Analysis: Prisa: Its Past & Its Future

Our columnist Jose Cervera describes the evolution of Spanish media group Prisa, which enjoys a strong presence in Latin America and the U.S. Hispanic market.  In fact, Prisa’s management recently announced that the company will be focusing on the U.S. Hispanic and Latin American markets as its top areas for expansion during the coming years. (Click here for related article).

The 60’s: Grupo Prisa’s Beginnings

Prisa (Promotora de Informaciones S.A.) was created in the aftermath of Dictator Francisco Franco (who ruled Spain between 1939 and 1975), with the clear objective of founding a newspaper that would serve as a point of reference during the country’s transition to democracy.

Founded by a large and diverse group of personalities drawn from the society and political circles of the day, the success of the group’s newspaper El Pais eventually led to internal conflicts between different factions at the paper with opposing political agendas.

The Young Turks: Polanco and Cebrian

It was in the midst of these confusing economic and political battles that Jesus de Polanco – a publisher specialized in textbooks who had founded the publishing house Santillana in 1958 and was originally included as an industrial partner in Prisa – ended up owning most of the shares in Prisa’s publishing company, and therefore controlling it. From that moment on, Editor Jesus de Polanco and Juan Luis Cebrian, the young founding publisher of the El Pais daily, formed a stabilizing foundation for the company that would distinguish the media group’s development, ultimately turning it into one of the most important in the Spanish-speaking world.

With the consolidation of El Pais as the most influential and best-selling newspaper in the Spanish press and the profits it generated, Prisa set out to build a real empire.  Its purchase of SER radio, the top radio network in Spain, served to definitely transform the group into a multimedia company. The company would later venture into Pay TV with the launch of Canal+, and also enter the fledgling field of satellite television with its Canal Satellite Digital.

Throughout this process, Prisa counted on the favor of the country’s center-left governments, whose ideological slant El Pais has shared since its founding. Sometimes, the government’s favor went even further: The company’s acquisition of radio station Antena 3 and the launch of Canal+ as a Pay TV network, rather than a free one, was possible thanks to government decisions that were denounced by the group’s enemies. The Polanco-Cebrian alliance was in place throughout Prisa’s ascent to multimedia’s Olympus.

Success Brings New Enemies

Along the way, however, the group had created enemies.  Journalists pushed out during the purchase of Antena 3 Radio never forgave the group for dismantling their journalistic endeavor and summarily integrating their stations into SER.  Disappointed bidders who lost out on the awarding of the television license to Canal+ complained of government favoritism.
The country’s main opposition political party – the Popular Party – was ideologically considered an enemy for Prisa’s ambitions. The alliance between all these forces was made evident when the conservative politician Jose Maria Aznar won the elections. Significantly, Aznar had never granted an interview to any of the group’s media properties during his entire tenure as opposition leader. The battlefield thus became digital television, which at that time meant satellite TV.

Canal Satellite Digital was in a good place. As the first Pay TV player in the market, it had easily captured the cream of the clientele. However, the cost of the new technology weighed on the company’s bottom line, as industry estimates calculated that, for satellite TV in Spain to work, providers would need to sign up more than 2 million subscribers in order to reach profitability. The country’s cable TV stations, still in their infancy, did not stand a chance to compete. The giant Telefonica, on the other hand, was in the midst of being privatized and was concerned that the development of Pay TV (cable, satellite or terrestrial) could create a platform for access into people’s homes and an alternative to their cables.

The last favor granted by the outgoing socialist government was allowing the merger of Telefonica’s cable assets with those of Canal Satellite Digital, to form the Cablevision company.

1996: Telefonica Enters the Scene

Immediately after taking power, Aznar maneuvered to replace the President of Telefonica with his personal friend Juan Villalonga, a bold financier who quickly undid the merger by withdrawing Telefonica from Cablevision, which was held by Sogecable (Prisa).  Villalonga then proceeded to use government influence, Telefonica’s money and the ill will of Prisa’s enemies to create a multimedia group that was decidedly anti-Prisa, by launching a satellite TV alternative called Via Digital.  Villalonga also added other offerings to the mix by purchasing stakes in publishing groups (including holdings in Recoletos and Pearson), free TV (Antena 3), content producers (Endemol) and radio (Onda Cero), thus creating a group designed as the perfect counterpart to Prisa.  The result triggered a fierce competition for strategic business such as movie and soccer rights, which in turn raised prices for both companies and eventually turned into a political showdown.

The New Millennium: War and Peace in the Age of Digital TV

Eventually, the Telefonica media group was unable to become a viable alternative, even with the Conservative government's support.  And the satellite television business became a heavy burden for both companies, locked as they were in a mortal combat that prevented them from reaching the minimum subscriber base needed to achieve profitability, and fatally hampering their budgets.  In the long run, the only solution was to merge Canal Satellite Digital with Via Digital, which was exactly what happened in 2002. The new company became Digital+.

Telefonica began getting rid of several of its media holdings (Pearson, Antena 3, and Endemol) and returned to its telecommunications roots.  Prisa survived the government onslaught and still remained the largest group in a fairly fragmented industry.  After a new government came to power in 2004, an executive order from the new socialist administration allowed Canal+ to exchange its Pay TV license for a free TV license, and the company was thus renamed Cuatro.

Sogecable, Prisa’s TV company, finally appeared headed toward sustained profitability. Yet it would become an obstacle that almost did the group in…

Next Wednesday: Prisa 2004 to Present


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