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Univision Communications Inc. Business Information, Profile, and History

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History of Univision Communications Inc.

Univision Communications Inc. owns and operates Univision, the leading Spanish-language television network in the United States, and Galavision, a Spanish-language cable television network. The company, in 1997, also owned and operated 21 television stations. The Univision network was providing, in addition to the company's own stations, 27 over-the-air and 835 cable affiliates with 24-hour-a-day programming.

Spanish-Language Pioneer, 1961-87

Univision began in 1961 as the Spanish International Communications Corp. (SICC), which was founded by Rene Anselmo, with the purchase of KWEX-TV in San Antonio, Texas. The Massachusetts-born Anselmo had worked in Mexico for Emilio Azcarraga Milmo, president of Telesistema Mexico (later Grupo Televisa), which indirectly provided SICC with 20 percent of its financing--the legal limit on foreign control of a television station--and all of its programming. Anselmo also became head of the Spanish International Network (SIN), established to handle advertising sales for the stations but eventually becoming a full-fledged network with more than 350 affiliated stations. Telesistema Mexico was able to hold 75 percent of SIN (with Anselmo holding the other 25 percent) because limits on foreign ownership of television stations did not extend to television networks.

SICC and SIN almost singlehandedly established Spanish-language television in the United States. By the autumn of 1968 SIN had added KMEX-TV in Los Angeles, WXTV in New York City, and KPAZ-TV in Phoenix to its holdings. All of these were UHF stations. Along with a non-SIN UHF station in Chicago, they constituted the only television stations in the United States broadcasting exclusively in Spanish. Five Mexican stations also belonged to the network.

During the 1970s the Spanish-speaking population of the United States increased seven times faster than the population at large.

SIN, in 1976, became the first network to deliver its signal by earth satellite. By paying $1.5 million for a transponder on Western Union's Westar II satellite, SIN was able to increase its potential outlets and pick up direct transmissions from abroad, while bringing its transmission costs down markedly.

Communications satellites greatly enhanced SIN's capabilities, enabling it to reach about two-thirds of all Hispanics in the United States by 1980, beaming 100 hours of weekly programming to ten over-the-air stations, 21 cable systems, and hundreds of CATV systems. By 1982 all but two of the 35 all-Spanish television stations in the United States were receiving programming from SIN. About 55 percent of the programming came from Televisa, with the other 45 percent produced in the United States. The fare included news, variety shows, World Cup soccer, and the wildly popular soap opera series known in Latin America as telenovelas. SIN's revenues were estimated at $10 million for 1978, $20 million for 1980, and $45 million for 1984. SICC, whose revenues came to about $90 million in 1985, also owned a string of Spanish-language radio stations.

In 1979 SIN also launched Galavision, a commercial-free pay cable television service in Spanish with programming beamed by satellite. First offered in Arizona, Colorado, New Mexico, and Florida, the Los Angeles-based network had 60,000 subscribers in early 1981 and more than 100,000 in early 1984. Featuring films, sports, and telenovelas, it was offering 14 hours a day of programming in early 1984. Galavision became a basic cable network in 1987 and in 1989 was on some 300 cable systems in 12 states and the District of Columbia. Its 24-hour-a-day fare of news, entertainment, and variety shows was supplied by Televisa and appeared to be aimed primarily at Mexican-Americans. Like SIN, Galavision was 75 percent owned by Azcarraga and other principals of Televisa and 25 percent owned by Anselmo. Galavision and a dozen other companies operated under a U.S. subsidiary of Televisa called Univisa.

Under Subsequent Ownership, 1987-95

In 1986 a Federal Communications Commission administrative law judge refused to renew the licenses of the SICC stations, ruling that they were under the control of Azcarraga and his relatives in violation of the 20 percent legal limit on ownership by foreigners. As a result, in 1987 SICC sold its ten TV stations for roughly $300 million to Hallmark Cards Inc. and its minority partner, First Chicago Venture Capital, who established Univision Holdings Inc. By the terms of the sale, SIN, which was renamed the Univision Network, was to provide all of the programming. In 1988 Hallmark purchased a majority stake in the Univision Network for $265 million. Revenues of Univision Holdings, including its network subsidiary, came to about $150 million that year.

