Univision Communications Inc

views updated

Univision Communications Inc.

1999 Avenue of the Stars, Suite 3050
Los Angeles, California 90067
U.S.A.
Telephone: (310) 556-7665
Fax: (310) 556-7615
Web site: http://www.univision.com

Public Company
Incorporated: 1961 as Spanish International Communications Corp.
Employees: 4,200
Sales: $1.92 billion (2005)
Stock Exchanges: New York
Ticker Symbol: UVN
NAIC: 513120 Television Broadcasting; 513220 Cable and Other Subscription Programming; 513111 Radio Networks; 513112 Radio Stations; 514191 On-Line Information Services; 334612 Prerecorded Compact Disc (Except Software), Tape, and Record Reproducing; 512220 Integrated Record Production/Distribution; 512230 Music Publishers; 512240 Sound Recording Studios

Univision Communications Inc. owns and operates an ever increasing group of media companies, including Univision and TeleFutura, the leading Spanish language television networks in the United States; Galavision, a Spanish language cable network; dozens of radio stations and several record companies as part of Univision Music Group; and the burgeoning web-based entertainment of its Univision Online division. With Hispanic television viewership on the rise, Univision has captured more than three-quarters of this growing demographic, regularly defeating ABC, CBS, NBC, and Fox programming in markets with Spanish-speaking households. Though Univision Chairman A. Jerrold Perenchio was looking for a buyer, Univision remained solid with soaring stock prices and revenues of just under $2 billion annually.

SPANISH LANGUAGE PIONEER:
1960–85

Univision began in 1961 as Spanish International Communications Corp. (SICC), founded by Rene Anselmo, with the purchase of KWEX-TV in San Antonio, Texas. The Massachusetts-born Anselmo had worked in Mexico for Emilio Azcárraga Milmo, president of Telesistema Mexico (later Grupo Televisa), which indirectly provided SICC with 20 percent of its financing—the legal limit on foreign control of a television station—and all of its programming. Anselmo also became head of the Spanish International Network (SIN), established to handle advertising sales for the stations. The SIN eventually became a full fledged network with more than 350 affiliated stations, with Telesistema Mexico holding 75 percent and Anselmo owning the remaining 25 percent (because limits on foreign ownership of television stations did not extend to television networks).

The joint venture of SICC and SIN almost single-handedly established Spanish language television in the United States. By the autumn of 1968 SIN had added KMEX-TV in Los Angeles, WXTV in New York City, and KPAZ-TV in Phoenix to its holdings. All of these were UHF stations. Along with a non-SIN UHF station in Chicago, they constituted the only television stations in the United States broadcasting exclusively in Spanish. Five Mexican stations also belonged to the network.

During the 1970s the Spanish-speaking population of the United States increased seven times faster than the population at large. In 1976 SIN became the first network to deliver its signal by earth satellite. Paying $1.5 million for a transponder on Western Union's We-star II satellite, SIN was able to increase its potential outlets and pick up direct transmissions from abroad, while markedly reducing its transmission costs.

Communications satellites greatly enhanced SIN's capabilities, enabling it to reach about two-thirds of all Hispanics in the United States by 1980, beaming 100 hours of weekly programming to 10 over-the-air stations, 21 cable systems, and hundreds of cable television systems. By 1982 all but two of the 35 all-Spanish television stations in the United States were receiving programming from SIN. About 55 percent of the programming came from Televisa, with the other 45 percent produced in the United States. The fare included news, variety shows, World Cup soccer, and the wildly popular soap opera series known in Latin America as telenovelas. By 1978 SIN's revenues were estimated at $10 million. The following year, 1979, SIN launched Galavision, a commercial-free pay cable television service in Spanish with programming beamed by satellite. First offered in Arizona, Colorado, New Mexico, and Florida, the Los Angeles-based network had 60,000 subscribers in early 1981 and more than 100,000 in early 1984. Featuring films, sports, and telenovelas, it was offering 14 hours a day of programming in early 1984.

Galavision's launch did much for SIN's bottom line, as revenues for 1980 had climbed to $20 million, and to $45 million for 1984. SICC, whose revenues came to about $90 million in 1985, also owned a string of Spanish language radio stations.

