Univision: TV Success Story That Will Last?

In 1961, Mexican media mogul Emilio Azcarraga Vidaurreta saw a rich future in the steady stream of his viewers heading north and the vast population of Latinos who had already put down U.S. roots. So he made a move, buying KCOR-TV in San Antonio, the nation’s first Spanish-language TV station.

He envisioned a vast Spanish-language TV network--christened Spanish International Network--that would bring programming, fed from his extensive library of shows, to Spanish-speakers across America.

In a classic journey of immigrant assimilation, what started as one small Texas TV station has indeed blossomed into a nationwide broadcast network, now called Univision. The Los Angeles-based network today holds an astonishing 92% share of the prime-time audience that watches TV in Spanish--a universe that Nielsen Media Research estimates to be 8.3 million households and 28.3 million viewers age 2 and older.

In Los Angeles, Miami and Houston, Univision-owned stations often draw more viewers than the major network-owned stations, and Univision is gaining share among key Latino 18-to-49-year-olds who watch television in prime time, whether in Spanish or English.

The company’s stock price has more than tripled in the last two years. In 1998, Univision reported operating profit of $131.2 million on revenue of $577.1 million, up 25.6% from $104.4 million in operating profit and $459.7 million in revenue in 1997.

Despite these striking gains, Univision’s future depends on a difficult balancing act. The network must continue to draw new viewers from a constant influx of immigrants, many of them illegal and virtually unassimilated. Yet it also needs to retain upscale, bilingual Latinos--often several generations beyond immigration--who in the past have shunned its programs as cheap fare for the newly arrived.

By attempting this straddle, the Spanish-language network may redefine what it means to be an American broadcaster.

To be sure, Univision is not a likely model of change in television. One major network chief says Univision doesn’t even figure on his radar screen, and even older-skewing CBS still draws three times as many younger adults in prime time.

But Azcarraga’s vision is proving to be more far-reaching than he could have imagined 38 years ago. The American population is changing, with Latinos poised to emerge as the largest single minority by 2005, claiming one in eight Americans. And Univision is growing, while its more established English-language rivals are declining.

If Azcarraga had the vision, however, it fell to a Hollywood insider, A. Jerrold Perenchio, Univision’s 68-year-old chairman and chief executive, to realize his dream. As Univision attempts to straddle two Latino cultures, it is undergoing its own assimilation journey internally. Perenchio is an American who isn’t fluent in Spanish, and the company has hired so many non-Latinos in its sales and marketing staff that some dub it “McUnivision.”

Yet its president and chief operating officer is an establishment Latino, Henry Cisneros, 51, a former Clinton cabinet member. Programming is headed by an immigrant, and a few years ago, Univision decided not to allow a word of English in its regular programming or advertising (product titles and movie dialogue excepted). As Cisneros explains it, “We believe that we should defend the Spanish language like Tiffany defends its jewels.”

The Early Days of the Network

After acquiring the San Antonio station and renaming it KWEX, Azcarraga quickly added stations in Los Angeles, New York, Miami and San Francisco. But instead of investing in original fare, he filled the air time with material from his Mexican Grupo Televisa, the world’s leading producer of Spanish-language broadcast programs. Over the next three decades and a couple of management changes, the appeal for the advertisers of the booming Latino demographic group wasn’t enough to offset the reality of Univision’s programming. Even the biggest telenovelas, the prime-time soap operas that are a lucrative staple of Spanish-language TV, looked cheap. And when it wasn’t pushing products (in, say, a “Cocina Crisco” cooking show), the network tended to broad slapstick, such as the Saturday night “Sabado Gigante,” featuring a buffoonish Don Francisco as ringmaster of a loud variety show, still a top-rated program. Off-hours were filled with dusty Mexican reruns.

The news division was chronically understaffed. Anchor Maria Elena Salinas recalls the days at Los Angeles station KMEX when she hosted a live community affairs show, co-anchored the news, reported three stories daily and watched the wires. “We didn’t even have a TelePrompTer,” she says. “Then I found out we did have one, but nobody knew how to work it.”

Even worse, there was a widespread perception that once Latino immigrants became assimilated, and presumably were financially better off and more attractive to advertisers, they “graduated” to the English-language networks.

