NEW YORK (AdAge.com) -- After years of dramatic threats and endless sniping, leading Spanish-language network Univision Communications and its main program supplier and former shareholder, Mexican media giant Grupo Televisa, will face off in court this week. Televisa is fighting to end the long-term programming agreement that supplies 40% of Univision's programming and most of its hit shows, a move Univision is fiercely resisting.
Univision, Grupo Televisa Will Finally Take Battle to Court
Media Group Alleges 'Material Breaches,' but Network Fiercely Denies
The trial starts April 29 in U.S. District Court in Los Angeles and is expected to last three or four weeks.
Televisa is alleging "material breaches" by Univision in the 25-year programming agreement that guarantees Univision exclusive rights to broadcast Televisa's shows in the U.S. until 2017. The two partners have always squabbled, but hostilities have escalated, especially since Univision was sold to private-equity partners last year for $13.7 billion, passing over a Televisa bid. And Televisa never liked Univision's chief operating officer, Ray Rodriguez, according to Univision's 66-page court filing outlining its case.
Immediately after the jury trial, a separate key issue will be decided by the judge alone: digital rights. Televisa claims that digital rights aren't covered in the original 1992 contract, giving it the right to target U.S. Hispanics with online programming. Univision insists that the agreement includes all broadcast media, even if it hadn't been invented when the contract was signed.
"It's more a question of who needs who more," said Julio Rumbaut, a pundit who advises Hispanic media companies as president of Miami-based consultancy Rumbaut & Co. "What if rational minds prevail before the jury decides? There are entrenched reasons and bad blood on both sides. Televisa is able to take that content and negotiate with [other TV networks]. They may need Univision less. But the bigger burden of proof is on Televisa."
In an effort to get out of the programming agreement, Televisa alleges that Univision owes the Mexican company money. Univision, with annual revenue of about $2 billion, including $1.6 billion from TV operations, pays Televisa about $130 million a year for programming, based on advertising sales. Crunching the numbers, Mr. Rumbaut calculates that about $517 million of Univision's 2007 revenue came from Televisa shows.
Court documents filed by Univision describe the dispute: "By far the single largest claim in this case is Televisa's assertion that it is entitled to receive royalty payments on unsold advertising time used by Univision divisions on the network. This claim comprises $85 million. ... The rest of the alleged breaches are hardly worth the king's ransom the parties will pay to try this case. And with respect to most of them, Univision has paid the money in question, albeit under protest."
Univision produces some of its own programs, but the top-rated Spanish-language shows in the U.S. are consistently the hour-long Televisa telenovelas Univision airs nightly. Last week the top 10 programs on Spanish-language TV were five episodes each of the novelas "Pasion" and "Al Diablo con los Guapos" ("To the Devil with the Beautiful"), according to Nielsen Co. data.
If Televisa prevails, the Mexican media group could negotiate a new, more favorable agreement with Univision or offer its programming to the highest bidder. There is even speculation that Televisa, thwarted in its attempt to buy Univision, might try to build a Spanish-language TV network of its own in the U.S. Televisa already controls about 70% of Mexico's TV market, so the U.S. is a crucial market for growth.
"We are confident that the facts are on our side and that Univision will prevail at trial once we present our case," the company said in a statement. Televisa had no comment.
Univision's upfront presentation, coming up May 14, is always packed with Televisa-produced blockbusters, but advertisers aren't panicking yet about top-rated programming disappearing.
"It's on everybody's radar and something they're keeping an eye on," said Ken Cervantes, VP-activation director at MediaVest's Hispanic media specialist, Forty-Two Degrees. "We're proceeding cautiously but are not necessarily super-concerned about looking at not purchasing Univision. [But] everyone will be looking to see what will be Univision's backup plan."