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UNIVISION AND TELEVISA CLASH OVER PROGRAMMING

Lawsuit and Boardroom Drama Rock Spanish-Language Media Giants

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NEW YORK (Adage.com) -- In an escalation of the tensions between Spanish-language TV network Univision and Mexican media giant Televisa, one of Univision’s biggest shareholders and program suppliers, Televisa has filed a complaint against Univision in a U.S. court and two Televisa executives have stormed off Univision’s board of directors.
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Battle over exec appointment
Relations have been tense between the two companies since Univision’s controlling shareholder, A. Jerrold Perenchio, promoted Ray Rodriguez to chief operating officer earlier this year. Televisa was believed to have its own candidate for the network job. In retaliation, Televisa pulled its TV stars from participating in Univision events.

Univision today filed two corporate announcements called 8-Ks. In one, the company said Televisa’s owner, Chairman-CEO Emilio Azcarraga Jean, had resigned from Univision’s board of directors, along with Alfonso de Angoita, Televisa’s executive vice president.

Major supplier of programming
Jessica Reif Cohen, an analyst at Merrill Lynch, said in a note she issued today that Televisa supplies 80% to 90% of Univision’s prime-time programming.

“We believe that Univision’s most significant competitive advantage is exclusive right to Televisa's programming through 2017, which puts Univision in the enviable position of having no development costs and few program failures, as all of its Televisa programming is effectively pre-tested in Mexico,” she said in the note. “We regard Televisa as the Hollywood of Spanish-language television programming.”

Televisa alleges breach of contract
In Univision’s second corporate filing, the network reported that Televisa filed a complaint yesterday in the U.S. District Court, Central District of California, alleging a breach by Univision of its program license agreement with Televisa. The breach included Univision’s alleged failure to pay Televisa royalties for one of its programs and unauthorized editing of certain Televisa programs, the filing said. In its claim, Televisa is seeking monetary relief of at least $1.5 million for the alleged breach.

Univision denied any breach of its license agreement with Televisa and said in the filing that the company “intends to vigorously defend the lawsuit.”

“The real question is what Televisa plans to do next,” Ms. Reif Cohen said. “Given Mr. Perenchio's super-voting rights, there is little chance that Televisa could gain control of the company (though it has clearly stated that it would like to). However, the decision to leave the Board could be a sign that Televisa plans to escalate the current dispute over the royalty agreement.”

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