Mexico's Televisa, partner Univision head to court

MEXICO CITY (Reuters) - Top Spanish-language broadcaster Televisa and its partner Univision will face off in court this week over the Mexican company's bid to pull out of a programming deal and generate more money in the U.S. market.

After three years of legal battles that have curbed Televisa's expansion in the booming U.S. Hispanic market, a judge in U.S. District Court in Los Angeles is due to start the trial Tuesday.

The case dates back to 2005 when Televisa filed a suit demanding royalty payments it said Univision had withheld as part of the programming deal that expires in 2017.

At stake is viewership and growth in the United States, where Hispanics are the fastest-growing minority and the Spanish-language television market is considered underserved.

If Televisa, the world's biggest producer of Spanish-language shows, wins the case it could turn to new partners that include Univision's U.S. rival Telemundo, to sell programming at a higher price.

"I think Televisa has the upper hand here ... if the programming deal falls apart," said David Joyce, an analyst with Miller Tabak & Co LLC in New York.

Such a scenario would prove difficult for Univision, which depends heavily on Televisa's shows to fill most of its prime-time slots and guarantee high ratings to keep top-notch advertisers happy.

"It is a precarious position for Univision if they lose this court case. They've got as much as 40 percent of their gross rating points they'll have to replace with other programming, which they have to buy or produce," Joyce said.

Hispanics account for about 14 percent of the United States' 300-million strong population.

Univision's strength lies with its in-house talk shows and newscasts. But it leans on Televisa for hit soap operas and other entertainment productions that lure viewers for its three networks: Univision, Galavision and Telefutura.

If the judge favors Univision, the U.S. company would lock in successful programming from Televisa for another nine years.

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The sparring between the two started in 2005, when Jerrold Perenchio, then CEO of Univision, appointed one of his aides as his successor, crushing Televisa's hopes of putting one of its own at the helm of the U.S. company.

Soon after, Televisa filed a suit against Univision in a California court claiming breach of the programming deal and demanded royalty payments.

Since 1992, when the two companies struck the deal, Univision has paid over $1 billion in royalties to Televisa, according to court papers obtained by Reuters.

Univision sued Televisa in August 2005, saying its partner had tried to sabotage its operations.

The fight escalated the following year after Televisa lost a bid for Univision against a group of investors led by media tycoon Haim Saban, which offered $12.3 billion for the U.S. Spanish-language broadcaster. Televisa also sold its 11 percent stake in Univision.

The trial is expected to last through the second half of May and the ruling could affect other U.S. media players like NBC Universal's Telemundo, which has flirted recently with Televisa, and Entravision Communications Corp, the largest affiliate group of Univision and Telefutura networks.

Last month, Televisa agreed to air more than 1,000 hours per year of Telemundo's shows on its Channel 9 and carry a pay TV channel for the U.S. company on its satellite and cable systems.

(Additional reporting Gina Keating in Los Angeles)

Reuters/Nielsen