Univision was sold in March 2007 during the private-equity boom to a consortium of five investors for $13.7 billion, a price that now looks expensive, especially with a $500 million debt payment coming up in March 2009. The plan was to partially finance that payment from asset sales, which have gone more slowly, and at lower prices, than expected. So far, the biggest sale has been the music division, for $153 million earlier this year.
"We continue to pursue the sale of select assets, albeit more slowly because of the current environment, but due to our cash position we are able to take a disciplined approach and wait until we will receive appropriate value," a company spokesperson said.
And Univision's legal battle against Grupo Televisa, the Mexican media giant and former shareholder that supplies 40% of Univision's programming and all of its telenovelas, is heating up again, with a trial date of Jan. 6, 2009. The trial, originally set for April 29 in U.S. District Court in Los Angeles, has been postponed four times this year to allow the two sides to try to settle out of court, which now looks unlikely.
"There are no settlement discussions, and no settlement is likely," sad Marshall Grossman, an attorney at Televisa's law firm, Bingham McCutchen. "The relationship has deteriorated to the point it's no longer reparable."
"We believe that going to trial is the right path to follow, and that we will prevail and continue to enjoy exclusive U.S. rights to Televisa programming through 2017, when the current contract terminates," the spokesperson said.
The fight is especially bitter because Univision passed over Televisa's own bid to buy the company last year. Televisa alleges "material breaches" by Univision that would allow Televisa to end the 25-year programming agreement that guarantees Univision exclusive rights to broadcast Televisa's shows in the U.S. until 2017. Univision pays Televisa about $130 million a year for programs, based on advertising sales, and dismisses Televisa's claims that it is owed more although the company has been making additional payments under protest.
Immediately after the jury trial, if the programming agreement is still in force, a separate key issue will be decided by the judge alone: digital rights. Televisa says it should have the right to target U.S. Hispanics with online programming. Univision claims the 1992 agreement covers all broadcast media, even though digital media didn't exist then. Right now, only a version of Televisa's website, esmas.com, that strips out all the video material can be seen in the U.S.
For years Spanish-language TV basked in double-digit annual growth, and even as TV ad revenue slowed in recent years, Hispanic networks could count on growth 3% or 4% higher than that of general-market networks.
In the first eight months of 2008, ad spending on Spanish-language TV grew by just 0.3%, said Jon Swallen, senior VP-research at TNS Media Intelligence.
"They're on a par with the total market," he said.
Univision's third-quarter results won't be announced until mid-November, but the second quarter of 2008 showed a drop in both revenue and operating income. In the first half of the year, revenue was flat at $991.9 million, and operating income before depreciation and amortization dropped 5.8% to $370.8 million. In the second quarter, even though ratings were up, revenue fell 4.3% to $533.1 million, and operating income was down by 10.9% to $219 million.