Hispanic TV Drama Unfolds in US Court

29 April 2008

LOS ANGELES: Spanish-language television companies Grupo Televisa and Univision are appearing in a courtroom drama straight from the scenes of the hugely popular and lucrative telenovelas at the core of their dispute.

Mexico-headquartered media conglomerate Televisa alleges that private equity-owned Univision owes millions of dollars in royalties as part of the contract that gives the latter the rights to distribute the former's soap operas to 40 million Hispanic viewers in the US.

As a result of Univision's alleged breaches, Televisa is demanding it be allowed to walk away from its contract with the broadcaster, which runs until 2017.

A break-up of the relationship would allow the Mexican group to demand much higher fees for its shows, or it could sever all ties with Univision and sell the telenovelas to smaller rivals such as NBC Universal's Telemundo.

The shows' popularity, last year, generated $538 million (€343m; £270.5m) in advertising sales for Univision – a sizeable portion of its overall $2.1 billion net revenue. It paid Televisa licence fees of around $145m.

In a regulatory filing last month Univision argued: "If Televisa were to stop providing us programming for any reason, it could be difficult to develop or acquire replacement programming of comparable quality whether on similar terms or at all."

The company warned that such an outcome "would have a material adverse effect on our results".

In an attempt to settle some of Televisa's claims, Univision has grudgingly paid it some $20m but says: "We are confident that the facts are on our side and that Univision will prevail at trial once we present our case."

Comments Manny Gonzalez, managing director of advertising firm Hill Holliday Hispanic: "It's very difficult to predict a divorce between Televisa and Univision because they need each other.

"Clearly Univision's strong ratings come from Televisa's programming, and Televisa needs Univision for the revenue. . . . They are caught in a pickle."

Data sourced from Financial Times Online and latimes.com; additional content by WARC staff