Exclusive Interview: Televisa’s Emilio Azcárraga Jean

PREMIUM: Emilio Azcárraga Jean, the chairman of the board and CEO of Grupo Televisa who has been named MIPCOM’s Personality of the Year, shares with World Screen his strategy for the Mexican media giant’s continued international expansion.

WS: Televisa acquired a substantial stake in Univision Communications, and also expanded its long-term program licensing agreement with the Hispanic broadcaster. How important is the U.S. Hispanic market for your company’s expansion?
AZCÁRRAGA: The Hispanic market in the U.S. is almost as natural to Televisa as the Mexican market. There are more than 50 million Hispanics in the U.S., of which more than two thirds are of Mexican origin. Televisa is undoubtedly the best cultural link between these people and their home country. We are the link to their traditions, their language and their values. We also keep them informed of what’s going on in their country. This minority is no longer a minority; these 50 million Hispanics represent more than $1 trillion dollars of disposable income, so they are also an enormous business opportunity. Hispanics are already a prominent demographic in all aspects of American life. That is likely to continue. Not only that. Hispanics are young. Their median age is 28 years, nine years younger than the total market median age.

Univision is the leader in this segment. During the second quarter of 2012, Univision finished as the number three network in the country among adults—regardless of language—and on Friday nights, it earned the title of number one network among young adults. Televisa’s programming continues to have solid success among the Hispanic audience. During the quarter, three of our productions were among the top ten watched serialized programs transmitted in prime time, also regardless of language.

In 2010, we made an investment of $1.2 billion to acquire a 5-percent equity stake in Univision, and debentures convertible into an additional 30-percent equity stake in the future, subject to regulatory changes. We also renegotiated our programming license agreement, which provides Univision with access to practically all of our audiovisual content, in exchange for a royalty of close to 12 percent of their television and online revenues. Through Univision, we have a unique opportunity to benefit from the growing appeal of this demographic to the advertising clients, and also from their continued loyalty and preference for our content.

We have a great working relationship with Univision’s management team and a firm commitment to help them make the most out of the content that we provide them with.

WS: Televisa closed a deal with Netflix providing it with 3,000 hours per year of novelas and general entertainment shows. Why was this an important deal?
AZCÁRRAGA: The agreement with Netflix expands the availability of Televisa programming in Latin America, Brazil and the Caribbean, where Netflix can make it available via subscription streaming.

With this deal we expand the reach of our content. In Televisa we are convinced that “content is king” but it is also our belief that the content should be distributed through all available outlets. Since the beginning of our company, we have adapted to every emerging distribution platform. Today, Netflix represents one of the growing distribution alternatives in which we want to participate.

Under the terms of this agreement, Televisa makes available to Netflix on a non-exclusive basis around 3,000 hours annually of telenovelas, series, and other general entertainment programming from its extensive library. As part of the agreement, current content is made available to Netflix one year after it is broadcast on over-the-air television.

We have more than 50,000 hours of content ready for digital distribution, so this agreement is a really good way to get started monetizing the value of this content.

WS: Grupo Televisa announced Televisa USA. In terms of international expansion, why is the English-language market of interest to Televisa? What can Televisa contribute to it?
AZCÁRRAGA: The U.S. English-language market is the largest and most dynamic content market in the world. Televisa is a global player and we know that we have a competitive edge to compete in this market. We are storytellers; we develop stories with universal appeal. Additionally, no one in the world dominates the telenovela format as we do.

Televisa USA launched with multiple broadcast-network deals, including the joint venture with Lions­gate, to develop new content for television audiences all over the U.S.

Televisa USA is being led by Paul Presburger, who will also continue to act as chief executive of Pantelion Films. Its chief creative officer will be Michael Garcia, who was VP of drama series for HBO and oversaw programs such as The Sopranos, Six Feet Under and The Wire.
Just recently, Televisa USA completed production of Devious Maids, a pilot co-produced with ABC Studios and Oasis Media Group and to be transmitted by Lifetime Networks. With Nickelodeon, we are also co-producing Hollywood Heights, an English-language adaptation of Alcanzar Una Estrella, the popular Mexican series.

Our daily series will allow U.S. networks to tap into the five-day-a-week format, which gives advertisers a unique vehicle to sell their goods or services, while providing the networks with a very cost-efficient way to produce high-quality content.

This venture is an opportunity for Televisa to bring its successful business model, and great storytelling, to the English-language market in the United States.

WS: What factors have been driving the success of Televisa Networks? What international expansion do you see for Televisa Networks?
AZCÁRRAGA: As of the end of the second quarter, our pay-TV network business reached 32 million subscribers around the world, carrying on average six networks each.

Close to 9 million of these subscribers are in Mexico, where most of our subscribers get at least 14 of our networks. Of the balance, approximately 26 million, the large majority, are in Latin America where we reach 19 countries, but we also have a presence in Europe and the United States.

Our most popular network in the region is by far our general-entertainment pay-TV network, but we have other channels with very strong appeal in the region, including our classic telenovelas channel, our movie channel, and our classic-entertainment channel. Also, we have strong success with two of our music and lifestyle channels.

The timing is perfect for our pay-TV network business. We have a solid and well-rounded portfolio of networks targeting almost every demographic, and we also have the right environment: pay-TV adoption is growing fast.

But the opportunity for us in this business comes not only from growing pay-TV adoption. It also results from the fact that higher pay-TV penetration is allowing many of our networks to reach the critical mass necessary to become attractive advertising vehicles for our clients.
In addition, the growing popularity of our networks is allowing us to increase the number of channels per subscriber. For example, in spite of far more competition, the average rating for Televisa’s top 15 pay-TV networks has more than doubled since 2003.

WS: Some analysts in the U.S. and Europe are saying that the future of television is not in free TV, which is only advertising supported, but in cable and satellite TV, which has a dual revenue stream of advertising and subscriptions. As Televisa operates both free TV and pay TV, how do you see the future of both?
AZCÁRRAGA: We believe that over-the-air television will play an important role in Mexican households for many years. Not everyone will be able to afford pay TV, and not everyone will want to.

Prices of pay-television packages in Mexico are rock bottom, which explains the fast growth in pay-TV adoption. But the quality of over-the-air television also plays a role.

Our over-the-air channels provide some of the best content available on television, including our most successful telenovelas, entertainment shows, newscasts, and many of the most important sporting events.
Fortunately for us, we also have the ability to reach the pay-TV viewer through many of our pay-TV networks, which are among the highest rated on pay television.

If that pay-TV customer is also a customer of one of our cable companies, then we also have an opportunity to capture a revenue stream coming from voice and data services, in addition to an affiliate fee and the advertising revenue on that channel. This is where the expansion beyond content, and into distribution, plays an important role for the purpose of diversifying our revenue base.

WS: You have been named MIPCOM’s 2012 Personality of the Year. What does this mean for you personally and for Televisa’s position as a major player in the international market?
AZCÁRRAGA: Over the last few years we have been working hard on protecting the value of our content, and on finding ways to expand its reach.

We have gone from a mostly domestic, advertising-driven business model, to one that maximizes the value of our content by tapping its multiple sources of revenue, from advertising, to streaming, to licensing, to subscription revenue.

We also made some inroads in the export of our business model to places as far as China. We continue to believe that our expertise in the production of content is best put to work when doing so together with experts in each of the markets that we access, and we are fortunate to have as our partners some of the most capable companies in the media industry.

I am very proud of the progress we have made and excited about the prospects for our business.