Telemundo Drug Lords, Smugglers Have NBC's Network En Fuego

(Bloomberg) -- The biggest shows on Telemundo this season don't look anything like the soap operas that have long dominated Spanish-language TV. There's no poor girl pining after a rich guy, no dramatic love triangles, no passionate arguments ending in a slap across the face.

Instead, “Hasta Que Te Conoci” chronicles the life of the music star Juan Gabriel. The second-biggest show, “El Chema,” is about the rise of an international drug kingpin who occasionally bears a resemblance to real-life crime lord Joaquin “El Chapo” Guzman. The third-most popular? A female “coyote” who smuggles immigrants across the Mexican border.

This new crop of dramas are designed with American Hispanics in mind, and they have made Telemundo a top performer in NBCUniversal's portfolio of channels, which includes MSNBC and USA. While the audience for rival Univision has declined sharply in the last three years, Telemundo's has been growing. Telemundo beat Univision among younger viewers in the last four months of the year, after topping its larger rival for the first time in July.

Last year, Telemundo generated $2.1 billion in revenue and $263 million of profit, according to David Joyce, an analyst at Evercore ISI. Telemundo could double both those figures in the next few years by charging about the same rates to pay-TV providers as Univision does, said Steve Burke, chief executive officer of NBCUniversal, the entertainment division of Comcast Corp. Univision charges about $1.25 per subscriber, while Telemundo charges about 25 cents, according to an estimate from SNL Kagan.

“There was a time when it was almost unthinkable that we'd ever beat Univision,” Burke said in an interview. The network plans to ride its slate of hit shows and the coming World Cup, which Telemundo will air for the first time starting next year, to get more money from pay-TV providers, a move that Burke said could “add hundreds of millions in profits.”

Shares of Comcast fell 0.3 percent to $37.48 at 2:53 p.m. in New York. The stock had gained 27 percent in the past year as of Wednesday.

For many years, Univision dominated Spanish-language television by importing novelas, or dramatic soap operas, made largely by Mexico-based Grupo Televisa SAB, the largest producer of Spanish-language TV and part-owner of Univision. The network held about three-fourths of the market in 2001, when NBC bought Telemundo.

Telemundo started making its own shows in 2003 because it didn't have that same steady supply of programming coming from Televisa. Only recently has it started to find some hits. Telemundo produces many of its shows from Miami, sometimes mining the news for relevant themes. “We're making content specifically for Hispanics living in the United States, and it's being made by Hispanics living in the United States,” said Cesar Conde, chairman of NBCUniversal Telemundo Enterprises.

For viewers concerned about the new U.S. president, Telemundo anchor Jose Diaz-Balart hosted a town hall last month to answer questions about Donald Trump's immigration policy. It led the prime-time ratings on Spanish-language TV that night.

Meanwhile, Telemundo's parent company is mining its catalog to find hits on other channels. In the tradition of ABC's “Ugly Betty” and the CW's “Jane the Virgin,” NBC's cable network USA adapted “La Reina del Sur” for an English-language series, “Queen of the South,” and recently renewed it for a second season. In January, Telemundo and NBC's Universal film unit announced it would make movies for both English- and Spanish-speaking audiences.

Univision, meanwhile, has struggled. Tied to Televisa's programming and beset with internal strife, the network's audience dropped 48 percent from 2013 to 2016 among 18- to 49-year-old viewers in prime-time, though it has regained the top spot in January and February. Parent company Univision Holdings Inc., which also has private-equity investors, has been planning a long-delayed initial public offering.

There's now fierce competition between Telemundo and Univision where there once was none, said Lisa Torres, president of multicultural at ad buyer Publicis Media.

“It is an hour-by-hour, show-by-show race now,” she said. “It's super competitive.”

In an effort to reverse the trend, Univision appointed Chief News and Digital Officer Isaac Lee to oversee content across Univision and Televisa. It acquired the U.S. TV rights to European soccer's Champions League. And Univision has also invested in new shows with English dialogue and American settings, as well as programming made by other producers like a miniseries based on the life of El Chapo that's co-produced with Netflix.

Univision is working to create “complex characters that speak to what it really is to be a U.S. Latino here,” said Lourdes Diaz, Univision's president of entertainment.

Telemundo and Univision aren't just competing with each other, of course. Netflix Inc. has increased the selection of Spanish-language titles available to American subscribers, including telenovelas and movies. And traditional TV networks are finding hits by remaking old telenovelas, like “Jane the Virgin.”

To deliver more dramas and sports to viewers, Telemundo has relied on financial backing from NBC. It's building a $250 million headquarters in Miami, where it will produce more original series. It also put up $600 million for the U.S. Spanish-language rights to the 2018 and 2022 World Cup tournaments, after Univision had shown every World Cup since 1970, going back to its founding days.

“That to me was the first message to the world that, ‘OK, these guys are serious,'” Burke said.

To contact the reporter on this story: Gerry Smith in New York at gsmith233@bloomberg.net.

To contact the editor responsible for this story: Crayton Harrison at tharrison5@bloomberg.net.