Las Razones del Adiós de Emilio Azcárraga: WSJ (English)

Emilio Azcárraga Jean, the 49-year-old scion who has led Mexican television giant Grupo Televisa SAB for the past 20 years, is stepping down as chief executive officer as the broadcaster grapples with sagging advertising sales and growing competition to lure young viewers, according to people familiar with the situation.

Two of his closest advisers, Alfonso de Angoitia, the company’s vice president and finance chief, and Bernardo Gómez, who oversees Televisa’s news division and government relations, will run the company as co-CEOs, these people said. Both joined the company soon after Mr. Azcarraga Jean took the reins of Televisa in 1997. The board of directors approved the corporate shuffle at a meeting on Thursday.

Mr. Azcárraga Jean will remain as chairman of the company that was founded by his family in 1973, and will head its charity foundation and the popular Mexico City-based Club América soccer team, which is owned by the broadcaster, these people said.

His resignation comes as the world’s largest producer of Spanish-language television programs struggles with the challenges posed by the internet age. Many young viewers have grown bored with Televisa’s stale format of low-budget soaps, and have abandoned the broadcaster in favor of deep-pocketed streaming services such as Netflix, which now offer fast-paced television series in Spanish.

The market shake-up has led to drastic changes at Televisa’s flagship content division, which has suffered a sharp decline in revenue and profitability in recent years. It now accounts for just a third of overall sales and less than 40% of operating profit compared with about 60% of sales and 70% of operating income 10 years ago.

In the first half of this year alone, ad revenue fell 8.9% compared with the same period a year ago. Weakness in advertising is expected to have continued in the third quarter when results are published Thursday, analysts say. The company’s shares have risen a modest 1% over the past three years, underperforming Mexico’s benchmark stock index, which has gained more than 13% during the same period.

Stagnant SalesTotal advertising revenue at Televisa andshare from upfront sales.THE WALL STREET JOURNALSource: GBM Research based on company dataNote: 1 Mexican peso = $0.0520
.billion Mexican pesosTotalShare from upfront sales2010’11’12’13’14’15’16051015202530

Early this year, Televisa replaced its top executive in charge of content with an executive of U.S. Hispanic network Univision Communications Inc. It also began revamping the way it sells advertising slots.

Mr. Azcárraga Jean’s resignation marks the end of an era for the company’s founding family, which ran Televisa since its creation and for decades enjoyed a near-monopoly on Mexico’s broadcasting market. Even today, the firm has about 70% of México’s free-to-air TV market.

Mr. Azcárraga Jean, who remains Televisa’s largest single shareholder with about a 15% stake, took over the reins of the company in 1997 after the death of his father, Emilio Azcárraga Milmo.

After a struggle with other shareholders, including family members, the then 29-year-old college dropout secured control and was credited with the financial turnaround of a highly indebted company that was bleeding cash. In recent years, the firm has also expanded its satellite TV and cable and telecommunications businesses, which now make up 54% of the more than $5 billion in sales last year.

Despite the diversification, the rise of the internet has exposed weakness in Televisa’s traditional business model. For decades, the company’s trademark product has been its soap operas, or “telenovelas,” produced quickly and cheaply. Several of its Cinderella-style rags-to-riches soaps were huge hits in markets as far away as Russia and the Philippines, helping make the broadcaster a regional titan in the late 1970s.

But subscriber services like Netflix allowed many younger Mexicans a window into a new world of content from abroad, much of it in Spanish.

Mr. Azcárraga Jean, right, took over the reins of the company after the death of his father, Emilio Azcárraga Milmo, left.
Mr. Azcárraga Jean, right, took over the reins of the company after the death of his father, Emilio Azcárraga Milmo, left. PHOTO: REUTERS

“Television’s paradigm has changed dramatically. Streaming services have sent free-to-air TV to the intensive care unit,” said Tere Vale, a Mexican media and telenovela expert.

Concerns about Televisa’s programming began to emerge about three years ago in the U.S., as a steady deterioration in ratings and audience share hammered Univision, the U.S.-based broadcaster of which Televisa owns 36%.

Unlike Comcast Corp. -owned rival Telemundo, which makes much of its own TV content—and has been gaining ground thanks to edgier offerings such as la Reina del Sur with former Televisa star Kate del Castillo —Univision has long relied on Televisa programming for its prime-time lineup. It pays more than $300 million a year for Televisa programs, and the outlays are set to increase in 2018 to about $500 million.

Univision began pressuring Televisa to make its shows more appealing to modern audiences, leading to the ouster in January of José Bastón, Televisa’s longtime head of content who was seen as close to Mr. Azcárraga Jean.

Succeeding Mr. Bastón was Isaac Lee, Univision’s head of news, entertainment and digital operations, who now oversees content and programming at both companies. Mr. Lee moved from Miami to Mexico City and brought in a new team of executives who are rethinking programming, genres and story lines for their shows.

The cast of the telenovela ‘Abismo de Pasion’ or ‘Abyss of Passion’ perform a scene in 2012.
The cast of the telenovela ‘Abismo de Pasion’ or ‘Abyss of Passion’ perform a scene in 2012. PHOTO: RAQUEL CUNHA/ASSOCIATED PRESS

Televisa’s management says the programming overhaul—led by new prime-time telenovelas, such as “La Piloto,” a drug telenovela first developed by Univision—is already showing a recovery in ratings. That has yet to translate to revenue gains, however, partly because of an old-fashioned business model based on advance, or fixed “upfront” sales for a whole year based on the previous year’s ratings. Televisa recently said it is planning to charge advertisers based on audiences reached rather than time slots.

Change won’t come easy. Televisa’s studios in southern Mexico City are like an old factory that provide little room for innovation, industry insiders say. Actors, producers and writers have limited creative freedom to tackle provocative topics or novel formats.

“Televisa’s San Ángel studios are like a car-assembly line, and what you require now is a change in the production line, from cars to planes,” said a former Televisa executive. “It’s a big cultural change, and you can’t compete using the same props.”

A Televisa spokesman said the company is making a big effort to foster innovation, overhaul production and content and attract younger viewers. Such efforts are already paying off, he said.

While Televisa has been slow to react to changes, it still has dedicated viewers in a country where the majority are poor.

“Televisa lost middle-class viewers,” said Luis Estrada, a renowned Mexican film director. “But it still has a great penetration power among the country’s poor and it still has a long life ahead.”

Write to José de Córdoba at jose.decordoba@wsj.com and Santiago Pérez at santiago.perez@wsj.com

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