Under the terms of this first post-Nafta broadcast deal announced May 16, NBC will provide technical and management advice and programming to Azteca and has the option of purchasing 10% of the company for $120 million.
Azteca officials say NBC's in-vestment could grow to 20% of the company, valued at $328 million, after three years.
The arrangement marks the first time a U.S. broadcaster has ventured directly into broadcast TV in Latin America, and NBC is going up against formidable competition. Televisa, the world's largest Spanish-language entertainment conglomerate, is estimated to hold a 90% share of the TV ad market and 85% audience share for its three national networks. For that reason, analysts say it has little to worry about.
"We've estimated that by 1996, the Televisa audience share will decline to 80%, and this is just one step closer to that," said Lisbeth Barron, a media analyst at New York-based S.G. Warburg and Co., a securities firm.
She added, however, that TV Azteca gives NBC an important Mexican stepping stone. "Once the two of them are up and running, there are countries in Latin America they can sell to and even some countries in Europe."
Ricardo Peon, analyst at Baring Research Mexico, said it could be an expensive move, but if [NBC] doesn't move now, it might be too late.
Tom Rogers, president of NBC Cable and Business Development and exec VP of NBC Inc., said the deal is as signficant as NBC's acquisition of Europe's Super Channel and the new cable TV channels it is starting in the U.S.
Televisa, reporting 1993 sales of more than $1.9 billion, is also moving ahead with international projects, including negotiations for production of sales deals in India, Russia and Saudi Arabia. And at home, Televisa expects to establish a fourth network by the end of the year.
Since Ricardo Salinas Pliego bought TV Azteca from the government for $640 million last July, he has tried to court advertisers and lure an audience for his two national networks.
Advertisers have long desired an alternative to Televisa, which requires a full year's payment in advance in order to qualify for substantial discounting. Although Mexican banks and automakers have bought time on TV Azteca, Mr. Salinas has so far failed to attract large food, beverage and consumer products advertisers. The network is estimated to reach only 15% of the country's viewers.
Accepting that, the company has tried to attract small local advertisers such as funeral homes, offering such enticements as 60-day credit, advance purchase discounts and advice on finding ad agencies. If NBC can somehow make TV Azteca work, it has much to gain. Analysts estimate that real growth in Mexico's TV ad market could reach about 15% annually.
NBC, however, seems to be looking further into the future. "It's a foothold in Mexico through the only other [broadcast] company-which has nowhere to go but up," said Ms. Reif.
"We feel there is going to be an explosion of TV advertising dollars in Mexico," said Mr. Rogers. "It is a market where over 60% of every advertising dollar goes into TV spending, as opposed to the U.S., where it is only about 36%."
Televisa's TV ad sales rose 18.7% in 1993 over the previous year, despite Mexico's stagnant economic growth. "In the past few years, Mexico has presented a rapidly expanding television market," said Mr. Salinas in announcing the NBC partnership.
The new partnership offers TV Azteca access to NBC's programming but analysts question just how effective that will be in boosting ratings. "NBC gives them nothing new in terms of local programming," said Jessica Reif, a media analyst at Oppenheimer & Co., New York. "If you look at the top 20 programs in countries all over the world, 99% of the shows are locally produced."
NBC's 24-hour Spanish-language news service, Canal de Noticias, and its sports events may draw Mexican viewers, along with some dramatic and comedy series. And the partnership will eventually involve joint production to provide NBC a launching pad for expansion into Latin America.
Joe Mandese contributed to this story.