A long-running feud between Univision Communications and the Mexican broadcaster that provides most of its programming is headed for a showdown in a federal court in Los Angeles. If Univision loses, it could see many of its prime-time shows yanked.
While a dispute over royalty payments is the source of the current dispute, tensions between the two companies date back to bad blood between Univision's former chief, A. Jerrold Perenchio, and the late Emilio Azcarraga Milmo, who felt he got a bad deal in 1992 when the two men negotiated the original contract. If the Mexican company, Grupo Televisa, wins and pulls its programming, Univision's enterprise value could be chopped by more than $1 billion.
The lawsuit centers on a program license agreement, or PLA, between Televisa, the dominant broadcaster in Mexico, and L.A.'s Univision, the dominant Spanish-language TV network in the U.S. and owner of KMEX-TV (Channel 34) in Westchester. The agreement gives Univision the exclusive right to air Televisa shows in the United States.
If Televisa were allowed to pull its popular Spanish-language telenovela programs from Univision, the company says it could sell the shows to other groups for much more money.
Currently, Televisa supplies Univision with about 15 hours of prime-time shows each week. Advertising on those programs account for about 40 percent of Univision's revenues, according to Julio Rumbaut, a Miami-based TV consultant.
Under the programming agreement, Univision must pay royalties of 9 percent on advertising sold during Televisa programming. But some time around 2004, Univision changed the way it calculates those royalties, resulting in much lower payments. Also, Univision sued Televisa for $118 million in refunds, claiming the new calculations were retroactive.
Televisa countered, claiming Univision had "materially breached" its agreement, thus voiding the contract, which was scheduled to continue until 2017. That countersuit plus rounds of supplementary charges on both sides is scheduled for trial April 29 in federal court.
The companies still deal with each other on a daily basis and Televisa continues to provide Univision with programming at least for now.
"The jury will decide if the breaches are material," said Marshall Grossman, an attorney with Bingham McCutchen who represents Televisa. If so, "then Televisa will have the option to terminate the contract. This is a powerful and rarely used procedure, but we have invoked it here and we are dead serious about it."
However, Univision general counsel Doug Kranwinkle said there's no basis for a finding of a material breach. Since the litigation started, Univision has paid approximately $20 million of the disputed amount under protest to Televisa. So even if the jury rules in favor of Televisa, it presumably could keep that money, the payments would be up to date and the contract still valid.
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