Emilio Azcarraga Jean at FIPP

May 23, 2005

Emilio Azcarraga Jean
CEO
Editorial Televisa

"Providing an Intense and Valuable Experience to Our Readers"
World Magazine Congress of the International Federation of the Periodical Press (FIPP)
May 23, 2005
New York, NY

It is an honor to be here today in front of our colleagues from all over the world. Thank you so much for a very pleasant invitation.

Grupo Televisa is the factory of dreams. It produces and commercializes television, cinema, Internet, radio, satellite television, cable TV, events and electronic content. And what is important for today’s agenda, it also owns the largest magazine publisher in the Spanish-speaking world selling over 2.5 magazines per second every day.

In a world where time is one of the most valued resources, the challenge of every media-oriented company is to deliver to its targeted audience a valuable, relevant and attractive product as well as a vehicle for advertisers to reach their communication goals and simultaneously generate profits for its shareholders.

Today, I am here to share what we believe are the two most important challenges of our magazine business in Latin America, Mexico, the North American Hispanic market.

First and foremost, develop relevant and attractive content. In other words what we call Intense and Valuable Experience (IVE) for our readers.

Second, operate profitably. Despite high political and economic volatility Latin America is a very attractive market due to its size and its growth potential. Mexico and The North American Hispanic market on the other hand, though politically and economically stable, and extremely attractive, have certain inefficiencies which require hefty investments and key structural changes.

Televisa is committed to the region.

Latin America is a key market because of its population of over 500 million inhabitants, its economic growth potential and its readership penetration.

Nevertheless, a very volatile terrain! Since 1990, eight and 10 fiscal reforms have occurred in Colombia and Chile respectively. In Argentina five Presidential and seven Ministers of Economy changes occurred within 48 months a couple of years ago. It goes without saying currency fluctuations in the region should not be overlooked.

Mexico, our biggest market so far, has achieved economic and political stability but has also endured difficult times in the past.

The North American Hispanic market, on the other hand, is the fastest growing segment in the continent, probably doubling its size in a few years down the road, while offering enviable stability on both fiscal and monetary fronts.

However, certain obstacles can make an apparent good business turn sour, key differences in each sub-culture, different concentrations per city with local independent tastes, low CPM’s on an advertising pure play environment. All these elements must not be forgotten.

To confront volatility and low CPM’s while guaranteeing a solid Intense and Valuable Experience (IVE) for our readers, we must ensure flexible cost structures and selective financial investments.

In our magazine business, three strategies have permitted a flexible cost structure:

One, centralized purchasing of raw material and other products to ensure better terms and conditions with local and foreign suppliers.

Two, development of strategic sourcing cites throughout the region for production, printing and distribution.

Three, exploit economies of scale in the purchase and creation of content.

Another challenge, in my opinion essential, is developing content for an Intense and Valuable Experience (IVE) for our reader.

Content is the key weapon in drawing sustained growth in reader spending time. This battle is vital and everyday it becomes more and more complex in the light of the convergence of media and technology.

Today, information is not enough.

Now it is possible to access all types of content almost everywhere and anytime through the thousands of hotspots everywhere. Wireless technology is a must.

Also, thanks to the new media consoles, we can automatically record our favorite TV program and decide when and where to see it. Furthermore, video on demand is here to stay.

In parallel, sharing music through the Internet in digital formats brought the biggest change ever upon the record industry.

Microsoft is manufacturing game consoles to compete with Sony, likewise Nokia is competing with Nintendo; and Gateway is producing flat screens to cannibalize one of Samsung and Panasonic’s most profitable businesses. Computers are becoming media centers at home. The options of entertainment and communication go from DVD players to the new generation cell phones and from messenger to portable video games.

All of the aforementioned compete aggressively, when the priority is maintaining reader spending time of an every day changing sophisticated consumer.

Some of our magazines, such as Men´s Health en Español and Marie Claire en Español recently, capitalize to the utmost their power of maintaining reader spending time by increasing interaction with thousands of readers via a number of channels such as email, SMS, snail mail, messenger and phone contests. The consumers can dissent at will and give their feedback constantly.

This is truly delivering an Intense and Valuable Experience (IVE) for our readers. I would like to share with you our position on how to achieve this experience:

We believe that 4 factors are essential:

First, multimedia cooperation and the absorption of the technological breakthroughs of digital media to communicate product values to larger audiences in different places and times, are excellent ways to make the readers live a more significant and memorable experience.

Clear examples of this is the transmission of content capsules to ipods or cell phones; the publication of additional content through Internet or magazines in digital format. With respect to the last, in the U.S., close to 15% of PC Magazine’s subscribers receive the magazine in digital format without ever touching the printed edition.

Another example is television and magazine integration. The team of Gruner and Jahr’s Automovil Panamericano, Mexico’s highest circulation and influential automobile magazine produces a television program based on its content, taking its car testing experience to the screen. A different case is the one experienced by Maxim where a one-time TV show is produced every year generating important brand recognition that has driven the magazine’s results to a higher ground.

Second, invest in relevant content differentiating the service offered to the reader. For this, we invest heavily in numerous profile research and trend studies.

Two examples of this are:

Cosmopolitan and Vanidades. Relevant local content is a priority. More than 60% of Cosmopolitan’s content in Spanish is produced inside the region. In fact, Cosmopolitan Mexico is the only Cosmo fortnightly edition in the world. This has of course required more local content than ever before.

The Vanidades recipe however is different. Its challenge is to reach a homogeneous segment of women of medium to high acquisition power throughout the continent. The formula is very successful as it sells approximately 1.2 million copies per month in the region. Despite competing against each other, in the women segment, each niche has its completely different interests. Identifying these differences is the on going battle that both editors in chief face for every edition.

Third, a solid brand positioning permits to transfer products values to the reader. In every market that Caras participates, it has become a symbol of style and an opinion leader amongst the segments of high spending power. A magazine is a mirror and in many cases the aspiration of a determined lifestyle. A magazine is a community. A successful magazine does not only provide us with content, it actually makes us feel we are part of something larger and transcendental.

Fourth, close interaction with our readers is essential to transmit the products’ DNA. During 2005 we experienced a three-fold increase in applicants to the Geography Contest launched in 2004 by National Geographic en Español Magazine. This allows its readers to participate in a content related, socially responsible program (which is education) that will improve children’s knowledge of geography and stimulate future readership.

The implementation of these factors has permitted Editorial Televisa to grow its profits at an unprecedented rate in the last five years reaching quarterly EBITDA margins above 20%.

In conclusion, our every day challenge is to develop a profitable model in an ever changing environment that will allow offering a higher Intense and Valuable Experience (IVE) than the competition.

The magazine is more alive than ever before. It continues to be a vehicle that powerfully influences the opinion and way of life of the consumer. In words and images we constantly reinvent ourselves without ever forgetting what it means to sit down and enjoy our favorite magazine.