Son Of El Tigre
Behind the desk of Grupo Televisa Chief Executive Emilio Azcarraga hang two photos: One is of his grandfather, founder of the company. The other is of his father, the man whose white-streaked hair and ferocious personality earned him the nickname of El Tigre. The 31-year-old Azcarraga grew up steeped in myths about how his family built one of the world's largest Spanish-language media empires. But to hear the son tell it, this is not his father's Televisa.
Once branded as a spoiled rich kid, the junior Azcarraga is remaking the $1.7 billion Televisa in his own image. When his father, Emilio Azcarraga Milmo, died in 1997 at age 66, he left behind $1.8 billion in personal debt. At Televisa, bloated management and coddled stars made for runaway costs. And the company's almost continuous monopoly on Mexican television--and advertising revenues--was facing a serious threat from a scrappy new competitor.
Sitting in his office at Televisa's sprawling San Angel studios in Mexico City, the normally press-shy Azcarraga recently discussed his early, tension-filled days as CEO. Neither Wall Street nor Mexico's cliquish business Establishment believed that the heir was up to the task of turning the media behemoth around. His lawyers recommended that he dump it. "But selling made no sense," he recalls. "At 29, nobody has an opportunity like that. I wasn't going to pass it up."
Azcarraga has confounded the skeptics. In his two years at the helm, he has turned Televisa into a leaner--and many would say meaner--operation. He still has a ways to go, though. Revenues are stagnant because of an antiquated ad-sales system and competition. And the company has yet to present a long-term strategy to tap its formidable ability to produce entertainment for new ventures on the Internet and pay-TV.
These are potentially serious problems. Yet the young CEO has shown that he knows how to make decisions. He has sold more than $1 billion in noncore assets and cut costs by $190 million. Azcarraga has slashed Televisa's workforce to 15,400, down from almost 20,000 in 1997. And the ax has fallen on upper management as well: Fresh-faced executives have displaced a number of El Tigre's old associates. "One shouldn't underestimate Azcarraga's efforts--from laying off two-dozen vice-presidents who had pledged undying loyalty to his father to sweet-talking top actresses out of their seven-figure exclusive contracts," says Andrew Paxman, a former Variety correspondent who is writing a biography on Azcarraga's father.
The young Azcarraga has also managed to tighten his grip on the the company. He bought out his stepmother and other heirs to raise his stake in Televisa's holding company, Televicentro, from 10% in 1997 to 51%. In February he restructured $1.3 billion worth of Televicentro debt, partly by swapping Televisa shares for loans outstanding to Mexican banks and rolling over the remaining $533 million. And in May he brought in Carlos Slim, chairman of the former monopoly, Telefonos de Mexico (Telmex), as a passive partner and ally. "Although very young, [he] is doing his job very well," says Slim, who has a reputation as one of Mexico's most savvy businessmen.
El Tigre's son has tailored his lifestyle to fit that of a CEO's. Daredevil sports, such as skydiving, have given way to indoor tennis. And after years of dating soap-opera starlets, he is giving up bachelorhood. He will wed Mexico City art dealer Alejandra de Cima on Oct. 30. Indeed, the only reminder of Azcarraga's carefree youth is his blue Land Rover. These days, it's always trailed by a car packed with bodyguards.
FIVE YEARS OF BUMPY ROAD. It's a good thing that Azcarraga has buckled down to work. Thanks to this year's debt restructuring, he is firmly in the driver's seat at Televisa, but few--himself included--expect the road ahead to be smooth. True, the company remains a giant at home. Last year, it produced 51,000 hours of TV programming, put out some 30 magazine titles, and sold more than 20 million music cassettes and CDs, realizing a $77 million profit on sales of $1.7 billion. But Pablo Riveroll, head of research at Merrill Lynch & Co. in Mexico City, predicts that it will take Azcarraga five years to sort out the problems he inherited. Azcarraga must focus on raising ad revenues and expanding other divisions, including satellite TV, cable, and the Internet, to stimulate growth. "That's a lot to tackle in the short and medium term," says Riveroll.
Boosting revenue from Televisa's four TV networks in Mexico and programming sales at home and abroad is a top priority: The goal is to double revenues from these operations during the next five years, to some $2 billion.
To do this, Televisa is overhauling its outdated sales strategy. The old scheme required companies to pay in advance for a year's worth of advertising--spread across TV, radio, magazines, and other media. That was fine when Televisa was the only private TV broadcaster in Mexico, and advertisers had no choice but to pay up. But since 1993, the company has faced tough competition from TV Azteca. The upstart, a product of the government's privatization drive, snatched audience share--and advertisers--away from its bigger rival. Azteca's soap operas have sizzle: They tackle taboo subjects such as corruption, drugs, and adultery. And its reputation for political independence has won over a middle-class viewership for its newscasts.
Televisa needed this wake-up call. Until Azteca came along, "everybody had to watch what we offered," admits Televisa Vice-President Jorge Eduardo Murguia. By the end of 1997, Televisa's overall prime-time share had dipped below 60%. It took two years for Televisa to rejigger its programming to win back viewers. "In an industry where you have two competitors, it's clear that one is going to respond to whatever the other does," says TV Azteca Chairman Ricardo Salinas. "So they came back with better programming and much better cost control. And they have been successful." Televisa's overall audience share is now back up to 77%.
