Network Claims Turf

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In the race for Hispanic TV viewers, Azteca America runs a distant third.


But this summer the network hopes to narrow the gap by moving its headquarters to Los Angeles and taking on market leader Univision Communications Inc. on its own turf.


“The move to Los Angeles is part of an evolution,” said Azteca America Chairman Luis J. Echarte, who currently resides in Mexico City. “Now that we’re producing money, it was time to move the corporate headquarters to where the market is.”


Advertising professionals have taken note of the network’s step into U.S.-based production.


“They have content; if they can get their distribution set and get some low-to-high power stations in the (U.S.) market, they are poised to make an impact,” said Teddy Hayes, vice-president of media services at Los Angeles-based La Agencia de Orci y Asociados.


Azteca America feels natural in its position as the come-from-behind network. The company is the U.S. subsidiary of Mexican network TV Azteca, which has always operated in the shadow of media giant Televisa.


For more than half a century Televisa maintained a virtual monopoly as the only commercial TV network in Mexico. Token competition came from a pair of government-owned stations in Mexico City called Imevision. But in 1993 the government sold Imevision to retail entrepreneur Ricardo Salinas Pliego, who immediately changed the name to TV Azteca.


At the time of the sale, Imevision controlled about 2 percent of the Mexican audience. Today, Azteca controls about 40 percent vs. Televisa’s 60 percent, according to Echarte.


In the beginning, TV Azteca competed by importing programs into Mexico “Los Simpson,” for example but the upstart gradually increased its production to the point it could export to other territories, particularly the U.S.


The company launched Azteca America in 2001. Financially, the parent corporation now garners about 35 percent of the advertising money in the Mexican market. In February it reported annual revenues of $797 million and an impressive EBITDA margin (earning before interest, taxes, depreciation and amortization) of 45 percent.



Local heroes?


To attract more U.S. viewers, Azteca America unveiled its upcoming programming slate on May 25 at the Skirball Center in its upfront presentation, in which advertisers screened shows and could reserve commercial time. Holding the event in Los Angeles coincided with the announcement that the company would move its U.S. production and corporate offices here.


The presentation included introductory remarks from City Council President Eric Garcetti. “He was delighted to welcome them to Los Angeles,” said a spokesman for Garcetti. “It wouldn’t be right to say he facilitated the transition, but in terms of their corporate affairs, we always want to roll out the welcome mat.”


In terms of local production, Azteca America plans to duplicate popular program formats from Mexico. The move to Los Angeles underpins two such shows: “Ventaneando” and “La Academia.”


“Ventaneando” (“Windowing” in Spanish) is a show biz gossip show. The Mexico City version has proven popular, and now Azteca America hopes to repeat the success with U.S.-based gossip and celebrity interviews. While the concept is familiar, Echarte promised that the show will cover competitor’s shows and personalities as well as Azteca’s. In contrast, Univision magazine shows focus predominantly on promoting the network’s own properties.


“La Academia” blends the dual realities of “Big Brother” and “American Idol.” A group of young singers live together in a school for the performing arts. During the week, viewers watch the intrigues and challenges of their training. Every Sunday, the vocalists perform in concert, after which viewers vote and toss one contestant from the competition. The format fits the Mexican TV traditions of “stripped” programming (every weeknight) and variety-show concerts on Sunday evening.


Both “Ventaneando” and “La Academia” will benefit directly from production in L.A. one from easy access to show biz information and personalities, the other from an ample supply of “wanna-be” talent.


Also at the upfront, Azteca introduced two telenovelas that enjoyed ample success in Mexico. Telenovelas supplied by Televisa account for the lion’s share of Univision program, and Echarte believes his network can follow the same pattern. “Since we compete against Televisa in Mexico, we can compete against Univision here,” he said.



Space to grow


Because a foreign corporation owns Azteca America, it faces special challenges on the distribution front. Federal law prohibits a foreign entity from owning more than 25 percent of a U.S. broadcast station.


Currently, Azteca owns the network including the right to sell national advertising while various U.S. groups own the stations. The original station partner, Pappas Telecasting, owns flagship station KAZA-TV (Channel 54) in Glendale.


The network has 46 affiliates that reach 83 percent of the U.S. Hispanic population, according to a company spokesman. Echarte spent 15 days a month last year flying around the U.S., trying to convince broadcasters to carry his signal. He admits that “we still need to improve our distribution to compete with Telemundo and Univision.”


He can point to several recent victories. Earlier this year Azteca America reached an agreement with Comcast for cable carriage, and one of its affiliate groups received a capital infusion from Alta Communications to buy 11 stations. But the biggest win came in late 2005 when it passed the threshold of coverage to merit certification as a national network by Nielsen Media Research Inc.


Ratings should help the ad sales force, which works on three levels: network, local, and a national spot team. Although Azteca provides a programming feed 24-7, affiliates only have to carry the signal during certain hours. At other times, they can air infomercials and local or syndicated programs. During Azteca shows, the commercial slots divide 50-50 between the network and the affiliate a reflection of the ownership structure between Azteca and the stations.


The move to Los Angeles will involve expansion of production facilities at the Glendale station to accommodate its new shows. The corporate headquarters, consisting of 10,000 to 15,000 square feet, will relocate to Hollywood or Century City, Echarte said. He expects the transition to finalize by November.


Echarte feels the relocation, rather than putting Azteca in the shadow of Univision, provides a perfect home for his network since the vast majority of L.A. Hispanics are of Mexican background. “For us, this is a good opportunity to come from behind,” he said. “We are positioned everywhere, but Los Angeles fits us like a glove.”

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