SUBSEQUENT OWNERSHIP

In 1986 a Federal Communications Commission (FCC) administrative law judge refused to renew the licenses of the SICC stations, ruling they were under the control of Azcárraga and his relatives in violation of the 20 percent legal limit on ownership by foreigners. As a result, SICC sold its ten TV stations in 1987 for roughly $300 million to Hallmark Cards Inc. and its minority partner, First Chicago Venture Capital. A new firm was established to oversee operations, called Univision Holdings Inc. By the terms of the sale, SIN, which was renamed the Univision Network, was to provide all of the programming.

COMPANY PERSPECTIVES

Univision Communications Inc. is the premier Spanish language media company in the United States. Its operations include Univision Network, the most watched Spanish language broadcast television network in the U.S. reaching 98% of U.S. Hispanic households; TeleFutura Network, a general interest Spanish language broadcast television network, which was launched in 2002 and now reaches 86% of U.S. Hispanic households; Galavision, the country's leading Spanish language cable network; Univision Television Group, which owns and operates 62 television stations in major U.S. Hispanic markets and Puerto Rico; Univision Radio, the leading Spanish language radio group which owns and/or operates 69 radio stations in 16 of the top 25 U.S. Hispanic markets and 4 stations in Puerto Rico; Univision Music Group, which includes Univision Records, Fonovisa Records, La Calle Records and a 50% interest in Mexico-based Disa Records labels as well as Fonomusic and America Musical Publishing companies; and Univision Online, the premier Spanish language Internet destination in the U.S. located at http://www.univision.com. Univision Communications also has a 50% interest in TuTv, a joint venture formed to broadcast Televisa's pay television channels in the U.S., and a non-voting 14.9% interest in Entravision Communications Corporation, a public Spanish language media company. Univision Communications is headquartered in Los Angeles with television network operations in Miami and television and radio stations and sales offices in major cities throughout the United States.

Galavision became a basic cable network in 1987 and in 1989 was on some 300 cable systems in 12 states and the District of Columbia. Its 24-hour-a-day fare of news, entertainment, and variety shows was supplied by Televisa and appeared to be aimed primarily at Mexican Americans. Like SIN, Galavision was 75 percent owned by Azcárraga and other principals of Televisa and 25 percent owned by Anselmo. Galavision and a dozen other companies operated under a U.S. subsidiary of Televisa called Univisa. In 1988 Hallmark purchased a majority stake in the Univision Network for $265 million. Revenues of Univision Holdings, including its network subsidiary, came to about $150 million for the year.

Under the direction of William Grimes, formerly chief executive of ESPN Inc., Univision launched Spanish language clones of such English language shows as Saturday Night Live, Entertainment Tonight, The People's Court, the Oprah Winfrey and Phil Donahue talk shows, and the 20/20 celebrity magazine-format program. It hired 16 more news correspondents and became noted for its coverage of Latin American hot spots, including the wars in El Salvador and Nicaragua. Its most popular offering, however, remained, Sabado Gigante (Giant Saturday), a three-hour combination variety-game-talk show, and the new programs it introduced were not as popular as the Televisa-made telenovelas they supplanted.

Univision and rival network Telemundo suffered from low advertising bookings; although Hispanics made up eight percent of U.S. residents in 1989, the Spanish language networks received only about 2 percent of the $11 billion the Big Three—CBS, NBC, and ABC—collected in revenue from commercials. Univision reportedly lost about $50 million in 1989. Hallmark had taken on $555 million in debt to buy the stations and network, nearly half of it in the form of high-yielding junk bonds issued by Univision Holdings. When this subsidiary missed interest payments on the bonds in early 1990, Hallmark bought them back from the holders, but at a deep discount, paying only about 49 cents on the dollar. In 1992 Hallmark sold Univision Holdings for $550 million to investors which included former owner Emilio Azcárraga Milmo and A. Jerrold Perenchio.

By 1992 Univision had annual revenues of more than $200 million, 13 Spanish language television stations, and a potential audience of 90 percent of the nation's Hispanic households. Perenchio, a non-Hispanic producer of TV shows who had owned and operated Spanish language television stations, made his purchase in partnership with Grupo Televisa and Venevision, Venezuela's largest broadcasting company. Perenchio took the reins as president, chief executive, and chairman of the board, owning 75 percent of the station group and 50 percent of the network, with the foreign companies splitting the remainder of each. The foreign investors also received warrants enabling them to acquire 50 percent of the station group if U.S. laws were changed to permit greater foreign ownership of broadcast outlets.

