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July 18, 2003 James R. Wade Chief, Litigation III Section Antitrust Division U.S. Department of Justice 325 Seventh Street, N.W., Suite 300 Washington, D.C. 20530
Dear Mr. Wade: Pursuant to the Antitrust Procedures and Penalties Act, 15 U.S.C. §§ 16(b)-(h), Spanish Broadcasting System, Inc. ("SBS") respectfully submits its comments on the proposed Final Judgment filed on March 26, 2003, by the Antitrust Division of the U.S. Department of Justice ("Department") in connection with the proposed acquisition of Hispanic Broadcasting Corporation ("HBC") by Univision Communications Inc. ("Univision"). A Univision and HBC combination raises serious antitrust issues that the Department's proposed Final Judgment fails to address. The draft decree leaves unremedied significant harm to competition and consumers that surely will result from the combination of the dominant firm in Spanish-language radio (HBC) with the dominant firm in Spanish-language television (Univision). Even if, as the Department Complaint posits, Spanish-language radio and television belong in separate markets, the remedy the Department selected fails to solve the competitive problem it identified: Univision's significant influence over one of HBC's closest competitors in Spanish-language radio, Entravision Communications Corporation ("Entravision"). The settlement only partially and incompletely disentangles Univision and Entravision. Moreover, the inadequate remedy the Department selected requires six years to implement, a period during which the transaction will continue to harm competition and consumers. Accordingly, the Court should reject the proposed Final Judgment as not within the reaches of the public interest. 1. SBS initially notes its disagreement with the Department's decision to confine its analysis to the product market for the "provision of advertising time on Spanish-language radio" (Compl. ¶ 14). The Department defined this market because "[m]any local and national New York Chicago Los Angeles Washington, D.C. West Palm Beach Frankfurt Hong Kong London Shangai KAYE SCHOLER LLP
advertisers" would "not turn to other media, including radio that is not broadcast in Spanish, if faced with a small but significant increase in the price of advertising time on Spanish-language radio" or its equivalent (Id.; emphasis added). The Department, however, provides no justification for ignoring the many other advertisers for whom Spanish-language radio and television are good substitutes.1 From the perspective of these advertisers, an HBC/Univision combination is effectively a merger to monopoly, for it combines the dominant Spanish-language radio broadcaster (HBC) with the dominant Spanish-language television broadcaster (Univision).2 This Spanish-language broadcasting market (defined from the perspective of advertisers for which Spanish-language television and radio are good substitutes) easily coexists with a Spanish-language radio-only market (defined from the perspective of other advertisers). The Department's Complaint and Competitive Impact Statement are entirely silent on why the Department has chosen to ignore the interests of advertisers who are vulnerable to the enhanced market power HBC and Univision will enjoy as a result of their combination.
KAYE SCHOLER LLP
Even accepting that Spanish-language radio and Spanish-language television belong in separate markets, SBS disagrees with the Department's conclusion that the only competitive harm from this acquisition flows from Univision's ownership of a significant stake in both Entravision and HBC. Specifically, Univision's acquisition of the dominant Spanish-language radio broadcaster, HBC, will give Univision, the dominant Spanish-language television broadcaster, an enhanced incentive to refuse to deal with or discriminate against Spanish-language radio competitors (such as SBS) who seek to advertise through Univision. Advertising on television is important for promoting Spanish-language radio stations and thus for surmounting the high entry barriers in Spanish-radio language that the Complaint identifies (Compl. ¶ 27). Moreover, after the merger, Univision/HBC will have the power to insist that Spanish-language advertisers who wish to advertise through both radio and television purchase time from both Univision and HBC rather than from the merged firm's rivals, including SBS. Such difficult-to-detect and subtle tying arrangements or refusals to deal realistic possibilities here impair competition. See, e.g., Lorain Journal Co. v. United States, 342 U.S. 143 (1951). It is unrealistic to expect that, following the acquisition, advertisers will stand up to the HBC/Univision colossus and challenge such practices themselves. The Clayton Act properly is invoked to restrain these restraints in their incipiency. The Department's failure to grapple with any of the competitive problems posed by combining the dominant Spanish-language radio broadcaster with the dominant Spanish-language television broadcaster should cause this Court to conduct an especially careful Tunney Act review. To be sure, that review is largely confined to determining whether the remedy the Department selected is a reasonable one for the competitive problem identified in the Department's Complaint. See United States v. Microsoft Corp., 56 F.3d 1448, 1461-62 (D.C. Cir. 1995). But when, as here, the Department has exercised its prosecutorial discretion to tailor its Complaint narrowly to the remedy selected, the Court must pay special attention to ensure that the fit between remedy and Complaint is indeed within the reaches of the public interest. As explained below, the fit here is very poor indeed. 2. The competitive problem the Complaint identifies is that Univision's significant control over, and its equity stake in, Entravision will cause HBC and Entravision to pull their competitive punches once HBC falls under Univision's control. The proposed Final Judgment seeks to preserve HBC/Entravision competition by requiring Univision to reduce its equity stake in Entravision and to relinquish certain rights Univision holds to control or influence Entravision's competitive activities. For a number of reasons, the proposed Final Judgment will not adequately protect purchasers of radio advertising from the adverse consequences of Univision's proposed acquisition of HBC. KAYE SCHOLER LLP
First, the Department's requirement that Univision surrender certain rights and dilute its stock holding in Entravision fails to address the most significant way in which Univision influences Entravision: through the Univision/Entravision affiliate agreement. As the Department's Complaint explains, pursuant to this "long-term" agreement, "Entravision broadcasts Univision programming from Univision's two networks on 49 television stations. As part of this affiliation agreement, Univision serves as Entravision's sole representative for the sale of television advertisements sold on a national basis" (Compl. ¶ 23). This agreement is Entravision's lifeblood. From it, Entravision obtains key programming and significant advertising revenue. As Entravision's 2001 Annual Report explains, "Entravision has benefitted enormously from a close relationship with Univision" which is "the dominant broadcaster of Spanish-language television in the United States."3 A recent Entravision securities filing also strikingly illustrates the importance of the affiliate agreement: Of an overall increase of $1.5 million in revenue for Entravision over the prior year, "$1.4 million was attributable to our Univision stations and 0.1 million was attributable to our Telfutura stations [a Univision network]."4 The affiliate agreement plainly will give Entravision significant reason to pull its competitive punches against HBC once HBC is acquired by Univision. The Department recognizes this; for the proposed Final Judgment prohibits Univision from "using or attempting to use any rights or duties" under the affiliate agreement "to influence Entravision in the conduct of Entravision's radio business" (Proposed Final Judgment § VI.A.5). This remedy, however, is a mirage. Univision need not actually use the affiliate agreement to influence Entravision's behavior. The mere fact that Univision might deny Entravision rights under the agreement, or even create disputes under the agreement, will cause Entravision to compete less vigorously with HBC.5 Strikingly, the Department has rejected such "behavioral" remedies in other circumstances, even when punishable by contempt if violated.6 The Competitive Impact
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Statement provides no basis for believing that a "behavioral" remedy relating to the affiliate agreement will be effective here. By contrast, blocking Univision's acquisition of HBC will preserve competition. Second, the proposed Final Judgment would allow Univision to retain shareholder rights to veto major strategic decisions of Entravision, including any plans i) to merge, consolidate or reorganize all or substantially all of its assets; ii) to transfer a majority of its voting power; iii) to dissolve, liquidate or terminate itself; as well as iv) to dispose of any interest in any FCC licenses relating to television stations that are Univision affiliates (Competitive Impact Statement ("CIS") at 11). Each of these actions that Univision can veto may have significant competitive impact. If, for example, Entravision wanted to sell a radio station to, or merge with, a rival, the proposed Final Judgment leaves Univision with the power to prevent possible competition-enhancing transactions. It plainly harms rather than benefits competition to require Entravision to obtain its rival's approval to undertake such actions. The Department should not hinder the competitive activities of third parties through consent judgments. Third, the proposed Final Judgment would require Univision to reduce its equity stake in Entravision over a very lengthy period: to no more than 15 percent by March 2006 and to no more than 10 percent by March 2009. The Department acknowledges that this divestiture is necessary to preserve competition; for Univision's significant stake in Entravision means that Univision/HBC "would receive some significant benefit even on sales it loses to Entravision" (CIS at 12). The Department nonetheless is willing to tolerate the lessened competition and consumer harm for as long as six years. Although the rapid sale of stock may be difficult to accomplish and impose costs upon Univision, the costs of accomplishing the transaction should not be borne by consumers. If owning the stock is competitively harmful, Univision should be required to sell the stock as expeditiously as possible. The Department's explanation for its unprecedented six-year divestiture period - that requiring a faster sale by Univision protects against "adversely affecting Entravision's ability to raise capital" (CIS at 12) - fails to persuade. If the Department's reasoning were valid, it would always permit divestitures to be made over the course of several years; but that is obviously not the Division's policy. And with good reason: The longer the merging parties hold assets that must be divested to preserve competition, the longer the period during which competition and consumers suffer. The speculative fear that Entravision's ability to raise capital will be harmed by requiring a shorter divestiture period is no warrant for inflicting competitive harm on advertisers and others.
