Spanish soap opera

Televisa-Univision suit may mask deeper struggle

MEXICO CITY — Is it the money or is it the power?

That’s the cliffhanger concluding the latest chapter of breathless melodrama, which has been unfolding between Grupo Televisa’s Emilio Azcarraga and Univision Communications’ A. Jerrold Perenchio, in recent months.

Last week, Televisa, which owns a 9.3% stake in the Los Angeles-based Spanish-language net, sued Univision for breach of contract and copyright infringement, calling for $1.5 million in allegedly lost royalties as well as protection from paying Univision $5.2 million it privately demanded from the Mexican net in March.

Simultaneously, the Televisa topper and his top deputy, Alfonso de Angoitia, stepped down from their respective positions of vice chair and alternate director at Univision.

It displays a new level of hostility between the companies, as Televisa becomes increasingly disenchanted with Univision’s style of business.

But it also calls into question the Mexican media giant’s real motives for the lawsuit. After all, it is being handled by one of the highest-profile litigators in the country — Boies, Schiller — for what is, essentially, a trivial amount of money.

One argument is that Televisa is looking for a way to renegotiate the 25-year content-sharing contract it signed with Univision in 1992 and reworked 3½ years ago.

In exchange for providing more than four-fifths of Univision’s primetime programming, Televisa receives 7.5% of Univision’s “combined net time sales” for all shows produced by the Mexican net. Last year, that amounted to $105 million, a paltry 4% of Televisa’s total revenue, while that programming makes up an estimated half of Univision revenue.

Unsurprisingly, Televisa is less than happy with the arrangement. But by getting a U.S. court to declare Univision in breach of contract, Televisa might pressure the U.S. net into renegotiating a fatter deal.

“If the tensions increase to the point where the continuity of the programming deals becomes questionable, Televisa would seem to have the upper hand,” UBS wrote in an analysts’ report.

On the other hand, some interpret the news as a power play in a longer-term fight to control Univision.

Azcarraga, 37, has made no secret of his desire to acquire the net co-founded by his father. He has gone so far as to move to Miami, the first step to seeking U.S. citizenship, which would allow him to own an American media concern under FCC rules.

But he’s reportedly been frustrated by the attitude of Perenchio, 74, who has made it clear he has no intentions of selling out. He angered Azcarraga in February by naming Ray Rodriguez, a former talent agent, to the long-vacant post of prexy-CEO at Univision, essentially lining him up as the successor to the net’s throne.

Rodriguez was chosen without consulting Televisa, and the net furiously responded by banning its exclusive talent from appearing on Univision programming.

(Televisa wasn’t the only vexed party. Venevision’s Gustavo Cisneros, which is another large stakeholder in Univision, was also allegedly angered by the unilateral decision, and independent director Fernando Aguirre, a Chiquita Brands exec, quit the net’s board.)

By going to court over royalties, Azcarraga may be showing Perenchio just how much weight he has to throw around, giving himself wiggle-room to demand a bigger role in decisionmaking at Univision.

For Televisa, losing the royalties “is a light blow compared with losing access to content that currently accounts for up to 90% of Univision’s primetime,” said investment bank Ixe in a report, and by threatening to pull it, the theory goes, Univision may have to start playing a bit nicer, especially since its own telenovela productions have largely been failures.

A civil trial would be months away at best, so viewers — and stockholders — will have to wait on the edge of their seats as they wonder whether Azcarraga is in it for the money, or for the power.