Big Stakes Merger

Combined Univision, Hispanic Broadcasting Corporation could be a media goliath

By C. Stone Brown
Published on LatinoLA: August 12, 2003

Big Stakes Merger

Los Angeles-based Univision Communications, the nation's largest Spanish-language media company, wants to acquire Dallas-based Hispanic Broadcasting Corporation (HBC). Since the two companies control a sizable portion of the Spanish-language television and radio market, there is fear among rivals a merger would limit diversity of viewpoints, political opinions and shrink the number of outlets advertisers would have in reaching the huge Latino consumer market. However, supporters contend that with the ever-increasing competition for Latino consumer dollars, Spanish-language media must get bigger to compete with major English-language networks for advertisers.

Why has this particular merger caused so much controversy?

"[The merger] takes a company that currently has over half of all Spanish-language media by any estimate and combines it with the largest Spanish-radio company in the country ? so it takes an already vertically integrated dominant company and makes it even bigger," says P.C. Cook, spokesperson for the Coconut Grove, Fla.-based rival Spanish Broadcasting System (SBS).

"Univision," Cook says, "is either a monopoly or dominant in television, cable television, television production, Internet portal and concert promotions."

Univision is dominant in the Spanish-language media market, reaching 97 percent of the 10.4 million U.S. Latino households through its three networks, TeleFutura Network, a 24-hour general-interest television network, and Galavision, the leading Spanish-language cable network. Univision owns 23 television stations, 42 affiliates and more than 1,100 cable affiliates, while HBC, who it seeks to acquire, currently owns or programs 69 radio stations in 17 of the top 25 Latino markets and Puerto Rico.

The combined company would be a goliath, compared with its closest Spanish-language media rivals, such as SBS, founded in 1983 by Cuban-exile Pablo Raul Alarc?n Sr. SBS owns 27 radio stations in 7 of the top ten Latino markets. Telemundo, the NBC-owned Spanish-language network based in Hialeah, Fla., controls 15 owned-and-operated television stations.

But comparing a merged Univision/HBC with other Spanish-language media isn't fair, claims Univision, because it's not just in competition with Spanish-language media companies. "The reality is Univision competes directly with major English-language broadcasters, NBC, ABC, and FOX, plus cable channels for Hispanic viewers," says Univision spokesperson Stephanie Pillersdorf. "Although we get 5 percent of an audience, we get less than 2 percent of the advertising dollars spent. They feel in order to really compete with NBC, Viacom, ABC, etc ? it needs to get bigger so that it can get that extra 2 percent to 3 percent of advertising dollars."

Pillersdorf contends that if the merger takes place, Univision would be able to do more of what it does best for the Latino community.

"One of the things that is really getting lost in all of this is that Univision does seven times more public-service announcements on the air than any other network," she says, noting the merger would result in more local programming for underserved Latino communities.

What many see at stake in this mega-merger is a sizable share of the estimated $580.5 billion in Latino consumer-buying power, a widely used dollar estimate that comes from the Selig Center for Economic Growth at the University of Georgia.

Indeed, Latino consumer-buying power is underserved by advertisers, according to the Right-Spend an annual Latino consumer-spending report compiled by the Association of Hispanic Advertising Agencies (AHAA), based in McLean, Va., and a merger supporter.

"As the leading voice for the Hispanic advertising and media industry, AHAA certainly feels strongly that we have to demonstrate a leadership position in this issue," says AHAA President-elect Manny E. Machado, whose organization represents more than 100 Latino advertising agencies.

"All of the major marketers are realizing the importance of the Hispanic market," says Machado. According to AHHA, the total 2002 advertiser spend in the Latino market was $3 billion. The top 10 Latino advertisers were, Procter & Gamble, Philip Morris (now Altria), General Motors, AT&T, McDonald's, Sears, Roebuck & Co, Coca-Cola, Toyota, Pepsi-Cola, and AOL-Time Warner.

However, Machado says, despite marketers realizing the importance of this market, their advertising budgets haven't risen to the level his organization would like. In AHHA's report "Missed Opportunities: Vast Corporate Underinvesting" researchers found that in the past three years, 64 percent of top companies targeting Latino consumers have invested less than 3.2 percent of their overall advertising budgets.

Machado, like Univision, believes that to attract more Latino advertising spending, Univision needs to get bigger and stronger.

Advertising dollars, however, aren't the only thing at stake in the proposed Univision/HBC merger.

If the Federal Communications Commission (FCC), which must approve the merger, doesn't apply the current English-language ownership cap rules to this merger, it could set a precedent for a double standard for what constitutes a media monopoly: one standard for English-language media markets and one for non-English-language media markets.

What the FCC is debating is whether Spanish-language media falls under a "format" category, in essence, a loop-hole, that could shield the merger from FCC regulations. A "format" is in essence a channel, such as R&B or jazz, not a market unto itself. If Spanish-language media is determined to be a format, the proposed merger wouldn't be in violation of antitrust laws that protect against monopolies and regulate the number of media in each market. However, if the FCC defines Spanish-language media as a separate market, the proposed merger would be blocked because it would exceed the 35 percent cap rule that applies to English-speaking media in the same market.

Critics of the Univision/HBC merger have wondered why a company that would potentially control 60 percent to 70 percent of the Latino radio, television and Internet audience doesn't provoke the kind of outrage buyouts that similarly sized English-speaking media usually do, with groups of all political persuasions arguing about the loss of diversity of opinions.

"If you have rules that say in English-speaking media you're limited to what you can own ? yet if this transaction goes through, it would set a precedent saying 'in "minority" media markets, there are no limits.' What prevents a company like this from a hostile takeover of [African American-owned] Radio-One?" asks Cook, referring to the Lanham, Md.-based Radio-One, which operates 66 stations in 22 markets.

When the FCC agreed on June 2 to ease the restrictions on cross-ownership for English-speaking media, including allowing television networks to increase their ownership stake in a single market from 35 percent to 45 percent, there was a national cry of outrage from groups as disparate as the National Rifle Association and Consumers Union. On July 23, the House of Representatives voted 400-21 to restore the 35 percent cap rule. The Senate is considering the bill to overturn the FCC's decision.

FCC Commissioner Jonathan Adelstein says there must be special consideration given to this kind of merger. "One consideration that we have is whether Spanish language is simply just another format, like smooth jazz or Hip-Hop, or other entertainment formats; or is it a distinct component of the general media marketplace that deserves its own protections from the media marketplace?"

Adelstein seems to lean on the side of Spanish-language media being a distinct market. "To me, the difference between English-language and Spanish-language media appears to be more than format. If you can't understand anything they are saying in another language, then it's something more than a format," he says.

However, Pillersdorf argues since Latinos are predominantly bilingual, Spanish-language media should be considered a format, rather than a separate market. "There's only one media market. We are all competing for the same audience and the same advertisers: Pepsi ? Pampers, etc.," she says.

According to Global Insight, a Lexington, Mass.-based business-research firm, 27.5 million people in the United States speak Spanish at home. That number is projected to reach 41.7 million by 2020.

Cook insists the Spanish-language market isn't a format and is composed of various cultures that have their own distinct tastes and likes within the Latino community, putting it on equal footing with the English-speaking market. "Just like the English-language market is a separate market with different segments and different formats in it, the Spanish-language media market is a separate market ? Mexican Americans, Central Americans, Cuban Americans all have different tastes and preferences," Cook says.

? 2003 DiversityInc.com

About C. Stone Brown:
Originally published on Diversity.com at: http://www.diversityinc.com/members/5429.cfm

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