KAYE SCHOLER LLP
Fourth, the divestiture the Department negotiated is insufficient to preserve competition. If the proposed Final Judgment is approved, Univision will continue to hold a ten percent stake in Entravision. Moreover, the Complaint alleges that Entravision and HBC have combined market shares ranging from 70 percent to as much as 95 percent in the several geographic markets (Compl. ¶ 21). It is plain that Univision will still financially benefit from every advertising dollar HBC loses to Entravision and, therefore, that Univision/HBC will compete less vigorously than if Univision's equity interest were divested completely. The Competitive Impact Statement fails to explain why a complete divestiture is inappropriate here. Thus, for several reasons, the proposed Final Judgment leaves Entravision entangled with Univision in ways that will seriously harm competition. The Court accordingly should find that the Department's proposed Final Judgment is not within the reaches of the public interest.
Dated: July 18, 2003 Exhibits Attached United States v. Univision Communications. Inc. Civ. Action No. 1:03CV00758 COMMENTS ON BEHALF OF JULY 18, 2003 EXHIBITS A-D
June 2, 2003 Marlene H. Dortch
Dear Ms. Dortch: Spanish Broadcasting System, Inc. ("SBS") has asked more than twenty advertising agencies and advertisers with special knowledge of the Hispanic community to address the nature and extent of the media marketplace in which they conduct their business. Their responses are attached. All of the responses indicate that English-language broadcasting and Spanish-language (Hispanic) broadcasting constitute separate markets. Many of them observe that the Spanish-language broadcasting market includes both radio and television. These propositions are fundamental to the Commission's analysis of the proposed Univision Communications, Inc.-Hispanic Broadcasting Corp. merger. The agency and advertiser perspectives on the market address both competition and diversity, just as the Commission must in connection with its public interest determination on the permissibility of requested transfers. The conclusions of the agency and advertiser executives conform with those the Commission has reached in other contexts. The Commission often and recently has recognized the existence of a separate Spanish language broadcasting market. It also has recognized that television and radio are part of the same product market for fundamental Communications Act purposes. The separate nature of the Hispanic broadcasting market means that the FCC may not rely exclusively on its cross-ownership and multiple ownership rules in making its public interest determination. These heuristic devices may be a sufficiently reliable basis for decision where transfers implicate majority-language broadcasting. Their reliability cannot be assumed where minority-language broadcasting is concerned. In this case, the proposed merger moves the Hispanic market June 2,2003 very decidedly in the direction of monopoly. Both the statute and ordinary prudence require that the decision in this matter be the product of careful analysis of record evidence and that it be reflected in a reasoned explanation. In this regard, SBS will respond to the many factual assertions contained in the May 14,2003, Univision submission shortly. Unsurprisingly, we do not find Univision's propositions probative of the substantive issues nor do we find Univision's legal and policy points relevant to the resolution of this important matter. (We note that the submission, inexplicably, is not posted on the ECFS site and thus remains unavailable to anyone seeking to follow the proposed transaction through the Commission's Web site). Finally, we note the unusual circumstance presented by today's Commission vote fundamentally changing its principal media ownership regulations (following "the most exhaustive and comprehensive review of [the] broadcast rules ever undertaken") and the pendency of this major broadcasting transfer application. As we are able to learn the details of the new ownership rules, we will submit our analysis of their significance for the Univision proposal.
June 2,2003
May 27, 2003 To Whom It May Concern Dear Sir or Madam: I have been involved in the Hispanic Market USA since 1966 and have owned my own firm for over 31 years. During that time, I have placed national and local ads for a very wide variety of companies, government agencies, and other public and private institutions, large and small including Coca Cola, McDonald's, Procter & Gamble, General Motors, Anheuser Busch, Castrol, Pizza Hut, Burger King to mention just a few. I am also the single largest individual receiver of Creative Awards in the industry, and was placed in the Hispanic Market Hall of Fame (only 4 recipients so far), in 2002. I have been asked to address two issues: First: Is there a separate advertising product market defined by the Spanish language? In other words, are Spanish language media and English language media substitutable for one another? The answer is an unequivocal: NO! English language media and Spanish language media are NOT substitutable. There definitely is a separate advertising product market defined by the Spanish language. Let me explain: One could safely say that for the first time in US history, there has been a CATERING to Spanish language, not so much out of a sociological sense of responsibility, but out of the dire necessity o! the large and small American corporations to open new markets to replace maturing ones in the US. They do this by attracting an ever growing group of people (the largest single minority In the US) which could not be otherwise addressed. There are 27 Latin American countries with endless political and economic travails, which only serve to increase the CONTINUOUS , NON-STOPPING immigration WAVE to the LAND of opportunity.
Second: Are Spanish language video (television and cable) and radio substitutes for one another? I have no doubt that Spanish and English language media are in different markets from the perspective of advertising buys. A small, but significant non-transitory increase in price in English language media will not induce the advertisers with whom 1 am familiar to shift their advertising to Spanish language media. Instead, they will absorb the price increase. The reverse also is true. The reason is that for many products the target audience simply cannot be reached unless it is addressed in their familiar language. Among other obvious bits of evidence, the major television networks virtually never present a commercial in Spanish (or any language other than English, for that matter). Spanish language video and radio are substitutes for many advertisers. Many advertise on both. Many sponsors are quite willing to allocate and reallocate percentages of their ad budgets to video or to radio depending upon shifts in the price and ratings of one or the other A small, but significant increase in price in one will shift purchases to the other for many products. It is very common in negotiations over advertising rates, for agencies and clients to make the claim, for example, that if concessions in price are not made, the advertising will be placed on the other medium, video or radio as the case may be. I hope that you find this information helpful. I would be happy to discuss it at greater length if you would find it useful. Sincerely, _______________/s/________________ Castor A. Fernandez
Dear Mr. Chairman, My name is Eduardo Caballero, President/CEO of Caballero TV&Cable Sales, an independent-Spanish TV stations sales representative. I started selling Spanish Media in February of 1962, as a local salesman for Radio Station WBNX, New York City. I became its General Sales Manager that same year. I resigned in March of 1968 to become General Sales Manager of Spanish TV Station WXTV, Channel 41, New York Market (licensed to Paterson, N.J.) Also in 1968, I became a VP and Director of National Sales for Spanish International Network (S.I.N., the predecessor of Univision), with affiliate stations in San Antonio, Los Angeles, Fresno, New York, Miami, San Francisco and Chicago. In 1973 I resigned that position, as the first -and only- Hispanic to be in charge of national sales for any "national network" in U.S., to start the first Spanish Radio National Sales Representative in this Country (Caballero Spanish Media, Inc.), representing over 140 Spanish radio stations. Amongst stations represented by CSM were those owned and operated by Heftel Broadcasting, Tichenor Broadcasting Co.(both of these Companies were the predecessors of the actual Hispanic Broadcasting Company - HBC), Spanish Broadcasting System, Liberman Broadcasting, Excel Broadcasting, The Z Network, etc. CSM was sold in 1995 to the Interep Company (a General Market -English language- radio representative). Interep has kept CSM, to this day, as a separate Spanish division. I remained with the Company until 1998, when I undertook the creation of a TV (low power stations) Newtwork -MasMusica TeVe- to broadcast Spanish music, 24/7. At the present moment this programming is broadcast over 21 Spanish TV stations within the U.S. Most recently, since there is no any advertising sales organization representing independent TV stations -including mine and others- I have started a new -and only- independent Spanish TV representative sales organization, Caballero TV&Cable Sales. I have been selling time for Spanish Media in United States (both radio and TV), for the last 42 years, uninterruptedly. I can say, unequivocally and based on my professional experience, the following: Unless an advertiser makes the decision to promote ils products or services to the Hispanic consumer, in Spanish and, subsequently, creates a "Hispanic Budget", there will not be schedules placed on any Spanish Media. Unfortunately, thai "Hispanic Budget", when it does exist, amounts, at best, to a 1 to 3% of the "general market budget" (although Hispanic consumers represent about 14% of the total U.S. population, according to the Census Bureau). That brings, as a result, the situation where many of those advertisers' Hispanic budgets cannot afford both television and radio schedules. Many