LOS ANGELES (Reuters) - Univision breached its contract with partner Grupo Televisa by failing to pay more $100 million in royalties, a Televisa attorney claimed on Tuesday in the opening of a much-anticipated court battle between the two Spanish-language TV titans.
“Univision was secretly not paying everything it owed,” said Marshall Grossman, an attorney for Spanish-language show producer Grupo Televisa, in his opening argument.
The trial, which has been postponed four times, has the potential to change the landscape of the lucrative Hispanic television market in the United States.
“Televisa’s auditors were stalled, delayed and misled,” said Grossman in outlining the Mexican company’s reasons for wanting out of a 25-year programing contract with privately-held Univision Communications Inc, a U.S.-based Spanish language broadcaster.
“Televisa is saying no more, no more, no more lawsuits. We hope to put an end to this relationship and each go our own way,” Grossman said.
If Televisa triumphs, it will be able to either renegotiate its terms with Univision, demanding more money for programing, or turn to Univision rivals like Telemundo, the Spanish-language TV division of General Electric Co’s NBC Universal.
Such an outcome would hurt Univision since it fills about 80 percent of the prime time slots on its three U.S. networks with Televisa content. Advertising from Televisa programing generates about 35 percent of Univision’s $1.6 billion in television revenue, according to analysts.
In his opening arguments, Univision’s lawyer, John Keker, said that despite some accounting mistakes made in “good faith” by Univision, the evidence will show Univision was right on most counts, specifically regarding disputed payments involving unsold advertising time.
“Univision is not violating its contract, not cheating,” he said, noting that Univision has paid Televisa more than $1 billion in royalties over the years.
“Each of these companies has profited hugely and made billions of dollars on this contract,” he said, adding that Televisa’s audits were conducted in a way to stir up trouble and turn “molehills into mountains.”
The two companies have been sparring since 2005 when Televisa filed a lawsuit demanding royalty payments it said Univision, its U.S. partner, had withheld as part of a programing deal that expires in 2017.
Televisa alleges that Univision wrongly excluded some programs from the deal it was supposed to share ad revenue on, even from shows that weren’t made by Televisa.
The legal battle started after Jerrold Perenchio, former CEO of Univision, made one of his lieutenants his successor, crushing Televisa’s hopes of putting one of its own at the helm of the U.S. company.
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 later sold its 11 percent stake in Univision.
If the judge favors Univision, the U.S. company will lock in its leading position in the U.S. Hispanic television market at a very attractive price, analysts have said.
Under this scenario, Televisa would have to get more creative with new products and programing bundling to reach U.S. Hispanics without breaching the exclusivity deal with Univision. Televisa inked three deals with Telemundo in 2008 looking for ways to increase its reach in the U.S. market.
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.
Reporting by Sue Zeidler; editing by Carol Bishopric