reported from Mexico City.