of those advertisers are willing to allocated and reallocate parts of their Hispanic budgets to TV or to radio, depending on changes of rates and the ability of a particular medium to negociate those rates. The fact is (hat Spanish language TV and radio are substitutes for many advertisers. Every advertiser in the U.S. considers this to be a SEPARATE AND DISTINCTIVE MARKET. In fact, most, if not all, of the still very few advertisers who have decided to advertise in the Spanish language have, first, funded a SPANISH ADVERTISING BUDGETS, then created a SPANISH MARKETING DEPARTMENT and. lastly, chosen a SPANISH ADVERTISING AGENCY. Without those three elements, the Spanish speaking consumer does not play any role in the marketing plans of ANY of the hundreds of national advertisers who are NO'l' advertising in the Spanish language, simply because the Spanish market is not integrated in iheir general market strategy, and as they say, "it has to be treated differently", language and otherwise. Many limes we were confronted with situations when general market agencies placed schedules on some of our represented stations: when they found out that we were broadcasting in Spanish, they canceled that schedule because, according to them, they were buying "radio" not "Spanish radio" or they were buying "television" not "Spanish television" Still, today, we confront many situations where most national (or general market) advertisers do not buy any Spanish language media because they (the advertisers) are not "prepared" to go into the Spanish market. Another point 1 want to make is the following. A General Market Network (radio or television), to be considered as such, has to guarantee advertisers to cover about 80% of the total U.S. population. In the case of Spanish Networks, they are required to cover ONLY ABOUT 80% OE THE HISPANIC POPULATION. Certainly, those Hispanic ADls where about 80% of the National Hispanic population resides do not even get close to cover 80% of the General Population of the U.S. This marks another very clear separation between the General and the Spanish Markets. If I can be of any help to this Commission, please, do not hesitate to have any of your associates to contact me. Sinceramente, _______________/s/________________ EDUARDO CABALLERO Eduardo Caballero was born in the Oriente Province, Cuba. Went to school in Sagua de Tanamo and Havana, where he obtained a Degree as Doctor in Law from the Jose Marti University. Started his own law firm with his wife, Raquel Miller-Caballero, also a lawyer, and practiced that profession in Havana, until the end of 1961, when, in view of the political situation in his country, decided to come to the United States as a political refugee. Under a program of relocation sponsored by the U.S. Government, he and Raquel went, first, to Dallas where he worked, simultaneously, at a restaurant, as a host, and at a department store, as a salesman; later on, they went to New York where, in 1962, Eduardo started his career in broadcasting, landing a job as a salesman for a local Spanish radio station (WBNX), thru the offices of a client of his former law firm in Cuba. Soon he became the first Hispanic in USA to hold the position of General Sales Manager of a radio station. In 1968 he helped to create what was known as Spanish International Network (SIN), today Univision. He was appointed first General Sales Manager for WXTV, Channel 41, New York and soon after that, in 1969, he became an Executive VP and Director of National Sales for the Network. In March of 1973 he resigned his position, and, again, together with wife Raquel, started Caballero Spanish Media Inc., the first Spanish media sales representative in this country. His company started representing four Spanish TV stations (all of the independent Spanish stations existing at that time), and fourteen Spanish radio stations (out of less than 35 existing stations). Eduardo also syndicated a weekly Spanish movie, which ran in twenty-nine television stations, almost all of them genera! market stations, using Ricardo Montalban as the presenter, and with the sponsorship of the Bristol Myers Company. In 1976, Eduardo decided that he should be involved exclusively in radio, where he saw the greatest potential for C.S.M. His company grew to represent over 140 Spanish radio stations from coast to coast, covering over 95% of the Hispanic consumers in the country, opening opportunities for new radio operators and hundreds of jobs for both, Hispanics and non-Hispanics. In 1995, Eduardo sold C.S.M. to Interep, and remained with the Company until the beginning of 1999, when he left to work on his new project, Caballero Television, owner and operator of twelve LP television stations, all of them located in Central California and Texas. He created his own network -Mas Miisica Teve- broadcasting 24 hours of music videos. Caballero Television has offices in Dallas, New York, Miami and Bakersfield, CA. Recently, the Broadcasters' Foundation presented to Eduardo, The American Broadcast Pioneer Award, as the first Hispanic to receive this award. In September 2002, Eduardo was honored by the American Advertising Federation with the Mosaic Award. Eduardo lives with his wife of 41 years, Raquel, in Miami, Florida. They have a daughter, Rosamaria, also a lawyer, who graduated from Georgetown Law School. Married, with two daughters, Sofia and Paloma, she lives, with husband P.J. Stafford, in New York City. Eduardo is, or has been, involved in the following organizations: Chairman-founder of the Hispanic arm of the Media Partnership for a Drug Free America. Member of the US Postal Service Marketing Advisory Board. Founder of the Spanish Radio Association of America. Former Member of the Board of the Stations Representative Association (S.R.A.). Former Member of the Board of Directors of the Advertising Counsel. Former Member of the Arbitron Bi-lingual Advisory Committee. Founder of the Association of Hispanic Advertising Agencies (A.H.A.A.). Former member of the Board of Trustees of the National Hispanic University (San Jose, CA). Former Member of the Board of Directors of the National Drop-out Prevention Foundation. He is also a proud member of the N.A.B. and of the Pioneer Broadcasters, among many other organizations.
Hi Albcat, as per your request, following are my thoughts on why the Hispanic market should be treated separately from the general market. As you know, I have over 15 years in the industry. Most of these years have been with agencies specializing in Hispanic marketing; and advertising. I am currently with Diario Las Americas, South Florida's first Hispanic daily newspaper. The U.S. Hispanic media market should be treated separately from the non-Hispanic media market. Hispanics differ in many ways from non-Hispanics:
sources: Nielsen Universe Estimates 2002, Strategy Research, Yankelovich 2000, Center for Media Research 10/7/02 Advertising in Spanish-language is proven to be far more effective with Hispanics. According to the Roslow 2000 study on advertising effectiveness among U.S. Hispanics: Marketing to Hispanics should not only be in Spanish-language but should also be culturally relevant. Translation of general market copy is not an effective or efficient approach for delivering the target. Advertising should be culturally relevant and dialect sensitive. Agencies specializing in Hispanic advertising and marketing understand that accents and terminologies differ based on country of origin. They exercise sensitivities to these differences when creating an advertising message. Important, as well, is not to stereotype this market. 2900 N.W. 39th Street; Miami, Florida 33142; (305) 633-3341 (ext 251) phone; (305) 635-4002 fax
Spanish language preference has not decreased throughout the years as many had predict^. It has actually increased. One contributor to the increase could be the increasing acceptance of Spanish-language, as well as, what many are calling 'retro-acculturation.' Latinos are feeling more comfortable with their culture and the use of Spanish-language. Great contributions by latinos in the areas of sports, entertainment, and business have laid out a new dynamic for Latino youths. They are more proud to be a part of the Hispanic community and to be considered Latinos. "The Spanish language is more
Source: Yankelovich Partners 1990 & 2002 Hispanic Monitor Study The Hispanic market is separated from general market by language and culture. Some companies early to sec the potential are cashing in. Sales of Ford brand cars and tight trucks to the Hispanic market grew 40% in the past five years. After the company started using Mexican bombshell Salma Hayek to market its Lincoln brand last year, Hispanic purchases of Lincoln Navigators grew 12%, while sales to non-Hispanics were flat, says a Ford Motor Co. spokeswoman. At Honda Motor Co.'s American arm, Latino purchases grew to 8.4% of all vehicles sold last year from about 7% five years ago. With the nation's economy as a whole stagnating, the U.S. Hispanic population is emerging as one of the most promising motors for growth. Driving the growth is the population's higher-than-average birth rate and immigration. Additionally, Hispanic household incomes are starting to catch up with national averages. The Global Insight report estimates that Hispanic household incomes should grow from 77% of the national average in 2000 to 82% by 2020. The Selig Center for Economic Growth at the University of Georgia says Hispanic disposable income will reach $926 billion in 2007, up some 60% from $580.5 billion last year. Meanwhile, non-Hispanic buying power will grow less than 28% to $8.9 trillion. The Selig Center estimates that in five years Hispanics will account for 9.4% of the nation's disposable income, up from 5.2% in 1990. 2900 N.W. 39th Street; Miami, Florida 33142; (305) 633-3341 (ext 251) phone; (305) 635-4002 fax
Both television and radio have seen the growth. Advertising on Spanish-language TV grew 16.5% last year, over twice the 7.6% growth by all broadcast TV, estimates Gordon Hodge of investment bank Thomas Weisel Partners. Today there are 8 times the number of Hispanic radio stations than there were 20 years ago.
