Spanish-language TV giant Univision Communications said Monday that it was creating an in-house production unit -- a move that reflects consumers' changing viewing habits and a sign that the company no longer wants to rely as heavily on its longtime partner in Mexico for its most popular shows.
Univision will launch Univision Studios in Miami to produce prime-time soap operas, reality shows and videos for the Internet. Although Univision benefits from a steady supply of the popular telenovelas produced by Grupo Televisa of Mexico City, the New York-based broadcaster has determined it needs greater diversity in content, according to company executives.
"This is the natural extension and natural evolution of our programming," said Cesar Conde, president of Univision Networks.
Until recently, Univision had little incentive to gear up an expensive U.S. production studio.
For two decades, the network has set aside two hours of its prime-time schedule to the telenovelas that originally aired on Televisa in Mexico. The low-cost dramas generate huge ratings for Univision, particularly among immigrants and Mexican Americans, but the network faces a future when the popular shows may no longer be available.
Televisa is contractually obligated to provide its telenovelas only through 2017, and Univision appears to be preparing for the day when it has to fill the gap with its own shows or line up replacement programming from outside suppliers. The network plans to spend the next few years experimenting with different formats and recruiting writers, directors and producers.
"Metro-Goldwyn-Mayer, Fox and even Rome wasn't built in a day," said Miami television consultant Julio Rumbaut. "This has always been the inevitable strategy. Not only does Univision have to look to 2017, when the Televisa agreement expires, they have to prepare for 2014 when much of Univision's debt becomes due."
Univision is carrying nearly $10 billion in debt stemming from a leveraged buyout two years ago. Because Univision's TV ratings -- and thus the ability to attract advertising revenue -- are driven by Televisa's telenovelas, Wall Street has been nervously eyeing what will happen when that programming disappears. Any decline in ratings could affect Univision's ability to secure new financing.
"This is a smart thing for Univision to do," said Hector Orci, chairman of Los Angeles advertising firm La Agencia de Orci & Asociados. "Content is king, and having more control over their content will strengthen their networks."
Though the telenovelas remain hugely popular, Univision has shown that it knows how to produce its own hit shows, including "Sabado Gigante," Orci said. But the network should be prepared for shifts in the viewing habits of its target audience, he noted.
"The Latino marketplace in the U.S. is developing its own idiosyncrasies," Orci said. "This might represent a recognition that there is a lot more competition in the media for the attention of Latino consumers in English and Spanish. Univision wants to find ways to keep up with the changes."
Univision named Luis Fernandez, a 30-year veteran with experience in the U.S. market, to be president of its new studio. Fernandez was head of Spain's largest broadcaster, Corporacion Radio Television Espanola.
But producing scripted shows can be expensive. NBC Universal's Telemundo, for example, has spent hundreds of millions of dollars producing its own dramas during the last five years.
Univision's Conde declined to say how much the company planned to spend.
"But it is worth noting that this is one of our biggest priorities and we will put in the blood, sweat and corporate resources that are needed to make sure this is a success," he said.