Now, Televisa is tackling the ad side of the business. Azcarraga has revamped its sales scheme, raising rates for prime-time TV, cutting some for daytime and scrapping all-media deals. Its top TV advertisers will have to put up with rate hikes of 40% or more in 2000, thanks to a new plan unveiled on Oct. 4 that features quarterly increases. But the company will, for the first time, guarantee spots on highly rated shows for those that pay for the year up-front.
Azcarraga is also tuning Televisa's programming to fit Mexico's new political realities. For as long as anyone can remember, the company and the Institutional Revolutionary Party (PRI), in power for 70 years, have been locked in a tight embrace. But with the country on the road to multiparty democracy, cozy relations with the PRI could prove a bane rather than a boon. So last year, Televisa replaced its nightly news anchor, who was widely seen as a PRI mouthpiece. The new anchor has boosted ratings with a straightforward newscast, free of editorializing. "Televisa is beginning to recognize that the country is changing," says Sergio Aguayo, a political scientist.
The real test will be the July, 2000, presidential election. Candidates for both the PRI and the opposition are already jockeying for publicity. Azcarraga promises balanced coverage: "Televisa doesn't decide who wins or loses. That's up to the people who go out to vote."
NEW OUTLETS. Azcarraga must also figure out how Televisa will compete in a world dominated by media giants. Although Televisa remains the heavyweight in Spanish-language television, other groups in the region are teaming up with foreign partners to grab a bigger share of the market. Among them are Argentina's Grupo Clarin, a $2.2 billion newspaper publisher and broadcaster, and the $594 million television division of Venezuela's Cisneros group.
But Azcarraga is ceding no ground. "I believe the Latin American market is still very underdeveloped," he says. "We want to participate in the growth." Here, his father left a strong legacy. One cornerstone is a regional satellite-TV venture called Sky Latin America. It links Televisa with Rupert Murdoch's News Corp., Brazilian broadcaster Organizac centses Globo, and Liberty Media International in Englewood, Colo. Televisa has a 60% stake in Sky's Mexican unit. With 348,000 customers as of July 1, it's the venture's most successful operation. Televisa also has minority holdings in other units.
The company is also exploiting its beachhead in the U.S. Hispanic market. Allied with the Cisneros Group's Venevision and U.S. producer Jerrold Perenchio, Televisa bought Los Angeles-based Univision in 1992. In exchange for programming that has helped Univision grab more than 80% of the U.S. Spanish-speaking audience, Televisa gets a cut of revenue. Televisa and Univision, which had $577 million in sales last year, are now looking to introduce Televisa's pay-TV channels to U.S. cable.
Negotiations on a joint venture to promote Televisa's singers and other musicians abroad are well advanced. And partnerships in Spain and France will translate its soap-opera formula to Europe. Televisa telenovelas have already made a name for themselves abroad: The Rich Also Cry was a hit in Russia during the early 1990s.
On the Internet, Azcarraga plans to go it alone. A portal, designed by the same team that helped create Disney's GO.com, is due to debut sometime this fall. Televisa is a Johnny-come-lately in this new field, but Jose Linares, a Latin America media analyst at J.P. Morgan & Co., believes that it could still come out ahead of the competition. "Nobody has the content that Televisa has," he says.
As he formulates a new game plan for Televisa, Azcarraga is breaking sharply with his father's management style. Don Emilio, as his employees called the elder Azcarraga, valued loyalty above results. This was rewarded to the point that there were 46 vice-presidents at Televisa when he died. Murguia recalls how some 20 executives would gather regularly in Azcarraga's office. Each would present their reports and wait for a comment, usually in colorful street language. "He would scold you like a father," says Murguia.
COLLEGIAL. That paternal style is gone. Today, a group of six to a dozen executives meet in the junior Azcarraga's office each week for a freewheeling exchange of ideas. On Fridays, they frequently take leisurely lunches at a local restaurant.
His more collegial approach aside, Azcarraga certainly has inherited his father's self-confidence. When asked whom he consults on tough problems, Azcarraga responds: "I talk to myself." One wonders, though, where the baby-faced CEO would be without his top lieutenants: Chief Operating Officer Jaime Davila, 50, formerly of Univision, and Chief Financial Officer Gilberto Perezalonso, 66. They were instrumental in hatching a strategy to cut costs and boost ratings. Analysts are worried that Davila, who commutes between Mexico City and his home in Connecticut, is on his way out. But Azcarraga says there is no need to worry: "Jaime is preparing the people below him and beside him for the moment when he decides [to leave]."
Azcarraga has more immediate concerns. Most pressing are recent maneuvers by his cousin, Alejandro Burillo, 47, to challenge his control of Televisa. Burillo, who holds a 25% stake in Televicentro, has criticized his young cousin's management decisions and declared his desire to buy out Slim's take.
So a new battle for Televisa may break out. But for Azcarraga, the company is still worth a family feud. After all, Televisa is the only world Azcarraga's ever known. "My school was Televisa, my university was Televisa, my apprenticeship was Televisa," he says. Now the apprentice must learn to be the master.
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