Get the picture? It seems some major companies have, and it spell $$$. They understand the importance of the Hispanic market. They see it as a separate market, and so should we. Sincerely, _______________/s/________________ 2900 N.W. 39th Street; Miami, Florida 33142; (305) 633-3341 (ext 251) phone; (305) 635-4002 fax
May 22,2003 Federal Communications Commission To Whom It May Concern, My name is Raquel Tomasino, I am Media Director of Castells & Asociados and have been asked to comment on whether the U.S. Hispanic media market is a separate market for the purpose of assisting the FCC in its ongoing review and analysis of the pending merger of Univision Communications and Hispanic Broadcasting Corporation. From a marketing standpoint the US Hispanic market is a separate marketplace. Marketing to Hispanics requires understanding of the cultural differences that exist versus the General Consumer, understanding that creatively Spanish-language commercials need to reflect Latino cultural nuances and queues to be fully effective in producing similar results versus the General English-language commercials. More than 50% of the US Hispanics are Spanish-dominant. In the West Coast that number is closer to 60%. While long time residents and US born Latinos speak English so that they can function in mainstream America, various factors which include, the growing population, strong Hispanic communities, and immigration keep fueling the desire for Hispanics to hang on to their culture, their language and entertainment preferences. The Hispanic market is not one Monolithic segment of the population, it is a complex group comprised of many segments with different cultural nuances and origins, united by one language. Spanish-language media plays a very big part in reaching out to the different segments of the population by continuing to supply programming that feature relevant content that speak to the Latino preferences. 865 south figueroa street suite 1100 los angeles, ca. 90017 phone 213.688.7250 fax 213.688.7092 adcastells.com In the case of Spanish-language TV, Experience has shown that original productions with familiar content such as Latino entertainers, International dramas and Futbol/Soccer is a formula for success. The English-TV programming, such as "Charlie's Angels" and "Reyes Y Ray" (Starsky & Hutch) remakes in Spanish that some networks tried to reproduce and run on Spanish-TV proved to be unsuccessful. Radio has become the optional source of information and news not only about our homeland but our communities, with commercials that we can actually understand and follow in our language. Radio also offers the variety in programming needed to finely target the different segments of the Hispanic communities. Like the Central American who listen to Cumbias, the Caribbean's who prefer Salsa, the South American's like Spanish-Rock and the Mexican Community who love their Rancheras and traditional sounds of Mexico. As an agency it is important for us to educate our clients on the most effective way to reach the Hispanic consumer. We are responsible for creating advertising that is compelling, that builds awareness and consumer loyalty and at the end of the day we need to deliver these through the various, relevant forms of media vehicles. That's why we have a list of ten things to avoid when marketing to Hispanics. Below is a top line of the top ten things not to do by Liz Castells-Heard, President of Castells & Asoicado:
Sincerely, _______________/s/________________ ![]() Latin America/U.S. Hispanic Integrated Marketing & Communications The Honorable Michael Powell, Chairman Federal Communications Commission 445 12th Street, Southwest Washington, D.C. 20554 Dear Chairman Powell: My name is Linda Lane González, president of The VIVA Partnership, Inc., a Miami-based advertising agency specializing in the U.S. Hispanic market. My professional experience over the past 15 years has been almost exclusively in the U.S. Hispanic market, having worked with some of the greatest pioneers of our field, Lionel Sosa, Carlos Montemayor, Paul Castillo and others over the years on a variety of accounts including Chrysler, Builder's Square, Cuervo, CBS, Verizon Wireless, Uniroyal, Meow Mix, and Entenmann's. I have been asked to comment on whether or not I believe the U.S. Hispanic media market is actually a separate market. My answer is an emphatic yes. To which could be added an emphatic of course! Hispanics are different in many ways: be it culture, language, or the numerous customs and traditions. Research shows that in-language programming is more impactful to the Hispanic target when it connects on a deeper level, in language and culturally relevant. The Hispanic media market and it s numerous vehicles are a separate, relevant entity. From Nielsen to Arbitron - media is adapting and adjusting to the ever-growing Hispanic population. Nielsen has adjusted the way it measures audience levels due to the exploding Hispanic numbers. Arbitron continues to be challenged and is currently modifying their methodology on how to accurately measure Hispanic audience levels. I hope my comments will be useful in the commission's consideration of the U.S. Hispanic media market as a separate and relevant entity and in its review of the Univision/HBC merger. Very sincerely yours, _______________/s/________________ VIVA Partnership
The Honorable Michael K. Powell Dear Chairman Powell: My name is Tere Zubizarreta, President & CEO of Zubi Advertising. I have been asked to comment on whether the U.S. Hispanic media market is a separate market. There's no doubt that the Hispanic media market is an entity completely separate from the "general market". As will be shown below, there is ample evidence and factual corroboration to conclude that the U.S. Hispanic media market is a separate market. The Hispanic media market stands alone since it caters strictly to those U.S. residents (33 million by 2000 census), in their native language, taking into account cultural idiosyncrasies and family values. The media availability to address this market is professional in its programming and formats are according to the demographics In each of the major Hispanic markets. This fact is particularly important when looking at the radio and TV networks as the primary source of communication with this fast growing market. I hope the information provided will be useful in the consideration of the U.S. Hispanic media market as a separate relevant market. Sincerely, _______________/s/________________ TAZ:mlt
To Whom It May Concern, I'm Richard Cotter, Senior Partner and Director of Local Broadcast for Mindshare. We're one of the largest buyers of time on radio and television stations in America. I've been asked to weigh in on the question If Hispanics in the United States represent a discreet market. The question is important because it's being used in the analysis by the F.C.C. concerning the proposed merger of Univision Communications and Hispanic Broadcasting Corporation. There's ample evidence and factual corroboration to conclude that the U.S. Hispanic media market is a separate market. First, the Hispanic media market is separated from the rest by "rt"a own radio and television stations broadcasting in their own language. The Spanish language radio and TV stations serve a distinct consumer base with different brand awareneee, tastes and preferences. To b« sura if s a separate population with different growth rates. As the F.C.C. reviews the Univision/HBC merger I hope the information highlighted here will help provide direction and the right decision to this important question. Sincerely, _______________/s/________________ May 2003 As a media executive, I've been asked to comment on whether the US Hispanic media market is a separate market from the general market. There is no question that the Hispanic market is indeed separate and should always be considered as such. There is ample evidence and factual corroboration to conclude that this to be true. The language of preference for many Hispanics, whether they are recent arrivals or US bom, is Spanish. The importance of the culture to Hispanics is such that parents instill pride in language, customs, music and dance to their children. In the mid seventies, the US had about 50 Spanish-language radio stations in the entire country. Today over 600 radio stations dot the landscape with stations cropping up in markets where just 10 years ago no one would have guessed the need for Spanish formats would be. The same holds true for Spanish-language TV. We've seen the growth in the number of networks and independent stations everywhere. Some markets, such as Chicago, Miami and Los Angeles have at least five Spanish-language TV options. The bottom line is, if you don't speak Spanish, chances are you ignore Spanish-language media. Similarly, if you don't speak English, or just simply prefer Spanish, chances are you ignore English-language media. So if you're not speaking to me in the language I prefer, I'm not listening to your message. Few advertisers can afford to ignore this market. There is no question as to the relevance of this market, and ample evidence exists that it reached through Spanish-language media. _______________/s/________________
DMA
May 27, 2003 My name is Pat Delaney. I am President of DMA and have been in the advertising industry for over 27 years. I have planned and purchased all mediums throughout the US for clients such as: Reebok, Wendy's International, BMW, AutoNation, Terminix, Rite Aid Drugs, Toys R Us, just to name a few. I have been asked to comment on whether the US Hispanic media market is a separate market. Also, whether there is ample evidence and factual corroboration to conclude that the US Hispanic media market is a separate market: The US Hispanic market is a separate market. Hispanics listen and watch various mediums differently than Anglos. With the available research on Hispanics, it clearly shows that while many Hispanics are bilingual, they still speak Spanish at home and do listen or watch Hispanic radio or TV. It's also substantiated by research that the number one radio or tv station in a given market (eg. Los Angeles, Miami, etc.) is Hispanic. This reflects all stations in a market, not just Hispanic and indicates to an advertiser that a large percentage of their potential customers are being missed if Hispanic media is not being purchased. In many markets, Hispanics account for over 50% of the market. Over the years I have found that with the available research an advertiser can effectively reach their potential customers by using both Hispanic and Anglo mediums. The research provides duplicated and unduplicated listenership/viewership of the media purchased to assure full coverage of both Hispanics and Anglos. Without this research it would be a shot in the dark. I hope this information provided will be useful in the consideration of the US Hispanic media market as a separate relevant market. Sincerely, _______________/s/________________ May 23, 2003
