Ricardo Salinas Faces New Era's Tough Entry.

Challenges don't spare youth in Mexico's TV biz

A generational shift of control among media moguls is the recent pattern in the Mexican television business. It started in 1993 with Ricardo B. Salinas Pliego, 42, the son of a department store owner who is now running TV Azteca. Then Emilio Azcarraga Jean, 31, took control of the vast Grupo Televisa media empire after the death of his father, Emilio Azcarraga Milmo, in 1996. Last year, Carlos Slim Helu a businessman with a net worth of $7.2 billion, handed his two sons the leadership of Grupo Carso. Carlos Slim Domit, at 32-years-old and the elder son, is Grupo Carso's new chairman while his brother Patrick, 30, has become CEO. Grupo Carso has also invested in fiber optic cable.

The youthful media moguls are taking over in the midst of changes involving every aspect of the business: from the capital market and the 23 percent peso depreciation in 1998, to globalization, multimedia, the Internet and audience fragmentation as a result of digital technology.

In 1998, for example, Azteca's audience share fell to 20 percent, from a high of 40 percent the previous year, before stabilizing at 23 percent. Azteca's production, programming and transmission costs simultaneously rose by 21 percent. To top it all, in 1998 TV Azteca's price on Wall Street dropped all the way down to $4.25 from a high of $19.50 before recovering to $7.31. For the year, Azteca's revenues rose 4 percent to total $471 million and its net income was $38 million (a 132 percent drop from 1997).

Even though Mexican television revenues grew by only 3 percent in 1998, TV Azteca captured 34 percent of all advertising in spite of its declining ratings. According to a Merrill Lynch analysis, Mexican TV advertising this year will be flat but will see an increase of 15 percent in the year 2000 to reach a total of $1.6 billion annually. In any case, both Televisa and TV Azteca will be increasing its advertising rates sharply over time, given the low cost of advertising today. So far, in this year alone, TV Azteca has increased its ad rates by 40 percent. This is still a far cry from the period when Televisa was able to demand advance payments from its advertisers.

While Salinas Pliego is battling the market, Televisa's Azcarraga Jean is facing inherited debt. With four national TV networks -- Channel 2, Channel 4, Channel 5 and TV Norte -- as well as Channel 9 (which covers the Mexico City region), Televisa is Mexico's leading broadcaster.

In addition to owning two major TV channels in Mexico, Canal 7 and Canal 13, as well as Unefon, a cellular telephone company and money wire-transfer service and Elektra (the appliance, electronics and furniture chain), Salinas Pliego owns 35 percent of Canal 4 in Costa Rica and other businesses in El Salvador and Guatemala. He lost out to Sony on the bid to purchase the U.S. Spanish-language TV Network Telemundo. Ever since, plans have been scaled down from Salinas Pliego's original "goal to have an Azteca-controlled network of television stations from Toronto to Tierra del Fuego," as pledged by him in June 1998.

Salinas Pliego's conglomerate was started by his grandfather, who began selling TV sets door-to-door before co-funding the department stores Salinas y Rocha. According to Forbes, Salinas Pliego's inheritance is valued at a net $3.2 billion, making him one of Mexico's 15 billionaires and, in the view of the newspaper La Jornada, one of 30 people who control the country's economy.

One of the emerging media moguls on the Latin American TV scene is the little-known Mexican Angel Gonzales, 55, who through his Miami-based Televideo Services, is now worth an estimated $300 million and who recently purchased Chile's Canal 4 from Salinas Pliego. In comparison, at Televisa, Azcarraga Jean's net worth is valued by Forbes at $3.5 billion.

Today, the Salinas family owns 70 percent of Grupo Elektra, with annual sales of $793 million, and 72 percent of TV Azteca, Mexico's second largest broadcasting company that was started in 1993 when a group led by Salinas Pliego won the two state-owned networks with a bid of $643 million. Subsequently, the group invested an additional $30 million for equipment and added 75 repeaters.

Previously, Salinas Pliego owned Grupo Radio Televisora del Centro, a small regional broadcasting organization which was integrated into TV Azteca together with a chain of movie theaters. These two later acquisitions were all part of a privatization program. The American network, NBC, provided the initial technical and programming expertise to TV Azteca; later, however, the relationship soured.

Today, in the view of some U.S. studio executives, TV Azteca's on-air look resembles that of the Fox Network. With some 1,400 employees, TV Azteca owns and operates two national television networks through its two anchor stations in Mexico City, as well as 250 repeaters throughout the country and 13 local stations. Channel 13, its flagship network, blankets 95 percent of the country, while Channel 7 covers 77 percent. TV Azteca's programming is now seen in over 14 million television households. TV Azteca went public in 1997 and today has a market capitalization worth $13.8 billion, with 1.9 billion shares issued and 527 million shares floating.

Salinas Pliego, who is not related to the embattled former Mexican president, Carlos Salinas de Gortari, is active in the international speaking circuit as well as domestic politics, with direct access to Los Pinos, the Mexican White House. Video Age reporters met with Salinas Pliego just as he was leaving to accompany Mexico's President Ernesto Zedillo to an economic summit in Switzerland.

Salinas Pliego and his wife Ninfa Sada de Salinas have three children. Ninfa Sada is also active with Fundacion Azteca and runs a drug-free program called "Vive Sin Drogas," which offers a series of 10 Spanish-language spots against drugs of 30 to 40 seconds to Latin American stations. The ads are aimed at children between the ages of 7 and 18.