Grupo Televisa, S.A. History

Company History:

Grupo Televisa, S.A. has a near lock on Mexico's popular culture. The company's four Mexican television networks broadcast to more than 225 Mexican television stations, of which Televisa owns more than 200, and reach more than 90 percent of that country's population--for a 70 percent share of Mexico's television viewing audience. But Televisa's reach extends far beyond its home country. The company produces more than 50,000 hours each year of its wildly popular telenovelas, entertainment, news, and sports, reaching more than 200 countries and making Televisa the world's largest Spanish-language broadcaster. Televisa's print arm, Editorial Televisa, is the world's largest Spanish-language publisher, with more than 40 magazine titles reaching 17 countries. Seventeen AM and FM radio stations, with 50 percent Televisa ownership, reach more than half of Mexico's population. The company also owns recording companies, 51 percent of the Mexico City-based Cablevision cable television system, film production studios, and two professional soccer teams (and the sports arena in which they play). Televisa also offers paging and other services. In the United States, Televisa owns 15 percent of Univision, the country's Spanish-language network. The company also controls a 60 percent stake in Innova, the Mexican operator of the SKY direct-to-home satellite service.

Pioneering Mexico's Communications Since the 1920s

The Azcarraga family's dominance of Mexico's airways coincided with the rise to power of the country's ruling Institutional Revolutionary Party (PRI). In the 1920s, Emilio Azcarraga Vidauretta (El Tigre's father) opened one of that country's first radio stations. Azcarraga's strong support of PRI's policies helped him expand his radio network, Radio Programas de Mexico, nationwide by the 1930s. In the 1940s, Azcarraga expanded into films, building the Churubusco Studios into a dominant force in the Mexican film industry. At the end of World War II, Radio Programas de Mexico sealed its lock on the country's radio waves when it absorbed the Mexican radio operations of NBC and CBS.

Television was first transmitted in Mexico in 1942. In 1946, Azcarraga began plans to enter this medium as well, forming Television Asociada, a group of Mexican radio magnates that sought to persuade the government to hand over the television industry to them as well. Azcarraga was not the first to win a television concession from the government, however. That went to Novedades publisher Romulo O'Farrill, who formed Television de Mexico, S.A. Azcarraga's move into television came only in 1951, when he formed Televimex, S.A., and won the concession to form the country's second television network. President Miguel Aleman Valdes awarded the third television concession to his own family. The Azcarragas, Alemans, and O'Farrills soon merged their stations into a single network, called Telesistema Mexico. The families retained individual licenses, however, avoiding charges that they were building a monopoly.

Telesistema went international by the early 1960s, forming Teleprogramas Acapulco, which quickly came to dominate much of the Latin American television market. The company also eyed the growing Spanish-language market in the United States. In 1961, the company backed Rene Anselmo in setting up Spanish International Communications Corp. (SICC) and buying KWEX of San Antonio, Texas. Anselmo, born in Massachusetts and a graduate of the University of Chicago (where he helped form the famous Second City improvisational troupe), had worked for Azcarraga since the 1950s. Telesistema supplied SICC with 20 percent of its financing--the legal limit on foreign control of a television station--and all of its programming. The somewhat murky relationship between Telesistema and SICC would eventually lead to a conflict with the Federal Communications Commission (FCC). In the meantime, SICC, and its network Spanish International Network (later the SIN Television Network) almost singlehandedly established Spanish-language television in the United States.

Telesistema's growing control of Mexican television faced only minimal interference from the government. In response to public complaints, the government attempted in 1968 to place a 25 percent tax on radio and television broadcasters. When the powerful group of broadcasters protested--in a country where a majority of the population was illiterate, information was gained primarily through radio and television; this gave broadcasters a great deal of power in affecting public opinion, particularly at election time--the tax was quickly abandoned. In its place, broadcasters agreed to give the government 12.5 percent of each station's air time. In 1972, Telesistema achieved complete dominance of the Mexican television market when it merged with Television Independiente de Mexico.