This sale was approved by the FCC despite protests by Telemundo and three Hispanic groups who feared Univision would end production in the United States (where it was producing 41 percent of its programming in Miami) and farm all of its programming out to Televisa and Venevision. When Univision dropped three U.S.-made shows in 1993 (replacing two of them with Mexican programs) and fired 70 people who worked on them, critics of the network felt their misgivings were confirmed. Within several years Televisa and Venevision were providing Univision with 92 percent of its programming. At the end of 1993, Univision's revenues had reached $104.7 million.

GROWTH AND EXPANSION

As a subsidiary of Univisa, Galavision had not been included in the sale to Hallmark, but it was acquired by Univision in July 1996. The cable network offered such attractions as classic movies, original series, and exclusive rights to sporting events, including baseball's Caribbean World Series and Mexican League soccer championship games. In September 1996 Univision completed an initial public offering at $23 a share and raised over $200 million. Univision's revenues for the year totaled $459.7 million with net income of $82.6 million.

KEY DATES

1961:: Spanish International Communications Corporation (SICC) is founded in Texas.
1976:: The Spanish International Network, SICC's partner, begins transmitting via satellite.
1979:: Galavision, a pay cable commercial-free service, is launched.
1987:: Univision Holdings, Inc. and Univision Network are established by Hallmark, Inc.
1992:: Hallmark sells Univision to A. Jerrold Perenchio and investors for $550 million.
1996:: Univision Communications becomes a publicly traded company.
1999:: Univision Online and Univision.com are launched.
2000:: The company announces it will buy 13 television stations from USA Network.
2002:: Company revenues top the $1 billion mark for the first time.
2004:: Univision's acquisition of the Hispanic Broadcasting Company is completed.
2005:: Relations are strained with partner Televisa and Univision puts itself up for sale.
2006:: A group of private investors agrees to buy Univision for $13.7 billion.

By 1997 Univision's share of Spanish language television viewing in the United States had grown to 83 percent. Several acquisitions, including stations in Chicago, Houston, and Sacramento gave Univision 13 full power over-the-air UHF stations, including 12 in the top 15 metropolitan areas with high percentages of Hispanic households. Each ranked first in viewership, as did all of Univision's full power affiliated stations. Gala-vision, the company's cable operator, reached about 2.5 million of the 4.4 million Hispanic households wired for U.S. cable service. A deal with Home Shopping Network led to the formation of the Spanish Shopping Network, available on Galavision.

Galavision was supposed to connect with younger, bilingual, or English-dominant U.S. Hispanics; a prominent producer told a Los Angeles Times reporter, "In a lot of Latino households, mom and pop are at one TV set watching telenovelas and the kids are at another set watching Moesha or Friends. " Galavision began targeting this market segment with two new English language shows aimed at Hispanics: Café Olé with Giselle Fernandez, including crossover Latino actors as celebrity guests, and Funny Is Funny, an all-comedy half-hour series hosted by comedian Carlos Mencia.

In 1997 Univision founder and shareholder Emilio Azcárraga Milmo, who ran Grupo Televisa, passed away and was succeeded by his ambitious son Emilio Azcárraga Jean. Azcárraga Jean, as a major stockholder in Univision, did not see eye to eye with Perenchio, who remained Univision's CEO and chairman but had brought in Henry Cisneros as president and COO. The popular Cisneros, former mayor of San Antonio and U.S. Secretary of Housing & Urban Development, gave Univision's image a boost until he was indicted for lying to the FBI regarding a former mistress (Cisneros later pled guilty to a lesser charge). In 1998 Univision signed an agreement with online portal Ask Jeeves (later renamed Ask.com) to develop a Spanish version of the search engine. Revenues for the year topped $577 million and helped finance the company's launch of Univision Online and an interactive web site, Univision.com. Revenues for 1999 jumped to $693.1 million, a year in which Univision's workforce grew to 1,850.