Under the direction of William Grimes, formerly chief executive of ESPN Inc., Univision launched Spanish-language clones of such English-language shows as "Saturday Night Live," "Entertainment Tonight," "The People's Court," the Oprah Winfrey and Phil Donahue talk shows, and the "20/20" celebrity magazine-format program. It hired 16 more news correspondents and became noted for its coverage of Latin American hot spots, including the wars in El Salvador and Nicaragua. Its most popular offering, however, remained, "Sabado Gigante" ("Giant Saturday"), a three-hour-long combination variety-game-talk show, and the new programs it introduced were not as popular as the Televisa-made telenovelas they supplanted.

Univision and rival network Telemundo suffered from low advertising bookings; although Hispanics made up eight percent of U.S. residents in 1989, the Spanish-language networks received only about two percent of the $11 billion the Big Three--CBS, NBC, and ABC--collected in revenue from commercials. Univision reportedly lost about $50 million that year. Hallmark had taken on $555 million in debt to buy the stations and network, nearly half of it in the form of high-yielding junk bonds issued by Univision Holdings. When this subsidiary missed interest payments on the bonds in early 1990, Hallmark bought them back from the holders, but at a deep discount, paying only about 49 cents on the dollar. In 1992 Hallmark sold Univision Holdings to A. Jerrold Perenchio for $550 million.

Univision at this time had annual revenues of more than $200 million, 13 Spanish-language television stations, and a potential audience of 90 percent of the nation's Hispanic households. Perenchio, a non-Hispanic producer of TV shows who had owned and operated Spanish-language television stations, made his purchase in partnership with Grupo Televisa and Venevision, Venezuela's largest broadcasting company. Perenchio received 75 percent of the station group and 50 percent of the network, with the foreign companies splitting the remainder of each. They also received warrants enabling them to acquire 50 percent of the station group if U.S. laws were changed to permit greater foreign ownership of broadcast outlets.

This sale was approved by the FCC despite protests by Telemundo and three Hispanic groups who feared Univision would end production in the United States (where it was producing, in Miami, 41 percent of its programming) and farm all of its programming out to Televisa and Venevision. When Univision dropped three U.S.-made shows in 1993 (replacing two of them with Mexican programs) and fired 70 people who worked on them, critics of the network felt their misgivings were confirmed. By the end of 1997 Televisa and Venevision were providing Univision with 92 percent of its programming.

Some Hispanics of Caribbean background were already angry at the company because Galavision was being aimed at the growing Mexican and Central American population. And in late 1990 Puerto Ricans demonstrated in front of Univision's New York City metropolitan-area station to protest remarks during a program about Puerto Rican "welfare mothers." As a result of the controversy Coca-Cola and Goya Foods withdrew advertising from the network. At nearly the same time Mexican-Americans in Los Angeles were protesting what they perceived as the "Cubanization" of both Univision and Telemundo in hiring and programming. The protests against Univision in Los Angeles began in May 1989, after the network announced it was consolidating its operations in Miami, where Cuban-Americans had a large presence and there were few Mexican-Americans.

Univision won some praise from Hispanics (as well as some criticism by non-Hispanics) for donating $100,000 in 1994 to a group fighting the ballot initiative known as Proposition 187, which sought to deny government benefits to illegal immigrants in California. Ironically, at the same time Perenchio was making huge donations to Governor Pete Wilson of California and the Republican Party, whose policies--including support for Proposition 187--were unpopular with many Hispanics.

Univision in the Middle and Late 1990s

Between 1992 and 1997, Univision's share of Spanish-language television viewing in the United States grew from 57 to 83 percent. With the acquisition of Chicago and Houston stations in 1994 and a Sacramento station in 1997, Univision was operating 13 full-power over-the-air UHF stations, including 12 in the top 15 metropolitan areas in terms of numbers of Hispanic households. Each ranked first in Spanish-language television viewership in its metropolitan area, as did all of Univision's ten full-power affiliated stations.

