Hispanic TV: Drama on Set

The scene was set for some real telenovela-style melodrama. Passion, power struggles, betrayal, high-stakes finances—it was all there. This past winter, after four years of bitter legal wrangling, New York-based television network Univision Communications and its top program supplier, Grupo Televisa, were finally going head-to-head in a Los Angeles federal court. Mexican media giant Televisa wanted out of its 25-year commitment to provide Univision with the enormously popular prime-time soap operas that made the network a powerhouse with Hispanics in the U.S., far outpacing competitors like NBC Universal’s Telemundo and TV Azteca’s Azteca America. Televisa argued that the exclusive licensing deal—intended to last through 2017—should be tossed aside because Univision had breached its contract and owed it more than $122 million in unpaid royalties.

If Televisa won the case (and along with it, the right to shop its shows elsewhere), it would do nothing short of change the face of this country’s Spanish-language TV. Univision, the dominant player in the U.S. market with about 75 percent of the Spanish-speaking audience, would be left with a gaping hole in its schedule, not to mention a loss of programming that brings in $750 million in annual advertising revenue. Since forging the partnership in the early 1990s, both companies have made billions of dollars from the highly addictive programming. Out of Univision’s four weeknight prime-time hours, no fewer than three are produced by Televisa.

But, as with any good soap, there was a twist and plenty of subtext. After three weeks of testimony, the two companies pulled an all-nighter and hashed out a surprise settlement that broke on Jan. 22. In short, the pipeline that had supplied Univision with massive hits like Al Diablo con los Guapos and La Fea Mas Bella would remain open. The agreement keeping it open was worth more than $610 million to Televisa.

Univision agreed to increase the license fees it pays Televisa, plus shell out $25 million in disputed royalties. The network would also give Televisa $65 million worth of free ad time annually for the deal’s duration.

The timing was as melodramatic as the programming. News of the settlement broke only moments before Televisa chairman Emilio Azcarraga Jean, the billionaire son of Televisa’s founder, was scheduled to take the stand. Industry watchers were caught totally off guard. Later, however, most said the agreement looked to be a good deal for both sides.


From the pact, Univision can now expect stability and a selling point with its investors.
“Univision has built its strength and dominance on the back of Televisa programming,” said Rick Marroquin, evp, managing director of Interpublic Group’s Mediabrands. “They did what was necessary to keep their stranglehold on the market. That programming is their bread and butter.”

Univision does produce some of its own shows, including well-watched local and national newscasts, in addition to Sabado Gigante, the over-the-top, three-hour variety/game show that’s the undisputed Energizer Bunny of Spanish-language TV. Gigante delivers, on average, 2.5 million Latino viewers. But Univision still snags more than 40 percent of its yearly revenue from its sexy, escapist novelas.

Which means keeping Televisa’s content in the mix was a smart move. Or, as Marroquin put it, the relationship between Univision and Televisa “might be a really bad marriage, but they couldn’t afford to get divorced.” (Televisa could have shopped its programming elsewhere, but U.S. choices are a bit slim. Telemundo draws lower ratings, and is committed to parent NBC Universal; and Azteca has had affiliate and distribution problems.)

The settlement also means that Televisa, a publicly owned company looking to grow its stature in the U.S., will continue to have its programming on the most-watched Spanish-language network. “This is good-good for everyone,” Azcarraga Jean told the L.A. Times shortly after the settlement was announced in late January. Adds Alan Albarran, director of the Center for Spanish Language Media at the University of North Texas, “In this economic environment, it was a windfall for Televisa. Now the big question is: What happens in the future? 2017 is not that far away.”