A NEW CENTURY

By the new millennium Univision was riding high; it dominated Spanish language television programming and saw both its revenues and stock prices surge. At the end of the summer stock prices hit a phenomenal high of over $124 per share, but then tumbled with the announcement of Cisneros's departure and a less than expected increase in ad revenues. Univision also had to contend with growing tension between Azcárraga Jean and Perenchio, even after Televisa had sold the majority of its stake in Univision the previous year. Rumors flew about disputes, lawsuits, and market share as rival Telemundo gained financial backing from Sony and Liberty Media. With the flow of new capital, Telemundo hoped to topple Univision from its berth atop the Hispanic programming throne.

At the end of 2000 Univision bought 13 television stations from mogul Barry Diller's USA Broadcasting Group for $1.1 billion, reinforcing its dominance of the Spanish language media industry. In 2001 Univision segued into music with the establishment of Univision Music. The new company's holdings included a majority stake in Disa Records and Fonovisa Records, bought from Grupo Televisa for over $200 million, and entered into a joint venture with Universal to distribute music by Spanish artists in the United States and Puerto Rico. The next step in Univision's media expansion was the purchase of the Hispanic Broadcasting Corporation (HBC) for $3.4 billion, and the creation of Univision Radio. With the merger, Univision possessed two of the biggest Hispanic record companies, 54 radio stations, 55 television stations, and 43 affiliate stations. Revenues for 2000 and 2001 totaled $863.5 million and $887.9 million, respectively.

Part of the HBC acquisition and merger included 27 percent of Spanish language broadcasting company Entravision Communications Corporation. To gain FCC approval, Univision agreed to reduce its ownership in Entravision to 10 percent to avoid trust issues in the United States. In 2002 Univision formed TeleFutura, a new Spanish television network in the United States, with Televisa buying a sizeable (12 percent) chunk. Univision ended 2002 with record breaking revenues of $1.09 billion and net income of $86.5 million.

By 2004 the merger with HBC had been completed and any goodwill between Univision and Televisa had turned into an all-out war for domination of the Spanish language television and radio markets. The long relationship between the U.S.-based Univision and Mexico-based Televisa had degenerated into mudslinging and lawsuits. In May Azcárraga resigned from Univision's board and filed suit against his father's former company over unpaid royalties. It was also said Azcárraga had wanted to be Univision's new president, but Perenchio had chosen the Cuban-born Ray Rodriguez. Azcárraga not only turned to the courts but threatened to yank programming, which constituted the majority (more than a third) of Univision's broadcasts, including the wildly popular telenovelas.

TURF WARS, 2005 ONWARD

While Univision continued to gain ground in the United States, Televisa had plenty of room to grow in its top market, Mexico. The young Azcárraga, however, was not content to rule the airwaves in Mexico alone, and was determined to carve up the ever expanding Hispanic market in the United States. Latin Finance likened the battle to "Old Guard v. Young Turk," in a June 2005 article, believing the legal actions and feud would only hurt both Televisa and Univision. If Televisa won its lawsuit over royalties, its long-term programming relationship with Univision would cease; Televisa would lose millions in future royalties and Univision would lose a significant portion of its most popular shows.

By late 2005 Televisa's legal action had expanded from royalty disputes to breach of contract. Univision countersued and announced it was seeking investors or an outright buyer. Azcárraga, of course, wanted to acquire Univision and wielded his legal action as a means to scare away potential suitors. In 2006 Univision—with its TeleFutura network, cable programmer Galavision, 69 radio stations, 62 television stations, several record labels, Univision Online, and commanding dominance (more than 85 percent) of Hispanic broadcasting—was considered an excellent opportunity for the right buyer. In September an investor group including Madison Dearborn Partners, Thomas H. Lee Partners, Providence Equity Partners, Texas Pacific Group, and Saban Capital Group agreed to buy the company for a reported $13.7 billion. The deal was expected to be completed by the spring of 2007.

Robert Halasz

Updated, Nelson Rhodes

PRINCIPAL SUBSIDIARIES

Entravision; Galavision, Inc.; TeleFutura; Univision Music Group; Univision Network; Univision Online; Univision Radio; Univision Television Group.

PRINCIPAL COMPETITORS

ABC, Inc.; Arts & Entertainment Network; CBS Corporation; Cisneros Group of Companies; Fox Broadcasting Company; Grupo Televisa, S.A.; NBC Universal Inc.; Entertainment TV Azteca S.A. de C.V.; Telemundo Communications Group, Inc.