I am Mike Herrera. My experience is Florida Distributor Coordinator. 1 have worked in the Florida Market for 17 year in the beer Industry. Fourteen years with Anheuser Busch and the last three with Presidente U.S.A. Presidente Beer is one of the leading beers in the U.S. that markets to Hispanic consumers across the country. I have been asked to comment on whether the U.S. Hispanic media market is a separate market. There is ample evidence and factual corroboration to conclude that the U.S. Hispanic media market is s separate market. Research companies such as Simmons measures media habits, product and service usage, demographics and psychographics of Hispanic consumers across the country. In addition to the Nielsen media research is one of the market leaders in terms of providing quality measurement of Hispanic TV audiences. When Presidente Beer commences its marketing planning and forecast our strategic approach is to identify the key markets within our Demographic group and separate within each market the hispanic and general market. This strategic marketing approach is used in all of our key markets across the United States. I hope the information provided will be useful in the consideration of the U.S. Hispanic media market a separate relevant market. Sincerely, _______________/s/________________
In reference to your questions regarding the Hispanic media survey my personal opinion is that Hispanic media should be maintained separate from the general market. The Hispanic market is a different segment and should be targetted differently. In the beer industry we face these challenges everyday trying to cross over to a complex ethnic market with such a Latin American influx and diversity. We are struggling trying to convey the same message. In reference to Radio, the audience of most listeners are probably working people or traveling in vehicles. During the most busy traffic hours and lunch time most people are listening to the radio. This is a key time for messages and commercials to get across. For example; lunch hour at any restaurant, bar or cafe usually has a radio station playing. I think today's TV viewer's are looking for specific shows, movies or the nightly news. Ana, I hope this information helps you with your survey and please understand this is my opinion and not of Labatt USA. Sincerely Yours, Nelson Quintero
May 21,2003 My name is Marci Neill I am the advertising coordinator for Glendale Nissan/Infiniti. I have been asked to comment on whether the U.S. Hispanic media market is a separate market, for the purpose of assisting the FCC in its ongoing review and analysis of the pending merger of Univision Communications and Hispanic Broadcasting Corporation. The first and most obvious example would be separate languages. From there the list goes on and on to include the following, separate location, population, growth rate, income level, brand preferences, and cost basis, to name just a few of the reasons why as an advertiser it is critical to be able to target Hispanic media, both TV and Radio as a separate market. I hope the Commission will take these factors into consideration when reviewing the Univision/HBC merger. _______________/s/________________
To Whom It May Concern: I've owned and operated a radio and TV buying service in New York City for many years. I'd like to share my thoughts with you concerning the Hispanic market in the hopes my comments wtll be useful in the Commissions consideration as it reviews the Univision/HBC merger. The central point is the US Hispanic media market is a separate entity. First, the radio and TV stations which make up this market deal a separate consumer base and communicate to it in a different language. Secondly, the markets population base differs as does its brand awareness and cost structure. Turn the channel-tune your radio. Your eyes and ears should convince your mind and heart this truly is a distinct market.
Miami, May 21, 2003 I am Gonzalo J. Gonzalez, Managing Officer at BVK/Meka in Miami. My experience in the advertising industry includes over 15 years working with most product categories in the United States, Spain and Latin America. BVK MEKA is one the leading Hispanic advertising and Public Relations marketing firms, and the Hispanic Division of BVK in Milwaukee, ranked among the top 50 Advertising Agencies in the United States. Our current client list for the US Hispanic market include Southwest Airlines, Sprint PCS, Pfizer, South East Toyota, Samsonite, Samsung and the Florida Anti-Tobacco campaign among others. I have been asked to comment on whether the U.S. Hispanic media Market should be considered as a separate market. Not only for the proven effectiveness of the Spanish Language in communicating messages, but also because of the different media habits and cultural relevance of programming, the Hispanic media is and should be considered separate when planning, buying and evaluating broadcast media. This fact has been proven by numerous research developed by the most prestigious research companies, such as Nielsen, Roslow Institute, Scarborough, Strategy research, among others. As a result of this, companies that measure and monitor broadcast media, such as Nielsen and Arbitron, has adapted their methodology in term of measuring Hispanics across the country, publishing separate Hispanic books with the results of their surveys. I hope the Point of View will be useful in the consideration of the U.S. Hispanic media market as a separate relevant market, and feel free to contact me should you need to further discuss this matter. Sincerely, _______________/s/________________
![]() May 21, 2003 Federal Coomunications Commission To Whom It May Concern: It is with great concern that our firm has approached you regarding the proposed merger between HBC and Univision. As a boutique firm in Coral Gables providing counsel in the areas of Advertising event marketing and public relations, we foresee the ramifications of this proposed merger. We are a young firm, comprised of individuals who have been active in the advertising industry in the South Florida marketplace for over a decade, particularly in Hispanic media. We live in this market, and understand the unique elements it's comprised of including how cyclical is it. The South Florida market will severely suffer if this merger happens. Our philosophy rests on the shoulders of innovation and we stand strong in our focus on providing unique and cost effective methods for our clients to achieve their marketing goals. However, we believe that the uniting of the nation's number-one Spanish-language television operator and the number-one Spanish-language readio owner resembles the Clear Channel model. Formulas such as this have tryly made it difficult for agencies and local businesses such as ours to thrive in a marketplace where as it relates to placing media, there are very few competitors. We are convinced that with such a merger taking effect, many areas of our industry will be directly affected. Our concerns are the strong negative effects on both the general as well as the Hispanic market. We are specifically concerned about the business practices and methodology that will ultimately impact the consumer. We would also like to comment on the issue of whether the Hispanic media market is a separate one. Our firm firmly believes it is. Just to begin, this is a market that ha its own consumer base that possess their out tastes, brand awareness, brand preferences, media, cost basis, population, and language. How can one ignore the facts listed above? Including both television and radio, it is evident that this market has its own unique set of separate characteristics, its own buying poser, and its own consumer psychographics. We implore the Commission to consider the ample evidence aforementioned. My firm could not feel more strongly about this manner. We respectfully seek your assistance in protecting the industry comprised of agencies and advertisers alike who realize how critical this matter is and how this proposed merger will affect the future of our industry. We trust in the judgment of the Commission and rely on its plight to protect the overall public's interest. Please take our pleas into consideration. If need be, our firm is at your disposition as it relates to the Commission's consideration of the U.S. Hispanic media market as a automomous market and its review of the Univision/HBC merger. Sincerely, _______________/s/________________ Liza M. Santana www.creativasgroup.com May 22, 2003 To Whom It May Concern: As an advertising agency in the South Florida market for over 7 years, and as an advertising professional for over 13 years, I am always asked the same question from many of my advertisers: "How can I best reach the Hispanic market?" The question would seem to have a simple answer: "Just through some budget dollars to a couple of Hispanic stations, translate our current spot (some advertisers actually use their English spot in Spanish language stations), and go with it!" The more I see these situations occur, the more I realize that there are still many people in South Florida and the U.S. that still don't get it. The Hispanic market is more than just a true and separate market from the general market. It has several "sub-markets" within itself. It is not suffice to think that with just one campaign, or one spot, or one theory, we can reach the entire Hispanic market. Hispanics in the U.S. are truly diverse. South Florida alone has possibly the most diverse Hispanic market in the country, comprised mostly of people from the Caribbean, Central and South America. Unquestionably, the same applies to all the Hispanic markets across the U.S. Hispanics have become an important part of our population with their rapid growth, as well as their increasing buying power as consumers. This is a market with different cultures, ideas, values and customs. Therefore, it is critical that Hispanics be considered as a separate market in order to reach them effectively and allow prospective advertisers to communicate with this powerful and evolving segment of our country. Thank you, _______________/s/________________ (On the left side of the letter)