Renamed Grupo Televisa, the company passed into the hands of the second generations of its founding families. But it was the Azcarraga family, in the form of son Emilio Azcarraga Milmo (known as El Tigre), that eventually gained complete control of the company. During the 1970s, the company firmly established its hegemony over Mexico's entertainment industry as well. With holdings in television, radio, film, and the recording industry, Televisa was able to achieve synergies that others could not--if, indeed, Televisa would have allowed that: actors and other performers could find themselves blacklisted from Televisa's stations if they performed for one of the government-run stations; advertisers faced a similar fate. Meanwhile, inside the company, Televisa had developed its own "star-making" system, complete with training schools. Apart from its near monopoly of Mexico's airwaves, much of the company's success with its viewership--which reached more than a 90 percent market share in Mexico--was built around the company's answer to the soap opera, the telenovela. These sentimental, melodramatic programs, which the company churned out in what it would proudly refer to as a factory-like assembly line process, proved wildly successful, not merely in Mexico, but throughout the world. Televisa's programming extended far beyond the Spanish-speaking world; dubbed and subtitled versions of its programs became successes in Western and Eastern Europe, Africa, India, and even China. Another fixed part of Televisa's programming offerings were lavish variety-type shows. In 1970, the company's Teleprogramas Acapulco arm, which had been generating its news reporting from a variety of sources, including the liberal media, launched its own news program, called 24 Horas, which reflected not only Televisa's staunch support of PRI, but also an arch-conservative, anti-communist viewpoint of Latin America during this turbulent political era. The program became the primary news program available in Spanish-language markets under Televisa's control, including the United States.

Challenged in the 1980s

At the start of the 1980s, Televisa faced a threat to its preeminence. President Jose Lopez Portillo had been moving to nationalize Mexico's economy, including the country's banking industry. But Lopez, under pressure to break up Televisa's monopoly, backed down from nationalizing the television industry. In return, Azcarraga reorganized the company, breaking it up into what were, on the surface, independent companies. Included among the tangle of companies was Televisa's relationship with SICC and the SIN network, which brought the company into conflict with the FCC.

By then SIN, which was 75 percent owned by Televisa (the limits on foreign ownership did not extend to television networks), had captured more than 75 percent of the U.S. Spanish-language television market. The SIN network, through SICC, included five owned-and-operated stations; however, SIN and Televisa provided all of the programming for 33 of the country's 35 all-Spanish stations, and 168 part-time Spanish stations. SICC also owned a string of Spanish-language radio stations. The U.S. company was one of the first to use the new satellite transmission technology, forming the Galavision cable network. At the beginning of the 1980s, the Spanish Radio Broadcasters Association, made up of SICC radio competitors, including one of Anselmo's former partners in SICC and SIN, asked the FCC to review the legality of SICC's ownership structure. If the FCC found that SICC exceeded the limits on foreign control, the company would have been stripped of its television stations--and much of its income-producing revenue.

Azcarraga and Anselmo, who owned 25 percent of SIN and 24 percent of SICC, fought to retain SICC's television stations. But the FCC found that Azcarraga and Televisa's de facto control of SICC exceeded the 20 percent limit and ruled that the company would lose its broadcast licenses for its five stations. Anselmo wanted to appeal the decision; however, Azcarraga decided to sell. The FCC agreed to allow the stations to keep their licenses as long as they were sold. The chain of stations was sold to Hallmark for $300 million in 1987. Azcarraga reorganized SIN as Univision; under terms of the SICC sale, Hallmark was committed to purchasing all of the station's programming from Univision. The following year, Hallmark purchased Univision from Azcarraga for another $300 million. Televisa, however, continued to provide a large part of Univision's programming. Anselmo, meanwhile, had left the company, and began preparations to launch a new company, PanAmSat.

Back in Mexico, Televisa was also receiving flak for its advertising policies. For most of the decade, the company had been selling a majority of advertising space under a so-called "French Plan" (named after a company inside joke). The French plan allowed advertisers to pay for the year's advertising in advance; in return for the advance payment, advertisers received three commercials for the price of one. About 75 percent of Televisa's advertisers fell under the French plan. Smaller advertisers complained that the costs of purchasing a year's advertising in advance was too expensive; buying advertising outside of the French plan also raised the costs of advertising time. Simultaneously, advertisers were limited to Televisa, facing possible blacklisting if they advertised elsewhere.

Televisa was also expanding into new areas. In 1985, it launched its own videocassette distribution arm, Video Visa. In 1989, the company launched the National, an English-language daily sports newspaper for the U.S. market. But cracks were beginning to appear in the walls of Televisa's fortress. A similar attempt to launch a Spanish-language sports daily in Mexico had failed. In 1987, the company's radio revenues were dropping, forcing the company to sell off some of its radio stations and lay off some 1,500 employees. Then the National proved to be a disaster, losing some $130 million over 18 months and dragging Televisa into the red. On revenues of $571 million in 1989, the company lost $25 million. The following year, the company continued to bleed badly, posting a $163 million loss for the year.

