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Televisa’s Fortunes Rest With Mexico’s World Cup Team

Emilio Azcarraga president, chief executive officer and chairman of Grupo Televisa SA. Photographer: Adrian Moser/Bloomberg
Emilio Azcarraga president, chief executive officer and chairman of Grupo Televisa SA. Photographer: Adrian Moser/Bloomberg

June 12 (Bloomberg) -- While millions of Mexicans will root for the national men’s soccer team to advance in the World Cup, television magnate Emilio Azcarraga has a special reason to cheer.

The billionaire’s Grupo Televisa SAB will get a boost of about 10 percent from advertisers this quarter and the next, according to Corp. Actinver SAB, as the country gathers in front of TVs to watch “el Tri,” as the national team is called for wearing the three colors of the national flag. That would surpass the 9.8 percent increase Televisa got in the second quarter of 2010 from the World Cup in South Africa, and advertisers may spend more the further Mexico advances.

“If Mexico moves forward, the broadcasters could charge more for advertising,” Martin Lara, an Actinver analyst, said in a phone interview. “Soccer is our No. 1 sport. The whole country comes to a halt during the games, but especially if Mexico is on.”

Beginning with a match against Cameroon tomorrow, all the team’s World Cup games will be shown by Televisa and its rival broadcaster TV Azteca SAB, who together account for 99 percent of all over-the-air TV advertising in Mexico. A surge in ad spending would give Televisa a new source of growth in a business that has slowed as more viewers turn to cable channels or the Internet for entertainment.

Elimination Rounds

Mexico, now ranked 20th in the world, has gotten past the group stage in five straight World Cups, though it hasn’t won an elimination game since 1986. This time, its group also includes title favorite Brazil and 18th-ranked Croatia. All four teams in the group play each other to determine which two will go to the elimination rounds.

According to U.K. bookmaker William Hill Plc, Mexico is the third favorite in its group. It has odds of 9-1 to move to the next round, meaning a successful $1 bet will return $9 plus the original stake. Brazil is 1-5 with the bookmaker, while Croatia is 8-1. The Mexican team has a 1.1 percent chance of winning the title, according to Bloomberg Sports.

Fans usually celebrate Mexico’s victories by storming Mexico City’s Angel of Independence monument, a local symbol commonly referred to as “El Angel,” and often blocking the adjacent Paseo de la Reforma, the city’s biggest business boulevard. In a May Buendia & Laredo poll, almost one-fourth of respondents admitted they will skip work or school to watch Mexico’s matches in the tournament.

The tournament can make the difference between a decent year and a great one for broadcasters. This year, advertisers will spend about 50.9 billion pesos ($3.9 billion) on Mexican TV, a 10 percent increase from a year earlier, according to data from ZenithOptimedia, a research unit of advertising firm Publicis Groupe SA. The jump in ad spending is due in part to the World Cup, which is helping fuel growth even with more muted economic expansion than expected in Mexico this year, according to Osbaldo Franco, a research analyst at eMarketer Mexico.

More Advertising

The World Cup normally straddles the end of the second quarter and the beginning of the third. Televisa’s sales spike in the second quarter of 2010, to 5.82 billion pesos, was followed by a third-quarter increase of 7.1 percent to 5.86 billion pesos. Last year, with no World Cup-like event on the calendar, advertising sales were up 3.9 percent. This year the sporting event may generate about $40 million in advertising for Mexican broadcasters, Lara estimated.

Viewership will get a boost with this World Cup because of a more accessible schedule. While South Africa’s time zone is seven hours ahead of Mexico, the difference with Brazil is only two hours. That will mean a boost for Televisa, with about 70 percent of the broadcast audience, and Azteca, which has most of the rest.

“The games’ schedule lends itself to more activity than in the past, when games were practically at dawn,” Andres Audiffred, an analyst with Grupo Financiero Ve Por Mas SA in Mexico City.

Afternoon Games

Mexico’s games were all no earlier than 9 a.m. Mexico City time in 2010, though other team’s matches were scheduled as early as 6:30 a.m. This year, the Cameroon game starts at 11 a.m., followed by a 2 p.m. match against Brazil June 17 and a 3 p.m. kickoff against Croatia on June 23. No other team’s match starts before 11 a.m. Mexico City time.

While Televisa normally dominates the ratings, it will contend with a big challenge from Azteca for soccer viewers.

The smaller broadcaster is producing more than a dozen shows to complement its sports coverage, including “Caipirinha Sunrise,” a fictional TV series featuring sports commentators that’s set in Rio de Janeiro. The World Cup helped lead to a 16 percent boost in Azteca’s second-quarter sales in 2010, to 2.86 billion pesos.

Televisa, meanwhile, is investing in three-dimensional technology that projects interview guests in Brazil onto a set in Mexico.

Satellite Boost

For Televisa, the World Cup effect even goes beyond advertising. The company’s Sky satellite unit has rights to all 64 matches of the tournament, including games that can’t be seen anywhere else. That may give Sky a flurry of new subscriptions, aiding a business that has been slowing after four straight years of more than 1 million additions each, according to a report from BTG analyst Gordon Lee, who recommends buying the shares.

Azcarraga has been counting on the satellite business, along with a cable-TV unit, to make up for slowing growth in broadcast advertising revenue. Satellite and cable sales each climbed more than 10 percent last year.

Televisa said Sky experienced a surge in subscribers during the 2010 World Cup. Sky subscribers have since more than doubled to about 6 million.

“The World Cup is very important for Sky, and we’re very bullish on Sky next year,” Televisa Executive Vice President Alfonso de Angoitia said in an Oct. 25 conference call. Press officials for Televisa and TV Azteca declined to comment.

Regulatory Crackdown

Televisa, which relies on exclusive content to attract advertisers, may find it difficult to to keep some games to itself in the future. Mexico’s telecommunications regulator said last month that from now on Televisa and America Movil SAB, which has an online video network, are prohibited from acquiring rights to a selection of exclusive sports programming, including much of the World Cup.

Mexico’s government is taking additional measures to boost competition against Televisa in the broadcast business. The Senate is working on a bill that will fill in details of the telecommunications overhaul signed into law by President Enrique Pena Nieto a year ago. The proposal includes a requirement that Televisa publish its advertising rates.

The regulatory crackdown has done little to faze investors, who are bullish about Televisa’s growth. This week, the stock hit an all-time closing high of 90.74 pesos. The shares have gained 45 percent in the past year.

“Closely monitoring this event is important for them,” Audiffred said. “Even if, in general terms, it’s not a huge increase, without the World Cup you would hardly see such a jump in ad spending.”

To contact the reporter on this story: Patricia Laya in Mexico City at playa2@bloomberg.net

To contact the editors responsible for this story: Sarah Rabil at srabil@bloomberg.net Crayton Harrison, John Lear

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