To Whom It May Concern, I'm Helane Naiman. I have worked in media in New York City for over twenty five years and have for the past five years owned my own ad agency/buying service, HN Media & Marketing, Inc. I've been asked to comment on whether the U.S. Hispanic media market is a separate market for the purpose of assisting the F.C.C. in its ongoing review and analysis of the pending merger between Univision Communications and Hispanic Broadcasting Corporation. In my opinion it certainly is. Here are just a few reasons why. The Hispanic population has separate tastes. It differs in brand awareness with a uniquely different consumer base. Hispanics in the United States have their own media. The market includes both radio and television stations that broadcast in the Spanish language. I hope this information is useful to the Commission in their consideration of this issue. As the FCC reviews the question of whether Hispanics in the United States are a separate market the answer is clearly-yes. Yours Truly, _______________/s/________________ Helane Naiman May 27, 2003 To whom it may concern: My name is Migdalia Santana and I am the media Director for Accentmarketing, a Hispanic advertising agency located in Coral Gables, Florida. I have been involved in the Hispanic Advertising business for more than 30 years, most of those as a Media Director for different agencies. I have been asked for my opinion and comments on whether the U.S. Hispanic media market is a separate market. During all the years in the business I have had multiple oppportunities to experience the differences of this market versus the Non-Hispanic market in the U.S. - The strongest and most obvious differences have been the Spanish language preference among Spanish dependants, Spanish dominants and bilingual Hispanics. Even the most acculturated Hispanics have shown their preference for the Spanish language and their appreciation of advertisers that communicate with them in this language. Research has shown that Hispanics feel more comfortalbe with a commercial message communicated in Spanish. They understand it better and most important, are ????? of the advertisers' ????? in communicating with them and competing for their business. This perception has made a real difference in the share growth of these advertisers in the Hispanic market. Large and consistent Hispanic media investments as well as dedicated community involvement efforts have generated growing market shares for advertisers. I have witnessed this ???? with different product categories that I have worked with throughout the years, including package goods, special services and high-ticker items. - Being Hispanic is a cultural issue beyond the day-to-day use of the language and despite the level of acculturation. The pride of being part of the Hispanic culture has overcome all the differences between the multiple Hispanic nationalities that comprise this market. The Hispanic culture has several constant values that have been permanent across all groups and levels of acculturation throught the years: Spanish language, Spanish music, family ties, religion, tradition, etc. As will be shown below, there is ample evidence and factual corroboration to conclude that the U.S. Hispanic media market is a separate market. - The growth of broadcast Hispanic media is the strongest proof of this market's uniqueness. Instead of disappearing or being reduced in number, the Spanish language television and radio stations continue to grow and get stronger in all markets. There are currently four over the air network TV stations advertising the different Hispanic markets. There are also more than four Hispanic cable networks and multiple local independent stations. Univision ranks as the fifth most watched TV network in the U.S. and this is not just among the Hispanic community. The same situation goes for Hispanic radio. There are more than 66? Hispanic radio stations in the U.S. Overall Hispanic stations rank amonth the top ? in Arbitron's audience ???? in markets like L.A. and Miami. - This growth of outlets and audience figures is the best proof that Hispanics need and prefer Spanish language media vehicles that offer them the kind of programming that is relevant to their culture and that keeps them informed of everything that is happening in the U.S., in the World and most important in their Hispanic communities as well as their communities of origin. I hope the information provided will be useful in the consideration of the U.S. Hispanic media market as a separate relevant market.
May 23, 2003 Mr. Raul Alarcon Jr. Dear Raul, Enclosed is a synopsis of my position paper on the U.S. Hispanic market. I have delivered this or very similar presentations on numerous occasions to a broad spectrum of general business and Hispanic marketing audiences. The most recent was at the Central Florida Hispanic Chamber of Commerce. I have edited out only tny personal (humorous) anecdotes; actually, they were the best part, Best regards, _______________/s/________________ A COUNTRY WITHIN A COUNTRY The U.S. Hispanic market is frequently referred to as "a country within a country. ..larger than Canada... the fourth largest Spanish speaking country in the hemisphere larger than Peru, Venezuela, Chile or Ecuador.". 42.6 million strong (including Puerto Rico), the population is expected to grow by more than 1.7 million per year. That's 100,000 people every three weeks or 5,000 every day. Hispanic purchasing power exceeded $630 billion in 2002. In and of itself, it represents the 9th largest economy in the world, larger than the GDP of Brazil, Spain and even Mexico. All indices and economic measurement standards reflect growth and increased prosperity. In the decade between 1979 and 1999, the number of Hispanic families reaching the middle class (defined as those earning between $40,000 and $140,000) increased 71.3% to 2.5 million, fully one-third of the total. The numbers get even more interesting in terms of business ownership. According to American Demographics Magazine, Hispanics now account for the largest share of minority entrepreneurs in the United States, owning 40% of all such businesses. The Census Bureau's last economic census reported 1.2 million Hispanic owned businesses with aggregate revenue in excess of $186 billion. The 2002 estimate put the figure at 2.3 million with $380 billion in sales. In 2001, the census also reported Hispanic labor-force participation at 80.4% (FYE 2000), higher than non-Hispanic white males as a whole. It is evident that even official agencies consider this market a discrete entity within the larger marketplace measured and reported accordingly. And while other minority markets are similarly measured in a number of areas, the Hispanic market stands alone as a self-contained, differentiated, "country-like" entity within U.S. borders; one from which specialized disciplines, professions, governmental institutions, NGOs and even foreign policy initiatives, have arisen and will continue to arise well into the foreseeable future. This is not a matter of opinion. It is a matter of fact extremely well grounded in logic, as we shall see:
© 2003 Ana María Fernández Haar May 20, 2003 To Whom It May Concern: I am Julio Amparo. I have worked in the Hispanic market as an owner of an independent advertising agency for over 15 years. I have been asked to comment on the pending merger between Univision Communications and Hispanic Broadcasting Corporation. An important question the F C.C. is facing is whether or not the U.S. Hispanic market is separate market. First, we speak a different language. We have our own consumer base, our own and separate tastes. As an owner of an ad agency I can tell you Hispanics have their own brand awareness for our own products, Our population growth is different, the cost structure of media is separate -- we are a separate consumer base. The Hispanic Media market-- radio and TV combined-- is a separate and distinct market. Listen and you will hear with your ears we are a separate market. I hope my comments will be useful in the Commission's consideration of the US Hispanic media market as a separate relevant entity and in it review of the Univision/HBC merger. 16 BOBOLINK PLACE BRYN MAWR, NY 10701 TEL. (914) 423-7373 FAX (914) 423-2579
June 11,2003 Marlene H. Dortch
Dear Ms. Dortch: Spanish Broadcasting System, Inc. ("SBS") has submitted several filings for the record of this proceeding demonstrating that Spanish-language media does not compete with English-language media. In other words, English-language and Spanish-language broadcasting constitute separate markets for competition and diversity purposes. The proposed Univision/HBC merger threatens to create substantial market power in numerous geographic markets for Spanish-language broadcasting to the detriment of advertisers, consumers, competition, and diversity. This letter submits data demonstrating the severity of that threat in the ten metropolitan areas with the largest Hispanic populations. Attached hereto is a chart for each of the top ten Spanish-language broadcast markets displaying the market share of each participant in terms of combined television and radio advertising revenues for 2002.l In seven of the top ten markets, the combined entity's (Univision + HBC) post-
New York Washington, DC Paris London Milan Rome Frankfurt Brussels June 11, 2003 merger market share will equal or exceed 60%, and in two of the top ten markets the combined entity's market share will exceed 70%. Indeed, in San Antonio, the combined entity will control a striking 80% of the market. Only in Brownsville/McAllen (13%) and New York (48%) will the combined entity have a market share below 50%. When Entravision's market share is included (Univision + HBC + Entravision), the combined entity's market share ranges from 48% in New York to 84% in Phoenix. For convenience, the table below summarizes the distribution of revenue shares for the combined entity, with and without Entravision. As illustrated by the data in this table, the combined entity would account for a large majority of advertising revenues in 8 (or 9) of the top ten markets.
