Showtime for Univisión

A new studio and fresh programming take center stage as the company scripts its future.

BY BRIDGET CAREY AND GLENN GARVIN

Business Friday, 10.22.10

When Nielsen Media Research sent out its weekly television ratings report for the first week in September, TV programmers and marketing directors across America blinked, rubbed their eyes, then blinked again. Could it really be? Spanish-language Univisión finishing first? Not first in the Spanish rankings, not first in Miami or Los Angeles: First in the whole United States, ahead of Fox, CBS, ABC and NBC.

It could be. It was. And, says Univisión Networks President Cesar Conde, it will be again.

“Our goal is to be the No. 1 network in this country regardless of language,” says Conde, from his office in Doral. “[If] we continue to perform the way we have — and you have to have some macroeconomic trends continue — that is feasible, that Univisión, a Spanish-language network, can be the No. 1 network in this country regardless of language, within the next five years.”

It’s time to insert a couple of asterisks here. Univisión was No. 1 not in total viewers but in the 18-to-49 age demographic that TV advertisers covet. And its victory came during a lull in English-language programming, a week between the end of the summer broadcast season and the beginning of fall’s roll-out of new programs when the schedule consists almost entirely of reruns and cheap reality shows.

But it also capped a year-long show of Nielsen strength when Univisión frequently finished among the top two or three broadcast networks in overall viewers, a performance that threatened to erase the traditional distinction between Spanish-language stations and what the industry refers to as the “general market,” the four big broadcast networks.

“They’re competing head to head with English-language networks,” says Miami Hispanic-media consultant Adam Jacobsen. “Forget the Spanish part. They’re America’s fifth network, period.”

Just four years ago, when Los Angeles billionaire Jerry Perenchio sold Univisión to a consortium of five private equity firms for $12.3 billion, the network’s future seemed uncertain. The stream of hit telenovelas that allowed it to dominate the Spanish-language market was about to dry up after a bitter and expensive spat with its supplier, Mexican media conglomerate Televisa.

The challenge from Spanish competitor Telemundo, powered by an influx of cash and expertise from new corporate master NBC Universal, was growing fiercer. And the eccentric and secretive policies the company had inherited from Perenchio seemed increasing out of step with the modern media environment. “You weren’t supposed to talk about anything,” recalls one former Univisión executive. “If your name turned up in a newspaper, you were dead meat.”

Since then, Univisión has emerged as a force to be reckoned with in that media environment. Moving beyond its immigrant roots, the network began targeting younger second- and third-generation U.S. Hispanics by broadening its news and public affairs programming beyond its traditional focus on Latin America, as well as experimenting with reality shows and other entertainment beyond the traditional telenovela format.

Result: The network has increased its share of viewers in the key 18-to-34 and 18-to-49 age demographics more than any other broadcast network except CBS over the past year. Univisión, once content to let cable systems air the signals of its affiliate stations for free, since 2007 has been asking fees as high as $1 per subscriber, a practice that brought in more than $175 million last year.

Conde took on the role of president last October after serving as executive vice president and chief strategy officer. He was part of the force to change the network priorities by making the focus on beating English-language stations. The company mission also put a heavy emphasis on educating and empowering its viewers.

To push more of its audience to graduate from college, the network highlighted hard-working teens winning scholarships between the hip-thrusting performances of top Latin artists during the awards show, Premios Juventud. And the network sacrificed commercial revenue to air political debates and town-hall meetings, a first for Univisión. As Arizona considered a controversial new immigration law last July, the network did five live news specials.

Meanwhile, Univisión has plunged across the digital frontier that broadcasters see as their future. Univisión.com is the most visited Spanish-language website among Hispanics in the United States. Between Univisión’s television audience (which includes sister network TeleFutura and cable cousin Galavisión), the listeners of its 68 radio stations and the millions of trips surfing across its 90 websites, the company reaches an estimated 80 percent of U.S. Hispanics.

And the news that Univisión and estranged partner Televisa have kissed and made up suggests that the company will become even more aggressive. Earlier this month, Univisión and Televisa announced a $1.2 billion deal that will end all their legal wrangling with one another and guarantee Univisión’s supply of Televisa’s hit novelas until 2025.

The deal, which gives Televisa a 5 percent stake in Univisión with the right to acquire up to 40 percent if U.S. regulatory rules are revised to permit it, also grants Univisión for the first time the right to use Televisa programming on digital platforms like the Web and cellphones.

“In an odd kind of way, Univisión with this deal is signaling that they’re going to play on the same field as the big networks,” says Telemundo president Don Browne, who ruefully admits the agreement won’t make his job any easier, either. “Joining up with an outfit like Televisa, a very formidable and successful company — that should be a wake-up call for the general market.”

Paradoxically, the deal also calls into question the tent pole of Univisión’s strategy — starting to make its own shows. When Univisión’s relationship with Televisa went sour six years ago, the Mexican company announced it would cut off its supply of programming to Univisión when their contract ended in 2017, and earlier if it could persuade a court to intervene.

Since then, Univisión has been laying plans to produce its own programming. Miami-based Univisión Studios launched in February and has had some success — particularly with ¡Mira Quien Baila! , a not very thinly veiled imitation of Dancing With The Stars that debuted this month to good ratings.

It already wrapped up production of a reality competition similar to Survivor, called Desafio: La Gran Batalla, and later this year it will launch Eva Luna, a novela, and El Gran Show, a two-hour variety game show that’s a co-production with Imagina US.