Reorganized and Looking Overseas in the 1990s

A 100 percent increase in Televisa's advertising rates helped bring the company back to profitability. But in order to fuel real growth in the company, Televisa needed to expand more aggressively into the international arena. The company reorganized as a public holding company, while shedding Video Visa and shutting down the National in 1991. The company went public in December 1991, selling 20 percent of the company and raising $807 million. With that money, Televisa went on an international buying spree. The company joined an investor's group in purchasing Univision from Hallmark; Televisa's stake in the dominant U.S. Spanish-language broadcaster was 25 percent. The $50 million purchase also gained the company a 25-year agreement to provide Univision's programming. Next, the company bought up 49 percent of the only private television network in Chile, then paid $17 million for a 76 percent stake in Peruana de Radiofusion, the second largest television station in Peru. In 1993, Televisa put up $200 million for 50 percent of PanAmSat, as Anselmo struggled to launch the world's only privately owned satellite network. PanAmSat proved to be a huge success: by 1995, Televisa's stake was worth more than $1 billion.

The company's revenues continued to build, reaching $1.35 billion in 1992 and $1.67 billion in 1993. But after posting earnings of more than $600 million in 1992, the company's net income sagged. By 1993, Televisa netted only $26 million. By then, the Mexican government was busy privatizing the country's industries. Television's turn came in 1993, when the government sold off two television networks to private bidders. Televisa was barred from bidding for these stations; as a consolation, however, the company was given the right to buy a third government network of six stations for $91 million. Televisa also purchased the Editorial America magazine arm of Miami-based America Publishing Company, making Editorial Televisa the world's largest Spanish-language publisher. In 1994, however, Mexico underwent an economic crisis. The subsequent devaluation of the peso forced a sharp drop in Televisa's revenues, down to $760 million. The company was once again in the red, to the tune of $54 million.

The company further reorganized, shedding operations including its stakes in the Chilean and Peruvian television networks, 49 percent of its Mexico City Cablevision cable system, and laying off 15 percent of its employees. The company also closed a newspaper as well as three training schools. In 1995, the company moved toward a full listing on the New York Stock Exchange, selling an additional 10 percent stake controlled by the Azcarraga family and raising some $1 billion. Televisa next focused on the direct-to-home satellite market, entering joint-ventures with News Corporation, Tele-Communications, Inc., and others. With the public offering of PanAmSat, followed by that company's merger with Hughes Communications, Televisa began looking to sell off its holdings in the satellite company, concentrating instead on providing content to satellite services. The company also began eyeing the English-speaking market; an early attempt at English-language programming, in a joint-venture with News Corporation, proved less than successful, however.

In 1995, Televisa managed to eke out an $88 million profit, as revenues rose to $1.15 billion. The company continued to struggle into 1996, however, as it began to face competition for advertising revenues from new Mexican rival Azteca, which had been steadily building market share and even beating Televisa in some markets. In mid-1996, the company raised $600 million in a private stock placement. Televisa continued to expand its interests in DTH and other satellite programming ventures, including a 30 percent stake in Sky Entertainment Latin America. It also expanded its television holdings by buying two English-language Mexican television stations on the U.S. border. In January 1997, Azcarraga took a medical leave of absence from the company. But with Azcarraga's son, Emilio Azcarraga Jean, ready to step in, it was clear that Grupo Televisa would remain firmly in the family's control.

In 1997, when the elder Azcarraga died at age 66, his son Emilio assumed the mantle of leadership as chairman and CEO. This event, occurring in the advancing shadow of challenges from rival TV Azteca, proved to be the point of departure for far-reaching changes at Televisa. By late 1997, Televisa's share of the prime-time audience had fallen below 60 percent; and El Tigre's effective legacy included $1.8 billion in personal and holding company debt. The younger Azcarraga began by bringing in Gilberto Perezalonso as chief financial officer. A Nicaraguan by birth and a naturalized citizen of Mexico, Mr. Perezalonso came from the retailer Cifra, where he had headed the finance division and acquired a reputation for fiscal austerity. If this model was to prevail at Televisa, where television stars had long enjoyed lush contracts, and high-salaried management personnel had become too numerous in the executive suite, some alterations were needed.

