Online Extra: Emilio Azcárraga on "Televisa's Advantage"

The Mexican network's chairman talks about his plans to broaden his offerings in the U.S. Hispanic market

Televisa Chairman and CEO Emilio Azcárraga Jean, 36, made headlines in February when he was married in front of 1,500 guests at his Mexico City residence. Mistakenly believing that his new wife was American (she's actually Mexican), analysts speculated that Azcárraga would use his new marital status as a fast-track to U.S. citizenship so that he could take over Univision, the No. 1 Hispanic TV network in the U.S.

Although Azcárraga says he's considering that possibility, he says he can expand Televisa's presence in the U.S. Hispanic market by other means. Azcárraga recently sat down with BusinessWeek Mexico Bureau Chief Geri Smith at his Mexico City offices, which overlook Televisa's architecturally stunning news studios. Following are edited excerpts from their conversation:

Q: Back in 1997, you joked that you considered dying your hair gray so that investors would take you seriously. Since then, you have slashed the payroll by one-third, restructured $1.8 billion in debt, doubled operating margins and forced coddled producers to start monitoring budgets and rating points. Are you now out of the woods?


The company's management lacked credibility because we didn't have a track record. Now I believe we've won the confidence of investors and analysts. Everything happened much faster than we thought it would.

Q: You're locked into a long-term programming agreement with Univision through 2017. How will you manage to expand in the U.S.?


There are experiments that we've started in the last six or eight months that are starting to work. It's time to sit down with Univision and say, look at this, you're our TV partner here [in the U.S.], so do you want to do it with us? If not, we'll do it with someone else. There's a very big opportunity to do business deals that today might seem small, like pay TV or live entertainment or magazines, but I believe they can be big if they are developed right.

Q: Investors have been happy with Televisa's turnaround: Shares, which trade in Mexico and as American depositary receipts on the New York Stock Exchange, are up 15% this year. Won't investors be spooked if you start investing big sums in the U.S.?


Spending without thinking and without carrying out an exhaustive analysis simply isn't going to happen because we appreciate [how fortunate we are] to be in good shape now. We have a lot of cash and we should be making investments...and use [the earnings] to grow the company.

Q: Why does it make sense for Televisa to grow in the U.S.?


It's the largest Spanish-speaking country. and it's going to grow in the next 10 years. A company that produces and transmits North American content, a NAFTA company that implies a fusion between Televisa and Univision would be excellent. The problem is that the [difference in] multiples between Televisa and Univision means that [a fusion] would dilute Televisa shareholders right now...but in the long run it would be favorable. [Meanwhile], there are many things that we can do together, such as co-production.

Q: Assuming Televisa can't find a way to increase its stake in, or control Univision, what will Televisa do when its exclusive programming deal with Univision runs out in 2017?


What will TV distribution be like in 2017? Will it really still be over the air or will it be via Internet? It's very difficult to say what will happen in technology over the next 10 years. Televisa must grow in the U.S. -- obviously in TV. But I believe we should grow in other areas, from pay TV to live entertainment and magazines.

Q: Will you take U.S. citizenship so that Televisa can become a broadcasting power there?


We have studied it, but there's no decision taken yet. It's not the only avenue -- there are other ways of doing that kind of business deal. I would have to spend 180 or 181 days a year per year there for five years [to qualify for citizenship]. Right now, it's not feasible, although I am spending more time there. It would completely change my life -- it's not that easy to move myself and my wife and stop seeing her family.

Q: For many years, Univision and Televisa had a testy partnership. How are relations today?


They were tense because Televisa knew it was receiving less than it deserved [for its programming}, and Univision was able to see that. They knew that an arrangement with Televisa would be a good thing and that if we are business partners we have to get along well. Jerry [Perenchino] and I have tried to create a relationship that is independent of the business. Before, our executives saw that there were differences of opinion between the owners of Univision and Televisa and so they didn't help each other. That was crazy. Today, things work much better.

Q: What makes you think that while you slowly plot your expansion in the U.S., that some other media giant won't come along and try to buy Univision?


Televisa's advantage is that it has the content and has proven that the content works. Other companies say they have produced Hispanic content, but none of it has worked [very well]. For me, the ideal thing would be to do a Televisa-Univision [merger], but if we put together Televisa and [another] American partner, I'd be happy with that too.

Q: Alfonso de Angoitia, one of your top executives, says he considers NBC's Telemundo Spanish channel a growing threat.


Throwing money around isn't [necessarily] the way to compete. If NBC's strategy is to say, I'll throw $100 million dollars [a year into Telemundo programming], well, I respect everyone's strategy, but I don't believe it will work for them. Telemundo has some things that are starting to work, and that's good [because] I believe there's room in the American market for everyone.

But Televisa has a production system that really works. We produce 18 telenovelas a year, and 15 of them turn out to be good. The difference lies in the experience we have, and in the production system which is unique...[that comes from] 30, 40, 50 years in the business.

Q: Televisa benefits because two-thirds of U.S. Hispanics are of Mexican origin. Does Televisa need to produce some shows that appeal to non-Mexicans, in order to do well in the U.S.?


Of course, there are 25% of viewers who aren't [Mexican], and that's an enormous market in itself that should be addressed. But I don't think you deal with that by putting a Salvadoran, a Puerto Rican, a Cuban, and a Colombian on a program. We believe we understand the U.S. Hispanic market very well, because we set up the first Spanish-language station in the U.S., back in 1961, so technically, Televisa has been in the U.S. Hispanic market for 43 years.

Q: A lot of the programming on Hispanic TV seems so frivolous and superficial -- game shows, soap operas, gorgeous women. Do you think more serious programming should be added?


We're thinking of running some of our historical documentaries, produced with [Mexican historian] Enrique Krauze. And practically all of our telenovelas deal with a social cause. We did a telenovela that dealt with organ transplants, and we collected 30,000 signature cards from new volunteer donors. Other telenovelas dealt with nutrition and violence against women, and we have one now dealing with handicapped people.

Q: For the last seven years, you've attended the media-entertainment-technology powwow that investment banker Herbert Allen Jr. organizes in Sun Valley.


Sun Valley is by far the best conference. I began going when I was 29 years old. Obviously I'm very proud of my company, but when you see the sales that a company like Disney (DIS ) or [Rupert Murdoch's] News Corp. (NWS ) or GE (GE ) has, you realize we're very small.

Two years ago I did a presentation there [on Televisa]. The only way to catch the attention of [Bill] Gates and Rupert Murdoch was to do something spectacular. So we produced something with surround sound that started with a girl holding a crystal sphere, and she tossed it at a screen which exploded. Everybody said the presentation was great, and possibly because of that, Bill Gates decided to invest in us. He figured Televisa was interesting.

Q: Televisa was founded by your grandfather and grew in prominence under your father. What is your main contribution?


Each quarter since I arrived at the helm has been better than we said it would be. [He walks over to his desk, where a large ceramic figure of a tiger cub rests on one corner. Azcárraga's father was known as El Tigre, or the Tiger, and his son has been called the Tiger Cub]. We had to impose some discipline in this company. A high-ranking executive brought me this statue he found on a business trip. He paid for it out of his expense account -- which he shouldn't have done. Needless to say, he left Televisa shortly thereafter.

I keep this statue on my desk as a reminder to employees that they are responsible to shareholders, not to me.

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