Grupo Televisa, Mexico's largest media conglomerate, plans to expand its reach in the U.S. by teaming up with an American studio to make movies and television shows and to distribute its growing film library.
Televisa signed a partnership agreement last week with Lions Gate Entertainment Corp., an independent studio known for horror franchises such as "Saw," according to people close to the arrangement who spoke on the condition of anonymity because they were not authorized to comment on the record.
It is unclear when the two partners will announce the deal, although Televisa's chief executive, Emilio Azcarraga, was scheduled to mention the partnership today during his keynote address at an entertainment industry conference in France.
The initiative is almost certain to inflame tensions with Televisa's current U.S. partner, Univision Communications Inc., the nation's largest Spanish-language broadcaster. Univision has an exclusive agreement to distribute Televisa's Spanish-language programming in the U.S. through 2017. Univision relies on Televisa for a steady stream of programming and sports, including its popular telenovelas that drive the U.S. broadcaster's prime-time ratings.
The new partnership between Televisa and Lions Gate would give both companies access to market segments they have been trying for years to penetrate. Although Televisa dominates the Mexican media landscape with its television, radio and publishing content, it has not had much success in expanding into film-making or English-language television in the U.S.
For its part, Lions Gate has not had much luck in making movies for the Latino audience here.
Neither Lions Gate nor Televisa would comment.
Under the proposed partnership, Lions Gate and Televisa have agreed to make an English-language version of Televisa's program "Bailando por la Boda de Mis Suenos" ("Dancing for the Wedding of My Dreams"). The show, which was enormously popular when it aired in Spanish on Univision, features a dance competition among couples who are trying to win a lavish wedding.
Lions Gate and Televisa also plan to co-produce an English-language version of "Trece Miedos," a science fiction series that is a huge hit in Mexico.
Lions Gate, which produces such programs as Showtime's "Weeds," is in discussions with cable and broadcast networks about licensing the two programs.
"Televisa is trying to expand its reach to Hispanic Americans whose first language is English," said Anthony DiClemente, an entertainment analyst with Lehman Bros. Equity Research. "This kind of deal is a great way for Televisa to separately add to its existing distribution deal with Univision."
However, such a partnership could violate the terms of Univision's programming agreement with Televisa, according to people familiar with the company's thinking.
Univision believes it has the U.S. distribution rights to all Spanish-language TV programs produced by Televisa -- even those remade into English.
The only programs not covered by the existing deal are original programs produced first in English, according to these people.
Univision declined to comment.
Relations between Televisa and Univision are already strained. Televisa formerly owned a stake in Univision and was trumped by a group of investors led by billionaire Haim Saban in its efforts last year to buy the company.
Earlier, Televisa sued Univision in an effort to terminate its long-term programming arrangement so that it could extract higher profit from its popular programming or find another partner.
Univision's new owners are trying to make peace with Televisa, its most important programming supplier.
That's why the Lions Gate-Televisa partnership comes at an interesting time.
The deal also includes the release of as many as six Spanish-language movies to be co-produced by Televisa and distributed in U.S. theaters by Lions Gate.
Lions Gate also gets the right to distribute approximately 384 movies in Televisa's library, which includes classics by director Luis Bunuel and the Mexican film icon Pedro Infante.
The Televisa deal would effectively replace a partnership Lions Gate formed last year with Panamax Films, the company owned by Spanish-language television veteran Jim McNamara. The partners planned to produce six to eight movies a year, but neither Lions Gate nor Panamax could have been pleased with the results from their first two films.
This summer's thriller "Ladron que Roba a Ladron" and last spring's lusty "La Mujer de mi Hermano" grossed only $4 million and $2.8 million, respectively, at the domestic box office.
As one of Mexico's largest movie producers and a recognized brand among Mexican consumers, Televisa offers Lions Gate more heft at the bargaining table with DVD retailers such as Wal-Mart Stores Inc. and pay television's Showtime network.
Spanish-language movies typically face challenges in these markets. For one, cable channels HBO and Showtime usually do not accept subtitled films as part of their deals with studios. Univision and NBC Universal's Telemundo tend to pay significantly less for the right to air movies on broadcast than their English-language counterparts.
In addition, established retailers such as Target Corp., Best Buy Co. and Wal-Mart are still trying to figure out how best to serve the Latino market. Often, Spanish-language films do not fetch the same distribution deals as English-language movies.
Some retailers such as Wal-Mart and Best Buy have separate Spanish-language sections in their stores -- something that can be helpful to consumers but also confusing when hit movies such as "Pan's Labyrinth" are found only among English-language DVDs even though they are in Spanish.