Just this sort of change became noticeable shortly after the addition of Mr. Perezalonso to the management team in March 1998. During that year, cost-cutting measures trimmed $65 million from operating expenses; by the latter part of 1999, savings had accumulated to $190 million. The size of management was reduced as part of a new round of layoffs numbering 4,000 overall, and bringing Televisa's workforce to 15,400 in 1999. Ultimately, this trend would bring staffing down to 13,500 by the end of 2001.

Although much had been accomplished with reductions in staff and spending, growth for the future seemed likely to be determined by expansion in varied media and in other markets. The traditional method by which the company sold advertising, the so-called "French Plan," was replaced with a new system in which advertisers paid for specific units of advertising, making them better able to see what they were receiving for their advertising dollar. Alterations in ownership were also part of Azcarraga's campaign. By buying out other heirs, he raised his share of Televisa's holding company, Televicentro, to 51 percent and consolidated control in his own hands.

The beginning of 2000 brought important changes for Televisa. A major restructuring of debt reduced the annual cost of debt service and allowed the company to receive an investment grade rating. Televisa's management team recognized that its close alignment with Mexico's ruling PRI party, in contrast with Azteca's greater political independence, could prove to be a liability in the changing landscape of Mexican society, and began to place less stress on the relationship. This was only the forerunner of a more seismic change. In 2000, Mexican businessman Vincente Fox of the Partido Accion Nacional (PAN), running as a right-of-center populist, won the presidential election in Mexico, depriving the PRI of the office for the first time since 1929. A new chapter seemed underway for the longtime PRI associate Grupo Televisa.

The Post-PRI Period

Following the election of 2000, Televisa divested or closed several costly units and launched several new projects, including En Vivo, a live entertainment division, and reality television (Big Brother). An Internet division and co-production of programming in Brazil and other countries played a continued role. From mid-2001, the company increasingly emphasized the U.S. Spanish-language market, through its stake in Univision. This equity, reduced to 5.8 percent during the days of cost reduction, was increased to 15 percent with an investment of US $375 million, after company officials announced in 2002 that the U.S. market had become its first priority for growth. Grupo Televisa, after just five years under the leadership of its new chairman, seemed far along in the process of transformation into a viable modern media giant.

Principal Subsidiaries: Centro Cultural Arte Contemporaneo, A.C.; Empresa Promotora del Valle, S.A. de C.V.; Grupo America; Grupo Radiopolis, S.A. de C.V.; Grupo Telesistema, S.A. de C.V.; Milar, S.A. de C.V.; Radio Comericales, S.C. (99%); Skytel (51%); Telesistema Mexicano, S.A. de C.V.; Televisa S.A. de C.V.; Television Independente de Mexico, S.C.; Univisa, Inc.

Principal Competitors: Cisneros Group of Companies; Telemundo Communications Group, Inc.; TV Azteca S.A. de C.V.

Further Reading:

• Dombey, Daniel, "Hopes Pinned on Mexican Soap," Financial Times, May 25, 1995, p. 29.
• Fisher, Christy, "Emilio Azcarraga: The Mystery Man Behind 'National,'" Advertising Age, December 18, 1989, p. 1.
• Johnson, Deborah, "Televisa, a Multimedia Leader," Broadcasting & Cable, November 18, 1996, p. 62.
• Malkin, Elizabeth, "The Rupert Murdoch of Mexico?" Business Week, December 11, 1995, p. 61.
• Rozenstiel, Thomas B., "Azcarraga Owns Huge, Secretive Empire," Los Angeles Times, June 2, 1989, section 4, p. 4.
• Russell, Joel, "The Televisa Empire Keeps Climbing: The Sky's Not the Limit!" Business Mexico, January/February 1994.
• Silverstein, Jeffrey, "Mexico's Telecommunications Mogul Expanding His Empire," San Francisco Chronicle, December 28, 1992, p. B1.
• Skinner, Joseph, "Octopus of the Airwaves," Monthly Review, September 1987, p. 44.
• "Son of El Tigre," Business Week, October 25, 1999, p. 66.
• Sutter, Mary, "Televisa at 30," Variety, April 1, 2002, p. A11.
• "Televisa's Grip Hard to Gag," Video Age International, September 1993, p. 17.
• Torres, Craig, and Joel Millman, "Mexico's Televisa Searches for Global Stardom," Wall Street Journal, May 30, 1996, p. A10.

Source: International Directory of Company Histories, Vol. 54. St. James Press, 2003.

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