GE, eager to take on Univision, pushes Telemundo on programs.

NBC Chief Executive Bob Wright didn't waste time in delivering his mandate for Telemundo Group Inc.

Two days after General Electric Co. agreed to pay $2.68 billion for the No. 2 U.S. Spanish-language TV network, Wright and former network President Andrew Lack met Telemundo Chief Executive Jim McNamara at NBC's New York headquarters.

The executives told McNamara to scrap Telemundo's strategy of buying pre-made shows from Latin America and to start producing original programs about Hispanics in the U.S. "We said, 'Yeah, yeah, yeah,'" McNamara says, recalling the October 2001 meeting.

Telemundo didn't move fast enough. In December 2002 and January 2003, it aired two traditional Latin comedies. The shows bombed, pushing Telemundo further behind Los Angeles-based Univision Communications Inc., which locks in viewers through its exclusive contracts for soccer matches and soap operas. "That's when we went into overdrive," McNamara says.

Footing the bill

Univision may have greater cause for concern with its latest rival. When General Electric completes its $14 billion purchase of Vivendi Universal SA's U.S. media assets, NBC will add the USA, Sci Fi and Trio cable networks and gain access to a library of more than 5,000 movies.

Wright says he sees opportunities to promote NBC and Universal shows in English and Spanish. "Most of our big stations are located in big markets that have very significant Hispanic populations," Wright told analysts on a conference call on Oct. 8, the day GE reached its final agreement on purchasing the Vivendi units.

NBC and Telemundo have already combined their newsrooms and were first in Spanish-language television to report the start of the war in Iraq on March 20. (In L.A., KNBC-Channel 4 has combined its news operation with Telemundo's KVEA-Channel 52.)

In April, Telemundo lured away Univision weatherman John Morales by offering him a chance to appear on NBC's "Weekend Today" show, says Don Browne, Telemundo's chief operating officer.

So far, General Electric has been willing to spend to help Telemundo catch up. Since the purchase closed in April 2002, General Electric has paid more than $200 million to buy Spanish-language stations in Boston, Fresno and Tucson, Ariz.

McNamara says he's looking for more stations and may pursue radio and publishing businesses. This year, Telemundo's budget for prime time shows will double, to about $50 million from $24 million in the previous year, he says. McNamara says his goal is to lift Telemundo to an average prime time share of 25 percent to 28 percent of Spanish-speaking viewers this season, up from about 22 percent now.

Telemundo's ratings dropped to a 14 percent audience share after it aired "El Beso del Vampiro," or "Kiss of the Vampire," one of the two shows that flopped earlier this year.

The ratings decline will hold pretax profit to $20 million to $50 million this year, says McNamara, based at Telemundo's Hialeah, Fla., headquarters.

Had Telemundo maintained its ratings, pretax profit would have been $70 million to $100 million, he says. Guzman & Co. analyst David Joyce estimates that Telemundo will have $85 million to $100 million in earnings before interest, taxes, depreciation and amortization in 2003 on revenue of about $350 million. That compares with Univision's $491 million in Ebitda and $1.5 billion in revenue. General Electric doesn't itemize Telemundo's results.

'Fabuloso! Fabuloso!'

McNamara's most pressing issue is updating Telemundo's prime time lineup, which competes against Latin American favorites that Univision buys from its two biggest investors: Grupo Televisa SA, the world's No. 1 Spanish-language broadcaster, and Cisneros Group's Venevision, Venezuela's top network.

Understanding McNamara's challenge involves an appreciation of Spanish-language TV's most popular genre, the telenovela. In May, McNamara stepped up Telemundo's campaign to outdo Univision with original telenovelas that focus on the lives of Hispanics in the U.S. He hired Colombian producer Patricio Wills to create the shows NBC is demanding.

"The telenovela is always the same recipe," says Wills. "A telenovela is a couple that wants to have a kiss and a writer who doesn't allow them to for 200 episodes."

McNamara was on hand at the studio in Florida to see Wills' first effort, a show called "Amor Descarado," or "Unmasked Love." The comedy tells the story of two Hispanic men in the U.S.--one rich and one poor--who trade places after the wealthy man gets amnesia.

After the viewing, McNamara led the applause, rising from his front-row seat and shouting, "Fabuloso! Fabuloso!" When "Amor Descarado" aired four days later, it won a 27 percent share of its 8 p.m. Monday-through-Friday time slot, up from the 19 percent share for a lineup of movies that Telemundo had run at that time during the summer.

McNamara says Wright and NBC executives understand that catching up with Univision will take longer than a few seasons. "They are firm in their resolve that we will close the gap on Univision and eventually overtake them," he says.