Azcarraga’s son Emilio inherited the business in 1972, but lost it, after a protracted legal battle, when the Federal Communications Commission found Spanish International Network in violation of rules prohibiting foreigners from controlling U.S. broadcast stations. In a two-year process starting in 1986, Televisa sold the network to Hallmark Cards Inc. for $600 million.

Hallmark, hoping to profit from the growing Latino community, changed the name to Univision and ramped up U.S. production. But Televisa took its popular Mexican telenovelas elsewhere, and replacement soaps from South America failed. Ad revenue never materialized. With a huge debt load to cover from the acquisition, bankruptcy loomed for Hallmark, as it did for rival Telemundo. In 1992, Hallmark bailed out, selling to Perenchio for about $550 million, the man it had outbid in 1986.

Perenchio’s purchase went through, despite protests from American Latinos that his minority partners--Televisa, again, and Gustavo Cisneros (no relation to Henry Cisneros), owner of Venevision, Venezuela’s leading television network--would mean a return to the days when programming was largely imported. “We were concerned that he wasn’t going to be committed to the [American] Hispanic community,” says Univision news anchor Jorge Ramos.

New Ownership and a New Era

Activists’ worst fears were realized as staff and programming budgets were slashed. Four senior executives defected to Telemundo. But Perenchio, a protege of legendary agent and studio chief Lew Wasserman and a former partner of Norman Lear, soon followed with a round of reinvestment. “Perenchio’s role was very significant,” says Jessica Reif Cohen, a Merrill Lynch securities analyst. “They took it step by step by step.”

First came new spending on the stations, some of which--like KMEX, now the network’s flagship station--had seen little growth for years. Sets were redesigned, equipment was updated, and travel budgets were increased.

He helped Univision’s bargaining power with advertisers by investing $37 million with rival Telemundo to have A.C. Nielsen, which tracks television viewership, set up a Latino ratings system.

In 1996, Perenchio took the company public. A year later he recruited Cisneros, the former San Antonio mayor and Clinton Housing and Urban Development secretary, who moves easily between the Anglo and Latino cultures that Univision is also trying to bridge. (That move could potentially backfire, however, if Cisneros’ September trial, on allegations that he lied about financial support he gave to a mistress, gets messy.)

Perenchio instilled a new discipline--shows were no longer allowed to run 20 minutes over schedule--and he instilled a new attitude in the executive suite. Managers in the buttoned-down Univision environment have found expectations high, teamwork obsessively stressed and drawing attention to oneself frowned upon. Following Perenchio’s long-standing aversion to publicity, the company rarely speaks to the media and refuses to release photos of its top executives; Perenchio declined to be interviewed for this article. But achievement is well compensated. Last year, the company gave $42.6 million in stock to select employees.

Perenchio installed as programming chief Mario Rodriguez, a 39-year-old Cuban American who had joined the network in 1990, fresh out of law school. His main programming qualification was that he was a walking encyclopedia of Spanish-language TV; since he was about 12, he had routinely pestered Spanish-language TV executives about their shows. “Mario doesn’t sleep. Mario has one eye open 24 hours a day because he’s always watching the programming of Univision,” says Neida Sandoval, news anchor for “Despierta America,” Univision’s slick three-hour morning show.

It fell to Rodriguez and his team to find the programming that would bridge the gap between immigrant and assimilated Latinos and lay the foundation for the future of Spanish-language television in America.

For three years, the team studied the new Nielsen ratings, which for the first time enabled them to track what viewers wanted. Today, “Despierta America” has replaced reruns of old Mexican kids’ shows; afternoons include the gossip and game show “El Blablazo,” talk show “El Show de Cristina” and an award-winning newscast. All lure assimilated Latinos with information about Latino issues that can’t be found on English stations. An investigative newsmagazine will be added in the fall, and soon, a new live hourlong 11:30 p.m. newscast.

Music and sports, such as the upcoming 18 straight days of Pan American games coverage, appeal to Latino viewers who could watch English-language TV, as well as the newly arrived. Domestic production--primarily such news, talk and variety shows--has increased to an all-time high of 52% of the schedule, Rodriguez says.