These high market shares--including above 70% in several markets--demonstrate that the merger will enable the new Univision/HBC to exercise substantial market or monopoly power to the detriment of both Spanish-speaking consumers and advertisers who seek to reach that audience. For "a share above 70% is usually strong evidence of monopoly power" and "a share between 50% and 70% can occasionally show monopoly power." Broadway Delivery Corp. v. United Parcel Service of Am., Inc., 651 F.2d 122,129 (2nd Cir. 1981). Even a share below 50% can support a finding of monopoly power when other indicia of such power--such as the high entry barriers present here--exist. See id. The consequences of a monopoly in Spanish-language broadcasting is not only higher rates for Factbook, 2002 U.S. Hispanic Market (a publication of Strategy Research Corporation), and various internet websites, including www.100000watts.com. June 11,2003 advertisers, but also a substantial loss in diversity of voices. Moreover, where, as here, the combined entity will control over 40% in all or virtually all of the major relevant markets, diminished economic performance is likely. See FTC v. Swedish Match, 131 F. Supp. 2d 151, 166 (D.D.C. 2000) ("Without attempting to specify the smallest market share which would still be considered to threaten undue concentration, we are clear that 30% presents a threat." quoting United States v. Philadelphia National Bank, 374 U.S. 321, 364 (1963)). In sum, the market shares shown here present a real risk of anticompetitive harm to Spanish-language advertisers, as well as a critical loss of diversity to Spanish-speaking Americans in these markets. Moreover, the merger threatens both competition and diversity whether or not Spanish-language television and radio compete in the same market. The reason is that the merger gives Univision/HBC the power to exclude competition even if Spanish-language TV and radio belong in different markets. First, the Univision/HBC merger would raise already high entry barriers into Spanish-language radio. Advertising on Spanish-language TV is important to a Spanish-language radio station's ability to obtain significant audience. Indeed, several of SBS's stations only succeeded because of risky and expensive television advertising campaigns. However, after its acquisition of HBC, Univision--which dominates Spanish-language television--will have an incentive to refuse to deal with, or discriminate against, Spanish-language radio competitors (including SBS) who seek to advertise through Univision (and other properties) in order to advantage HBC. Second, after the merger, the combined entity will have the power to insist that Spanish-language advertisers who wish to advertise through both radio and television purchase time from both Univision and HBC rather than from the combined entity's rivals. Such difficult-to-detect and subtle tying arrangements or refusals to deal--realistic possibilities here--impair competition. See, e.g., Lorain Journal Co. v. U.S., 342 U.S. 143 (1951). The resulting harm to competitors, including SBS, that is sure to follow will not only harm advertisers, but also will impair diversity. To meet its obligations under the Communications Act, the FCC must undertake a detailed analysis of diversity and competition specific to the Spanish-language media markets implicated by June 11, 2003 this merger. In addition to the materials submitted last week and filed today, SBS intends to file shortly with the Commission further information demonstrating the severity of the threat to competition and diversity presented by the proposed merger.
Spanish-Language Broadcast Advertising Revenues, 2002 Notes: Advertising revenue-based satellite program services that also offer Spanish-language programming include services such as Galavision Cable Network, MTV Latin America, and Viva Television Network. Sources: 2002 BIA, Inc.; 2002 Television and Cable Factbook; 2002 U.S. Hispanic Market, Strategy Research Corporation. Spanish-Language Broadcast Advertising Revenues, 2002 Notes: Advertising revenue-based satellite program services that also offer Spanish-language programming include services such as Galavision Cable Network, MTV Latin America, and Viva Television Network. Sources: 2002 BIA, Inc.; 2002 Television and Cable Factbook; 2002 U.S. Hispanic Market, Strategy Research Corporation. Spanish-Language Broadcast Advertising Revenues, 2002 Notes: Advertising revenue-based satellite program services that also offer Spanish-language programming include services such as Galavision Cable Network, MTV Latin America, and Viva Television Network. Sources: 2002 BIA, Inc.; 2002 Television and Cable Factbook; 2002 U.S. Hispanic Market, Strategy Research Corporation. Spanish-Language Broadcast Advertising Revenues, 2002 Notes: Advertising revenue-based satellite program services that also offer Spanish-language programming include services such as Galavision Cable Network, MTV Latin America, and Viva Television Network. Sources: 2002 BIA, Inc.; 2002 Television and Cable Factbook; 2002 U.S. Hispanic Market, Strategy Research Corporation. Spanish-Language Broadcast Advertising Revenues, 2002 Notes: Advertising revenue-based satellite program services that also offer Spanish-language programming include services such as Galavision Cable Network, MTV Latin America, and Viva Television Network. Sources; 2002 BIA, Inc.; 2002 Television and Cable Factbook; 2002 U.S. Hispanic Market, Strategy Research Corporation. Spanish-Language Broadcast Advertising Revenues, 2002 Notes: Advertising revenue-based satellite program services that also offer Spanish-language programming include services such as Galavision Cable Network, MTV Latin America, and Viva Television Network. Sources: 2002 BIA, Inc.; 2002 Television and Cable Factbook; 2002 U.S. Hispanic Market, Strategy Research Corporation. Spanish-Language Broadcast Advertising Revenues, 2002 Notes: Advertising revenue-based satellite program services that also offer Spanish-language programming include services such as Galavision Cable Network, MTV Latin America, and Viva Television Network. Sources: 2002 BIA, Inc.; 2002 Television and Cable Factbook; 2002 U.S. Hispanic Market, Strategy Research Corporation. Spanish-Language Broadcast Advertising Revenues, 2002 Notes: Advertising revenue-based satellite program services that also offer Spanish-language programming include services such as Galavision Cable Network, MTV Latin America, and Viva Television Network. Sources: 2002 BIA, Inc.; 2002 Television and Cable Factbook; 2002 U.S. Hispanic Market, Strategy Research Corporation. Spanish-Language Broadcast Advertising Revenues, 2002 Notes: Advertising revenue-based satellite program services that also offer Spanish-language programming include services such as Galavision Cable Network, MTV Latin America, and Viva Television Network. Sources: 2002 BIA, Inc.; 2002 Television and Cable Factbook; 2002 U.S. Hispanic Market, Strategy Research Corporation. Spanish-Language Broadcast Advertising Revenues, 2002 Notes: Advertising revenue-based satellite program services that also offer Spanish-language programming include services such as Galavision Cable Network, MTV Latin America, and Viva Television Network. Sources: 2002 BIA, Inc.; 2002 Television and Cable Factbook; 2002 U.S. Hispanic Market, Strategy Research Corporation.
Dear Ms. Dortch: On July 8, Andrew Jay Schwartzman of the Media Access Project met with Susan Eid, Legal Advisor to the Chairman to discuss the proposed transfer of control of Hispanic Broadcasting Corporation. Mr. Schwartzman took the position that the Commission should treat Spanish language radio as a separate market for purposes of this case, and that leads to the conclusion that the transaction is contrary to the public interest. He made two specific points. First, Mr. Schwartzman discussed the extraordinary and insuperable barriers that any new entrant would face in trying to compete with the combined Univision/HBC entity. Unlike English language markets, a competitor would face great difficulty in making the audience aware of its service, as Univision would control the principal means of promoting and advertising a new radio station, i.e., Spanish language broadcasting. Moreover, Clear Channel, which would be one of the largest shareholders of the combined companies, is the largest owner of outdoor advertising, which is the second most important advertising medium used for this purpose. Mr. Schwartzman then turned to how the Spanish language market should be treated from a diversity perspective. He noted that under the FCC' s 1981 radio deregulation decision, broadcasters were freed from the obligation to serve every enumerated audience segment in their community. They were, however, expected to demonstrate that they have met the problems needs and interests of whatever niche audience segment they might have chosen to serve. Plainly then, the Commission treated Hispanic other minority communities as distinct for this purpose as well. In response to questioning from Ms. Eid, Mr. Schwartzman explained that he thought it was entirely logical for the Commission to conduct an analysis of the impact of a transaction on particular segments of the community while still including the same stations in voice counts and other analyses of the entire market. Thus, the question of how many stations a particular broadcaster might own in a market would be a separate issue from whether it held excessive power within the Spanish language submarket.
