Emilio Azcárraga Jean, who owns the largest empire in Spanish-language television, spoke with Universia-Knowledge at Wharton about the fundamental role of quality, values and responsibility in his business model. The ambitious Azcárraga views the United States as his natural market, and Spain as his entry point into Europe. He believes high-quality content is the only weapon that can win over any market. For him, language and culture are not barriers — “successful products can always be adapted to the peculiarities of each country,” he says — and new technologies are not a threat. On the contrary, he views them as an additional channel of distribution.
His decisiveness in taking control of Televisa, following the death of his father in 1997, has produced strong results year after year and earned him the respect of the marketplace. Initially, there was little confidence that he could successfully manage the company.
He was barely 29 years old and the media giant was then on shaky ground. In addition to a family feud over his inheritance, the younger Azcárraga had to deal with corporate debt of $1.8 billion, a bloated payroll — 20,000 employees compared with 15,000 today — and a decline in the [TV show] ratings that had inspired Wall Street’s confidence in the company. Televisa missed the strong leadership of the current CEO’s father, Emilio Azcárraga Milmo. Known as ‘The Tiger,’ the elder Azcárraga had established a style of vertical management that left little room for flexibility in decision-making.
The younger Azcárraga decided to break with the past by introducing a style of management that gave more autonomy to the company’s various divisions. “I trust my management team a lot,” says Azcárraga, now 37. Team work played a key role in restoring the company’s health. “In 2005, we distributed the largest dividend in our history,” he says. He also led the company through a severe restructuring process, cutting costs by 40%. As a result of these efforts, Televisa finished the past fiscal year with sales of 29.11 billion (mexican peso) and a profit margin of 15%.
The Mexican Challenge in the U.S.
As the biggest shareholder in Univision, the largest Spanish-language chain in the United States, Azcárraga believes Televisa’s natural market transcends the borders of his native Mexico. “We do not compete only in Latin America. The United States is our main objective,” he says. “We see a tremendous growth opportunity in the Hispanic market. That’s why we bought Teve.” He also owns three of the fastest-growing magazines in the United States.
Aware of the strong competition, Azcárraga praises his rivals, especially the NBC television network, which he calls “our main competitor.” To deal with that threat, he is focusing on “producing good content. The key difference is between good and bad content, not whether it is from the U.S. or is Hispanic.” He provides some advice for Mexican companies: “Corona Beer serves as an example that we have good products that we can export to the United States.”
Azcárraga criticizes the view that Mexico’s only competitive advantage is its low production costs. “We have real business opportunities in different parts of the U.S., thanks to our immigrants,” he says. “Today, in the United States, it is very important to speak Spanish because there is a market of millions of people that you need to understand.” Spanish-language media can take advantage of some strong cultural ties, especially with Mexican immigrants. “We Latinos are very attached to our families and we always keep one foot planted in our homeland. For example, many Mexicans in the U.S. continue to pay their social security contributions in Mexico because they anticipate retiring there.”
However, Televisa does not want to limit its activity in the U.S. to the Hispanic market. It also hopes to win over the English-speaking public. Its strategy is to create alliances and co-productions, and provide a consistent, high-quality brand. “To capture the U.S. public, we need to analyze the products that have been winners in Spanish and produce them in English. However, it is not just about dubbing the language. It may also be about producing those programs again, using American actors in U.S. locations. It’s about adapting quality products to the unique characteristics of each country and culture. It’s what I call ‘localizing’ the idea.”
Azcárraga has the same recipe for getting into both the U.S. and European markets. On May 3, he announced that his company is about to enter Europe. He was speaking at a meeting of the Sumaq Summit 2004: International Business Strategies in Latin America, which was organized by the Instituto de Empresa (Spain), the Monterrey Institute of Technology (Mexico), the INCAE Business School (Costa Rica), the Getulio Vargas Foundation (Brazil), the University of San Andres (Argentina), the University of the Andes (Colombia), IESA (Venezuela) and the Pontifical Catholic University of Chile.
His idea involves moving into Spain first and broadening his presence to the rest of Europe later on. “We are planning an alliance with a local partner,” he said, without mentioning any names. However, he cited an agreement that he has with Grupo Prisa, the largest Spanish media communication firm. Prisa owns El Pais, Spain’s leading daily, and Cadena Ser, Spain’s largest radio chain. It is also the largest shareholder in Sogecable, which operates the Canal+ television channel, and has an alliance with CNN+.
Four years ago, Grupo Prisa became Televisa’s partner in Mexico by purchasing a 50% ownership in Azcárraga’s radio chain, known as Radiópolis, for a price of $60 million. The close ties between Azcárraga and Jesús de Polanco, president and owner of Grupo Prisa, have spawned rumors that Azcárraga will use Grupo Prisa as a launching pad to enter Spain. No possibility can be ruled out, including co-production, co-ownership or an exchange of shares. “We have to work on communicating ideas between Spain and Mexico that we can use for co-productions,” Azcárraga explains. “It is hard to have a good idea for a television program. We have to use their ideas and take advantage of speaking the same language.”
Azcárraga realizes he cannot claim to know every country. On the contrary, each market is different and it makes sense to form alliances with local companies. That’s something some Spanish companies failed to keep in mind when they expanded in Latin America. “For example, things did not go well in Argentina because it is not just about buying [companies], but also about knowing the market. You achieve this with partners,” he says.
He also detects some hesitancy among European companies in his sector. “I believe that, generally speaking, Europe was too late in privatizing its television. This provided an advantage to programming that came from America. It has broader appeal because it has been around longer.”
New Technologies Bring New Opportunities
Azcárraga defends advances in technology. “Whatever your technology is, if you produce good content, people will buy what you create.” He jokes about fears that print media could eventually disappear. “The Internet is not a problem for magazines and newspapers. It is a problem for the paper industry. I see the Internet as an advantage for distribution; I read a couple of online newspapers.”
Industry is undergoing a process of change, he insists. With the emergence of new technologies, “the editorial question is, quite simply, transformed.” But the revolution in technology is not merely forcing print media firms to rethink their business models. Other sectors, including the film and music industries, are also suffering the effects of this new form of competition.
In response to alarmists who say the Internet will eventually dominate the market, Azcárraga comments: “Going out to the movies is a pleasant experience. Going out to buy some good music is also fun. As long as buying a newspaper is a pleasant experience, newspapers will continue to survive.”