Telenovelas, meanwhile, draw both crowds. With Televisa again a part-owner, the most popular novelas from Televisa and Venevision are locked up through 2017; in exchange the two foreign partners get 14.7% of Univision’s revenue. The novelas themselves have become more sophisticated; they also target different age groups. So Univision stacked them in a three-hour block designed to appeal to children at 7 p.m., teens at 8 p.m. and adults at 9 p.m. and saw its ratings triple.

To avoid alienating any nationality, a longtime policy of maintaining a neutral Spanish accent in the domestically produced programs is enforced. The network also makes sure producers stay away from slang and humor that appeals only to Mexicans or Cubans or Puerto Ricans.

How on target is the Univision strategy in its attempt to bridge the chasm between new immigrants and assimilated Latinos? Among adults 18 and up in bilingual households, Spanish-language TV viewing increased to 31% in 1998, from 24% in 1996, according to Nielsen.

Meanwhile, Univision got a big boost this past season as Telemundo, under new owners Sony and Liberty Media, faltered in its own strategy to lure assimilated Latinos with high production values and mainstream stories. Viewers rejected the execution, if not the strategy of using series based on Sony-owned scripts from “Starsky and Hutch” and “Charlie’s Angels.” Telemundo’s shows, airing just twice a week, were crushed by Univision’s telenovelas, which hook viewers with new episodes each weeknight.

“There has never been a year in Spanish-language media where more distinct theories about Hispanic viewing behavior have been put to a test,” Rodriguez told advertisers in May. “There has never been a year when our programming philosophy was more questioned, as headlines from ‘Entertainment Tonight’ to Advertising Age predicted that the Hispanic consumer would prefer something else. Never a year where the theories turn out to be so wrong.”

Advertising dollars flowed Univision’s way; last year the company was able to raise ad rates 33%. In the last two years, the number of major advertisers has jumped to 63, from 37. But they still pay prime-time rates that on average are just 65% of what they would pay to reach the same number of viewers on the English-language networks.

The situation will likely improve next season: With prime-time ratings among key 18-to-49-year-old adults up 23% this past season, Univision is looking at ad sales for the fall that will increase anywhere from 15% to a “long-shot” 50%, says Merrill Lynch analyst Cohen.

Univision’s long-term success will depend on how well it continues to balance its two audiences. The company is assured of new viewers: Half of the Latino population’s near-term growth is expected to come from immigration, according to Cisneros. But 60% of Latino households also watch English-language TV, according to Nielsen, and they’re frequently the younger viewers that advertisers seek. To hedge its bets with upscale, fully assimilated Latinos, Univision has the cable network Galavision, which carries bilingual, youth-oriented shows, but it must keep them interested in the broadcast network, as well.

Univision also must counter advertiser resistance, from those who just aren’t set up to supply commercials in a second language to those who continue to harbor cultural stereotypes. There’s also the likelihood that Telemundo will eventually get its act together; last week, the network named a new president, veteran Hollywood executive Jim McNamara. “We have to assume” that Telemundo will bounce back, Cisneros says. To counter that, Rodriguez expects at least two more years of capital investments as the network continues its upgrade in areas such as its children’s offerings, one place Telemundo does well.

Univison also is aggressively expanding into related media. It plans to produce 10 to 12 made-for-TV films a year, some of which will be released in movie theaters in Latin America. In March, it belatedly launched an interactive division. New cable networks are likely; Univision is closing in on its purchase of Florida-based Spanish-language cable channel GEMS.

Ultimately, Univision executives are confident of their approach. “As long as the general market continues to shy away from Latino themes and Latino concepts, we will have the market to ourselves,” Rodriguez says. “It’s not a language issue as much as a cultural issue.” And in what would prove the ultimate in assimilation, Univision executives even muse that someday soon they hope to offer a special soundtrack to increase their viewership even further--a soundtrack in English.

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What Latino adults watch from 7-11 p.m.

Shift to Spanish TV

Network

May 1996: 38%

May 1998: 29%

Cable

May 1996: 21%

May 1998: 29%

Spanish

May 1996: 24%

May 1998: 31%

Other

May 1996: 17%

May 1998: 11%

Note: Networks are ABC, CBS, FOX, NBC; cable figures are for English-language channels only.

Source: Nielsen Media Research, National Hispanic Television Index