cc. Susan Eid 1625 K street, NW - Suite 1118 Washington, DC 20006 PHONE:(202) 232-4300 FACSIMILE:(202) 466-7656 LAW OFFICES Smithwick & Belendiuk, P.C. 5028 WISCONSIN AVENUE, N.W. SUITE 3OI WASHINGTON, D.C. 2OOI6 TELEPHONE (2O2) 363-4O5O FACSIMILE (302) 363-4266
July 11,2003 W. Kenneth Ferree, Esquire
Dear Ms. Dortch: The National Hispanic Policy Institute, Inc. ("NHPI") hereby replies to the June 25, 2003 letter filed by Univision Communications, Inc. ("Univision"). In its letter Univision again restates its contention that, if the proposed merger with Hispanic Broadcasting Corporation ("HBC") is granted, Univision's interest in Entravision Communications Corporation ("Entravision") will be non-attributable. In arguing for a "bright-line" attribution test, Univision claims that it demonstrated in a December 9, 2002 letter to the Media Bureau that its interest in Entravision is below the 33% threshold equity/debt plus ("EDP") ratio. In fact, Univision failed to make any such showing. Univision's December 9, 2002 letter was filed in response to a November 29, 2002 Commission request for further information. The Commission was responding to a NHPI showing, that Entravision had outstanding debts owed to Univision. Univision had previously represented to the Commission that "Univision has no debt interest in Smithwick & Belendiuk, P.C. W. Kenneth Ferree Entravision."1 The Commission ordered Univision to "explain the origin and nature of such accounts." It further ordered Univision to, "[p]rovide an audited financial statement to support any factual assertion, and a detailed showing demonstrating compliance with the Equity/Debt Plus Rule."2 In response to the Commission's letter, Univision submitted certain documentation, which it claimed showed that it was in compliance with the Commission's EDP rule. However, the evidence Univision provided was incomplete and not audited.3 As NHPI stated in its December 16, 2002 letter: Univision has again misled the Commission and has failed to be forthcoming and candid in its representations to the Commission Entravision's DEF 14A shows that Andrew Hobson, Executive Vice President of Univision, holds 211,136 Class A shares of Entravision. The DEF 14A also shows that Michael D. Wortsman, Co-President of Univision Television Group, Inc., holds 56,136 Class A shares of Entravision. For the Commission to make a bright-line determination concerning compliance with the EDP rule, it must know the percentage of equity and debt a party holds. In this 1 Univision Opposition to Petition to Deny, at p. 11. 2 FCC letter dated November 29, 2002. 3 Univision letter dated December 9, 2003. Smithwick & Belendiuk, P.C. W. Kenneth Ferree case, the Commission knows that Entravision has outstanding debts owed to Univision. What the Commission does not know, is the amount and percentage of Entravision's debt owed to Univision. Also unknown, is how many shares of Entravision's stock are held by Univision's officers and directors. See, Section 73.3555, note 2. Here again Univision has refused to provide this information. Without knowing the extent of equity, and the extent of debt Univision, its officers and directors hold in Entravision, the FCC cannot determine whether Univision complies with the EDP rule. Univision's failure to produce information, which is easily obtained and uniquely within its control, permits the Commission to draw the negative conclusion that if the information were produced it would show that Univision, post-merger, will still have an attributable interest in Entravision. Tendler v. Jaffe, 203 F.2d 14, 19 (D.C. Cir. 1953) ('The omission by a party to produce relevant and important evidence of which he has knowledge, and which is peculiarly within his control, raises the presumption that if produced the evidence would be unfavorable to his cause."); International Union, UAW v. National Labor Relations Board, 459 F.2d 1329, 1336 (D.C. Cir. 1972) ("the failure to bring before the tribunal some circumstance, document, or witness, when either the party himself or his opponent claims that the facts would thereby be elucidated, serves to indicate, as the most natural inference, that the party fears to do so, and this fear is some evidence that the ... document, if brought, would have exposed facts unfavorable to the party.") (quoting J. Wigmore, Evidence §284, 3rd ed. 1940); United States v. Robinson, 233 F.2d 517, 519 (D.C. Cir. 1956) ("[unquestionably the failure of a defendant in a civil case to testify or offer other evidence within his ability to produce and which would explain or rebut a case made by the other side, may, in a proper case, be considered a circumstance against him and may raise presumption that the evidence would not be favorable to his position"); Washoe Shoshone Broadcasting, 3 FCC Red 3948, 3952-53 (Rev. Bd. 1988); Thornell Barnes v. Illinois Bell Telephone Co., 1 FCC 2d 1247, 1274 (Rev. Bd. 1965). Univision's failure to produce evidence permits the Commission to conclude that Univision's interest in Entravision is attributable as a matter of law. Univision does not meet the FCC's bright-line EDP test. Even if Univision could demonstrate that its interest in Entravision is below the 33% debt/equity threshold, its relationship with Entravision is such that it would still be able to continue to exert significant influence over key licensee decisions. As the Commission has said: In adopting the EDP rule, we affirm our tentative conclusion.. . that there is the potential for certain substantial investors or creditors to exert significant influence over key licensee decisions, even though they do not hold a direct voting interest. . . which may undermine the diversity of voices we seek to promote. They may, through their contractual rights and their ongoing right to Smithwick & Belendiuk, P.C. W. Kenneth Ferree communicate freely with the licensee, exert as much, if not more, influence or control over some corporate decisions as voting equity holders whose interests are attributable.4 Univision's relationship with Entravision is significantly different from previous relationships that the FCC has found to be non-attributable. For this reason, the cases Univision cites in support of its claim that its interest in Entravision, will be non-attributable are inapposite. Univision debt and equity interests in Entravision have historically been attributable interests. Univision has a long relationship with Entravision as a business partner, program supplier, creditor and financial backer. In return for Univision's support, Entravision has granted Univision significant rights, including the right to appoint two directors to its board and the right to influence its core operations. As Entravision's SEC 10K acknowledges, "Univision has significant influence over our business." Univision proposes to convert its voting shares into non-voting shares and to give up its right to appoint directors to Entravision's board. This, however, will not change the fundamental well-established relationship between Univision and Entravision. In none of the cases Univision sites, did the Commission permitted an applicant to convert a long-standing attributable relationship with another party into a non-attributable interest. For example, General Electric's purchase of Telemundo fully complied with the multiple ownership rules without the need to convert previously held attributable interests into non-voting, non-attributable interests.5 If, for example, General Electric's proposed purchase of Telemundo did not comply with the FCC's multiple ownership rules and General Electric proposed to convert its attributable interest in NBC into a non-voting interest, and further, if the FCC had permitted such a transaction, then Univision would have a case on point. Univision's letter has little to say about its plan to retain the exclusive right to make national sales on behalf Entravision. Section 73.658(i) prohibits a television network from representing individual stations, affiliated with the network, for the sale of non-network time. In the 1970s, Univision's predecessor entity argued that, as a fledgling network, a waiver of this rule was required to enhance the development of Spanish language television.6 Univision's letter merely states that Telemundo was given the "exact same waiver." Here again the situation is quite different. In Telemundo II, there was no issue concerning Telemundo's inappropriate exercise of control over its 4 Review of the Commission's Regulations Governing Attribution of Broadcast and Cable/MDS Interests, Report and Order, 14 FCC Red 12559, 12582-3 (1999) ("Attribution Order"). 5 Telemundo Communications Group, Inc., 17 FCC Red 6958 (2002). (Telemundo If). 6 Amendment of §73.658(i) of the Commission's Rules, 5 FCC Red 7280 (1990). Smithwick & Belendiuk, P.C. W. Kenneth Ferree affiliates. In this case, the central question is, will Univision's exclusive right to make national sales on behalf of Entravision give Univision the right to influence Entravision's core operations, especially its radio station holdings? Univision's letter cites, with approval, the Commission's statement, "[t]he mass media attribution rules seek to identify those interests in or relationships to licensees that confer on their holders a degree of influence or control such that the holders have a realistic potential to affect the programming decisions of licensees or other core operating functions."7 The FCC, while granting a waiver of the national spot sales rule to Univision and Telemundo, maintained the rule for other, non-Spanish language television networks. The FCC reasoned that without the rule networks would be able to exert undue influence over affiliate programming decisions. The right to sell national spot advertising gives Univision significant rights to influence Entravision, including, as the Commission has stated, the power to influence programming decisions. At a minimum, the FCC should forbid Univision from making national spot sales on behalf of Entravision, if the proposed merger is approved. Converting Univision's voting shares in Entravision into non-voting shares will not fundamentally change the existing relationship. Entravision has been and will continue to be dependent on Univision for it continued survival. Univision, through its control of national sales and it absolute right to grant or deny new network affiliations, will be able to control financial decisions, programming and personnel at Entravision owned radio stations, thus ensuring that Entravision's radio stations will not compete with HBC's radio stations. Such influence will diminish diversity and stifle competition, two key aspects of the FCC local ownership rules.
7 Univision, June 25, 2003 letter citing the Attribution Order at p. 12560, (emphasis added). Smithwick & Belendiuk, P.C. W. Kenneth Ferree
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