Much of Univision's fare was similar to that offered by the U.S. English-language networks, starting with "Despierta America," a "Today"-type early morning program, and continuing with a morning talk show, "Maite," another talk show, "Cristina," the popular magazine show "Primer Impacto," and, of course, the telenovelas.

Cuban-born Cristina Seralegui claimed to be the most watched talk show host on earth, seen by 100 million people from Boston to Chile. In 1997 the network added a late night variety show, "Al Ritmo de la Noche." Of the 20 top prime-time Spanish-language programs in the United States in that year, the first 14 all belonged to Univision.

"Noticiero Univision" was the most influential and highest-rated Spanish-language news program in the United States. WLTV, the Univision affiliate in Miami, led the CBS, NBC, and Fox stations in news ratings, and KMEX, in Los Angeles, led all of the network newscasts. According to a 1994 study, 45 percent of a typical "Noticiero Univision" broadcast dealt with Latin American events, compared with less than two percent of the main nightly ABC newscast. A 1996 poll found that Univision was the second most trusted institution among the nation's Hispanics, trailing only the Roman Catholic Church. In smaller, poorer Latin American countries, television stations often simply taped Univision stories for their own use.

As a subsidiary of Univisa, Galavision had not been included in the sale of SIN to Hallmark, but it was acquired by Univision in July 1996. This cable network was offering such attractions as classic movies, original series, and exclusive rights to sporting events, including baseball's Caribbean World Series and Mexican League soccer championship games. Galavision, in 1997, was reaching about 2.5 million of the 4.4 million Hispanic households wired for cable service on more than 370 U.S. cable systems. After the parent company joined with Home Shopping Network to form Spanish Shopping Network in 1997, Galavision began carrying its offerings.

Galavision was also being used by the parent company to connect with younger, bilingual, or English-dominant Hispanics in the United States reported to be turning away or turned off by Univision's programming. A Hispanic producer told a Los Angeles Times reporter, "In a lot of Latino households, mom and pop are at one TV set watching telenovelas and the kids are at another set watching 'Moesha' or 'Friends."' Galavision began targeting this segment of the market in 1997 with two English-language shows aimed at Hispanics: "Cafe Ole with Giselle Fernandez," including crossover Latino actors as celebrity guests, and "Funny Is Funny," an all-comedy half-hour series hosted by comedian Carlos Mencias.

The station group, Univision Communications, made its initial public offering in September 1996, selling 19 percent of its common stock at $23 a share. In early 1998 Perenchio held 26.5 percent of the Class A common stock, while Grupo Televisa and Venevision each held 10.3 percent, plus warrants that if exercised would nearly double their stakes. Because of his full ownership of Class P stock, however, Perenchio held 78.5 percent of the voting power.

Curiously, Perenchio's partners also were potential threats to Univision's future. Televisa, for example, had agreed with several partners to develop and operate a direct broadcast satellite venture that would use Televisa programming. Univision was threatening legal action, contending that it had exclusive rights to any such venture. Similarly, Univision said it was considering action against Venevision, claiming that the Venezuelan network had not made available the nine hours per day of programming required by an agreement that locked in Univision's rights to Televisa's and Venevision's telenovela output through 2017.

Univision's net revenues grew from $104.7 million in 1993 to $459.7 million in 1997. After losing money in 1993, 1994, and 1995, the company had net income of $10.4 million in 1996 and $82.6 million in 1997, including $19.5 million as a carryover for earlier losses. Univision's 1997 revenues were almost double the previous year's, primarily reflecting the acquisition of Univision Network L.P. in October 1996. Interest expenses in 1997 came to $40.1 million. The company's long-term debt was $481.3 million in September 1997.

Principal Subsidiaries: Galavision, Inc.; PTI Holdings, Inc.; Sunshine Acquisition Corp.; Sunshine Acquisition, L.P.; and California general partnerships for each of Univision's 13 full-power stations.

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