The network is far from being able to fill its prime-time schedule with its own shows, yet this summer it canceled one of its most famous home-grown talk shows, El Show de Cristina. Emmy award-winning host Cristina Saralegui told The Miami Herald that she wasn’t ready to end her show, which has been on the network for more than 20 years. But Univisión thought differently, and now must fill her Monday night spot after her last show airs Nov. 1.

Whether Univisión will keep trying to create original programming seems an open question. On the day the new deal with Televisa was announced, Haim Saban, the Los Angeles billionaire widely acknowledged as the most powerful member of Univisión’s board of directors, told the Wall Street Journal Univisión would get out of the production business. “Why would I even wrack our brains here to go try and duplicate what they’re doing?” he said. “We don’t need to. We have the original Coca Cola formula.”

Conde, however, told The Miami Herald just the opposite. “This partnership reinforces the programming strategy that we have in place and continues to build on the momentum we’ve been building,” he said, adding that development of original shows will “continue full-speed ahead.”

Many analysts, however, suspect that Univisión’s studio will be allowed to die a quiet death. South Florida media consultant Julio Rumbaut noted that in Univisión’s last public filing with the SEC four years ago, it said it turned a profit of more than 70 percent on Televisa novelas, almost twice the margin on the company’s operations as a whole.

“Televisa can make these things more efficiently than anybody else, anywhere,” said Rumbaut. “And when you’re using Televisa’s shows, you know they’ll be successful because they’ve already aired in Mexico and you can see what kind of ratings they got.”

Regardless of which way Univisión moves on original programming, the deal with Televisa will allow Univisión to plunge even deeper into digital content. For the first time, Univisión can feature Televisa’s programs on its mobile platforms.

The network began building its mobile offerings six years ago, but it boosted its online investment to dominate digital coverage of last summer’s World Cup soccer tournament. Games were streamed online and on mobile television subscription services like Flo TV and MobiTV, which can be accessed on some cellphones and in-car televisions.

“It broke every single type of video record for us,” Conde said of the network’s World Cup online coverage. Since then, the network has continued to launch mobile apps of not only soccer but other news and entertainment programming — a canny strategy, since a continuous stream of research shows Latinos use cellphones and other wireless devices more than any other racial or ethnic group.

“I think that mobile will be a bigger business for us than dot-com,” Conde said.

For all the new programming power delivered by the deal with Televisa, there’s still some potential static in Univisión’s future.

Though Univisión executives now airily claim that they aren’t playing in the same league as traditional rival Telemundo, other industry figures say television is a tumultuous business where you’re only as good as your last batch of shows. And if the purchase of Telemundo’s corporate parent NBC Universal by cable giant Comcast is approved by federal regulators as expected, Telemundo could get new resources with which to fight back.

“Telemundo is just one hit novela away from being at Univisión’s throat,” says a television executive who has worked with both networks. “They’d be wise to remember that.”

Telemundo president Browne says Univisión’s dismissal of his network is mostly bravado, anyway. “Whenever we launch a new novela, they counterattack with an unusual amount of promotion of their shows on radio, on all their networks, on their websites,” Browne said. “It looks good in a press release to say they don’t care about us anymore, but they clearly are competing against us.”

An even bigger challenge for Univisión is the same one faced by Spanish-language networks since their infancy three decades ago: Advertisers won’t pay them the same rates that their English-language counterparts get. What’s known in the industry as CPM — cost per thousand, what an advertiser paysto reach a thousand viewers — is about 10 to 15 percent lower on the Spanish-language networks.

“That’s the real problem with trying to compete with ABC and NBC and Fox,” says Jacobsen. “They make more money even when they don’t have more viewers. Look at the advertising billings. If I’m Univisión and I’m beating NBC, I want to charge just as much as NBC. But they can’t.”

The gap in advertising rates dates back to the early days of Spanish-language TV, when its audience was smaller and poorer and advertisers weren’t convinced it was worth reaching. “We just got crumbs at the beginning,” recalls one former executive. “The money put into advertising on Spanish TV amounted to rounding errors in the budgets of the big ad agencies.”

Conde acknowledges the problem, but believes it’s about to be blown away by the 2010 Census, which is expected to show that the U.S. population includes 50 million Hispanics, about 60 percent of them in that ideal TV advertising demographic of age 18 to 49.

“I think the results of the 2010 Census are going to be a major wake-up call for corporate America and all organizations here in the United States,” Conde said. The new numbers will prove that the Hispanic media market has evolved from a niche to a mass core audience, Conde says, adding: “Companies that ignore it, ignore it at their own peril.”

Not everybody is convinced, especially with the American economy in the worst shape since the 1930s. A lot of firms, says Gaston Legorburu, executive director at marketing agency Sapient, still regard Hispanic market as “a special project” that’s the first to go at a time when it’s hard to keep the lights on.

And yes, he’s heard all the buzz about how the census will show what a powerful market Hispanics are. “But the reality of all that is Big Brand X, when they cut the budget by 20 to 30 percent,” says Legorburu, “the guy on the second floor that does the multicultural marketing, his budget went night-night.”

Conde says it’s up to him and other Spanish broadcasting figures to not let that happen.

“The opportunity is to ensure that we maximize ad revenue by receiving our fair share of ad dollars for the amount of viewers that we have,” Conde said. “This is the opportunity that Univisión has, and frankly, all of Spanish-language media.”


--